Ah, price, everyone’s favourite subject! If you’re considering engaging a custom software development firm to grow your business or bring an idea to life, what it might cost is a crucial question.
By their very nature, no two custom software development projects are the same. Each project is a unique journey involving a sense of adventure as we chart the path that turns an idea into reality.
At Findan Software, we’ve worked on projects for large brands such as TELUS and Imperial PFS Canada (formerly SNAP Premium Finance), as well as startups with a dream and small to medium-sized enterprises looking to go to the next level. The needs and realities of each vary greatly. As such, so do the projects.
So, how do we go about pricing such projects? In our industry, two pricing models are commonly used. They are “Fixed Price” and “Time and Materials” – let’s break them down.
Pricing models
As with most anything, there are pros and cons to both pricing models. Since our launch in 2018, we have experimented with both models to determine what enables us to deliver the best end result for our clients and, of course, which approach allows us to run our organization successfully. Let’s look at the critical points for each model.
Fixed-price model (FP)
In a fixed-price model, a client agrees to a set amount of expenditure for a set amount of work. The course is set at the start of the project, and the work proceeds from there. The challenge is that this type of approach offers minimal flexibility. It assumes that the estimate and plan are entirely accurate from the outset and that new information will not emerge during development.
As we see it, any project has three main elements: the scope, the quality and the budget. With the price and the scope set in a fixed price model, the only flexible variable is the overall quality. In other words, once the course is set, the only wiggle room left is with the quality of the finished product.
Fixed-price model pros
- Budget predictability
- Controlled deliverables
- Allows for easier planning
- Simpler to understand
Fixed-price cons
- Rigid and offers limited flexibility
- Places limitations on innovation and opportunity
- Can lead to a compromised finished product (i.e. a company cuts corners to save on costs)
- Relies heavily on an accurate initial plan and scope
Time and materials model (T&M)
In the time and materials model, a client pays the development firm for the material and time used. This is usually broken down into an hourly rate. In this model, the scope/finished product is the key focus as the client and software development company work hand in hand to do whatever is needed to create the desired final product.
Again, consider that there are three main elements to any project: the scope, the quality and the budget. With time and materials, the scope and quality of the finished product are set in stone, and it’s the budget that offers the wiggle room. New insights can come to light as a project evolves, significantly impacting the finished product. Time and materials is nimble enough to accommodate changes so long as the budget is available to tackle them.
Time and materials pros
- Greater opportunities for collaboration and client involvement
- Enables innovation
- Provides a substantial degree of flexibility
- Offers efficient route to MVP (minimum viable product) and time-to-market
Time and materials cons
- Total project cost and timeline may be uncertain at the project launch
- Requires greater input from the client and their team
- Less predictable and more challenging for clients to plan for
Which model do we favour and why?
We’ve tried both the fixed-price and time and materials models since our launch in 2018 and decided that neither is a 100% perfect fit for us or our clients. Both of these common pricing models have their drawbacks.
With that said, the Findan approach is essentially a time and materials model with an important tweak – an added ‘Not-to-Exceed’ piece. In other words, we set a not-to-exceed budget estimate in conjunction with our clients and work to develop the best possible product for that estimated budget.
We’ve found that this approach works better for the projects and type of custom software development we do. It aligns nicely with our agile project management and enables us to consistently deliver a high-quality product to our clients.
Moreover, the very nature of software development typically involves shifting priorities as client feedback and new information come into play. This approach is able to accommodate changes as we consistently reassess the scope in consultation with our clients.
Again, remember that a project has three main elements: the scope, the quality and the budget. With this model, the quality is set, the budget is reasonably firm, and the scope is where some wiggle room can be found. Crucially, this approach gives us room to collaborate and be innovative in responding to new information and finding the software solution that truly meets your needs while our clients have some clarity around what their investment level will be.
What we should say is setting an estimated budget is not the same as setting a fixed price. Imagine going out to dinner with a $250 budget à la carte versus going somewhere with a set menu. We have an excellent track record of managing budgets and projects and find that this approach helps us and our clients achieve the desired end result.
As a general guide, our projects start around the US $25,000 mark and can go up to US $500,000 and beyond. Obviously, that’s a substantial range, and where exactly you fit in will be determined by the specific needs of your project. What we can say is, having worked successfully in our industry since 2018, we’re not the cheapest option, but we’re not the most expensive either.
However, the real question isn’t how much will this cost? It’s how much is the solution worth to your organization?
As a rule, Findan Software does not respond to traditional RFP requests. In our industry, the specifics of a project can only be uncovered through in-depth analysis. RFPs place too much risk on us and our clients and are not conducive to delivering a high-quality product.
Need a guide on your software development journey?
If you’re preparing for your excursion into the custom software development space, let Findan Software be your guide. Given our extensive experience with companies of all sizes across a variety of industries, we know what it takes to deliver excellent software that works. It’s no exaggeration to say that we have a skill set that very few firms in the world have, and we’d be proud to deploy our skills to help you achieve your goals.
If you’re curious about how Findan Software may be able to help your organization, send us a note, and we’ll find a time to chat.
FAQs
How does Findan Software determine the “Not-to-Exceed” budget estimate in collaboration with clients within their pricing approach, and what factors are considered in setting this limit to ensure project feasibility and client satisfaction?
At Findan Software, determining the “Not-to-Exceed” budget estimate involves close collaboration with our clients. We take various factors into consideration to set this limit, aiming to ensure both project feasibility and client satisfaction. Our approach considers the project scope, desired quality, and available budget constraints. Through open communication and a thorough understanding of client needs, we work together to establish a budget that allows for flexibility while maintaining a clear boundary to guide the project’s progression.
Can Findan Software provide examples or case studies of projects where their customized pricing approach, blending elements of both fixed-price and time and materials models, resulted in successful outcomes for clients, particularly in terms of budget management and project flexibility?
We have numerous examples and case studies where our customized pricing approach, blending elements of both fixed-price and time and materials models, led to successful outcomes for our clients. These case studies show our ability to effectively manage project budgets while accommodating changes and ensuring project flexibility. By leveraging our experience and collaborative approach, we’ve helped clients achieve their goals within reasonable budget constraints, demonstrating the effectiveness of our pricing strategy in real-world scenarios.
In what ways does Findan Software ensure transparency and clarity around project costs and budget allocation throughout the software development process, especially considering the uncertainty inherent in the time and materials model and the dynamic nature of custom software projects?
Transparency and clarity around project costs and budget allocation are paramount throughout the software development process at Findan Software. We prioritize open communication and provide regular updates to clients regarding project costs and budget utilization. Our team ensures that clients have a clear understanding of how their budget is being allocated and any potential deviations from the initial estimates. By fostering transparency and maintaining clear communication channels, we aim to build trust with our clients and ensure that they feel confident in our ability to manage project finances effectively.