Time & Material model in software development


A good pricing model is a must for any business. Without one, there is no way to determine how much effort you're putting towards your company and the amount of cash flow you're generating.

An efficient pricing model also lets you and your customers retain control over everything involved in the relationship: control over evaluating costs and benefits and control over the term of the agreement itself! Customers will stay happier because they will not be at risk of unexpected fee changes for example, neither will your company. Flexibility is probably the keyword here as it allows both sides to fit their needs. Pricing models also have a lot of room for improvement when it comes down to negotiating terms with competitors whether that's price or time spent for instance!

Let's say you want to make a delicious cupcake, but you don't have the right oven. In this case, an oven manufacturer is your guide to success. Sometimes it's not obvious how to pay the baker for the job done and how to build financial relations. This article answers these questions within the framework of the price-per-hour model.

Time and Material (T&M) is the model that considers only the cost of resources: contractor’s salary, cost of materials and in some cases the average for the fixed charges - the value and scale of the project can be evaluated only as a draft. The essence of this approach is to orient your business strategy toward your customers rather than what you want to accomplish. This means that if a customer comes to you looking for an enterprise-level database solution (A job), but they do not have enough funding yet (may require B & C jobs) you might still accept them as a client if they agree to pay you for your work(D) at an hourly rate until they come back to fund more work on it later.

Time and material pricing models are used by clients to contract projects that are likely to have greater risks than an average outsourced project. Another reason for this would be for clients who prefer risk management instead of the contractor. Therefore, it is important to stop here and understand what exactly Time & Material Costing model is? This practice has three major components.

Specific requirements

When a client doesn’t have all the exact specifics required for a project, it is usually because his situation is constantly changing and he knows that he needs a fairly adaptable product if he wants to keep up with what’s going on around him. This is fairly common in startups, especially those benefit from being fairly flexible with current trends. In this case, requirements have to be specified after each iteration so they can adapt as things evolve.

Long-term projects

The model is suitable for sustained projects which are not limited by rapid spontaneous development. At the end of each development stage, a payment is made to the company after detailing all of the time/costs that have been spent on the project up until that point. Nevertheless, it’s important to make sure your project team is well-structured even before you begin work. While choosing a contractor, do pay attention to the presence of internal procedures and guidelines that describe certain processes as this will save you time in the long run as some processes can take more time than they should if your business structure isn’t as efficient as it could be.

Finalizing the draft

Clients often need post-development support for their products, whether it is adopting them to market trends or improving upon prior versions. Such cooperation generally includes certain requirements when it comes down to the number of hours that are needed for the development of your project, but it can ensure that you stay working with your client steadily without running into difficulties in regards to completing it on time. Generally, hourly rates are based on the category of specialists involved, especially if the startup is in the phase of modifications and bug fixes. This pricing model also implies detailed requirements for the stages of work when there is access to the primary and technical documentation for a project. The number of people within a team, and how long a given phase may last, is only secondary.

Joint team

In some cases, it's the employees of the customer whose work on a project is managed by a contractor. In this case, there’s a need to be cautious concerning dependencies between the contractor and the client’s team that work together. Also, information shouldn't be exposed. If not exposed to the risk of infringement upon property rights, the process of software development becomes more effective, which makes control over its progress unneeded.

The client is obliged to give clear-cut tasks - understanding that he pays for each hour, it will not be wasted on useless changes to requirements. This format includes regular submission of reports and the use of modern tools for time management within the project. It involves running tests throughout the development process to increase the quality of the final product.


To help prevent sudden costs from sneaking up on you, split up your project into phases with fixed budgets for each phase. Phases should be determined according to planning and related to the final result. It's easier to avoid unexpected problems if you know that what you're working toward meets industry standards. The fixed Budget Time & Material supports better planning, transparency and fair pricing by agreeing to a fixed budget upfront. The development team focuses on tasks, but not on the specification principle. Team members don't pay attention to shortcomings and omissions.

Outsourcing your IT projects is a good idea when it comes to dealing with software development tasks. This approach is generally a cost-efficient solution that works best for mid-size and large companies that can't afford to have an in-house IT team or departments. The best part about outsourcing IT work is that you pay only for the actual hours worked and the resources invested, which helps you to adjust your priorities when needed without having to spend too much money in the process. And with T&M outsourcing, you don't have to worry about the contractor taking advantage of you and charging exorbitant prices or not sticking to their budget—simply because they're only paid for what they've worked on!