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Fixed Price vs Time & Material

Risks and complications that may occure.

Fixed Price model implies a fixed price, project scope and delivery time frame. But, the estimate assumption how and when to build the system may not be accurate. This results in both the customer and the software supplier absorbing the risk of cost over-runs. This fear may not result in the best business solution, as the software supplier may try to cut corners by opting for workarounds, or overcharging for project changes and extensions. Time & Materials model provides no real incentives for the software supplier to develop efficiently and the client may have only a limited visibility and control on the development progress and budget. Both these pricing models can be a trap but can also bring great benefits.




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