How to Benefit from Fixed Price & Fixed Budget Software Development

Although Agile approaches to development have become more popular in recent years, at Freeport Metrics we understand the value that a fixed time and fixed budget contract can bring to your business.

Working in Agile can put you in a situation where your development partner is not talking about the time it will take or how much it could cost you to develop the amazing features you agreed upon when workshopping. Fixed time and fixed budget contracts allow you to make wiser business decisions, with clear ROIs.

1. What projects work best with fixed time and fixed budget contracts?

The two types of projects we highly recommend going with fixed time and fixed budget contracts are when replacing old software, or building something completely new. These types of products are usually constrained by time and budget, which is why you should have a clear road map of when certain features, or the final product, will be delivered, as well as how much you imagine it should cost you.

Replacing legacy software

When trying to replace an old piece of software, the scope is already determined, and for an MVP it’s often just about replacing the system. You already know what you want to build, and what you want to change, but your specialists must have the skills to execute your vision. Fixed time and fixed budget contracts are perfect for projects like this because once you decide to replace your software, you just need to know your ROI goals, get an estimate for building the software, and understand the dollar value of the rebuild.

Your development team should be aware of the costs & priorities, so they can make pragmatic decisions based on the budget you’ve allotted. This ensures they make the best business choices for your product while delivering within your budget and on your timeline.

Launching a new product

You can benefit from working with your partner on a fixed time and fixed budget contract when launching a new digital product on the market. You can jump to Agile development later with a separate portion of your budget once you are getting feedback from real users. You want to avoid the risk of endless internal perfectionism and launch delays. Your aim should be to get your Minimal Viable Product (MVP) in the hands of beta testers, your sales team, and real prospects.

The cost of developing and deploying your product can be a large part of your budget. With fixed budget contracts, you’re able to realistically see the bigger picture, and ensure you hit a critical milestone for your business (i.e., “We’re live!”).

While you need an estimate for the cost of building your product, your development team needs to be aware of the budget so they can work within the constraints of your business plan and make sure your new product is viable. Having a fixed price and fixed budget contract can help you to clarify your time to market while increasing the chances of your business seeing a return on investment.


Demand a roadmap from your software development partner


2. Roadmaps get you where you need to go

To get work done, and deliver features on your timelines, you should demand a roadmap (a breakdown of your larger project into smaller milestones) from your software development partner. Build what’s most important. The whole team should be aware of what they are working towards and be accountable for their parts. These milestones should be set at a maximum of 3 month periods, to allow for goals that are more attainable and less overwhelming. These roadmaps and milestones should be clear for everyone on the team, from clients to developers.

If there are changes in development throughout the development roadmap, from either the client, stakeholder, or developers’ side, there should be active communication between the teams. Not just about what changes will be made, but how these changes will impact the budget and timeline. With fixed time and fixed budget contracts, you reduce the guessing when your product will actually be launched or have to worry about changes just being folded into a backlog to be dealt with at some later unknown date.

3. Developing software with a team that can plan work & provide detailed estimates

When working with fixed time and fixed budget contracts, you’re making decisions based on realistic cost estimates. If your team isn’t accountable in the estimate then you’re not making sound business decisions - and this could be detrimental. Accountability for time and budget allow your development team to make pragmatic recommendations and decisions along the way. They will work on what is essential for your product, helping you achieve your goal.

With Agile, you can build the same feature multiple times, and continue iterating on it. This is ok, if your product is already live and the changes are driven by usage and prospect feedback Every hour put into those iterations is costing you time and money. You don’t want all that refactoring, re-writing requirements, and re-testing based on questionable feedback.

As Reid Hoffman, the founder of LinkedIn said: “If you are not embarrassed by the first version of your product, you’ve launched too late”. You’ll get your product to market faster and cheaper, allowing you to get feedback from real users about your very real product. Feedback is crucial because it means you can iterate only on the features you know need improvements, and you’ll also know exactly how your users want it improved.

Takeaways:

  • Informed business decisions are essential when launching a new product or replacing an existing one
  • Fantasy estimates aren’t acceptable. Software development work can be planned and estimated just like any other work
  • Fixed contracts give a clearer vision of your ROI
  • Follow Lean Startup ethos more than Agile. Get your products in the hands of end-users ASAP. Design your MVP, build it, launch it, then start your iterations




Many clients have already benefited from choosing fixed time and fixed budget software development with us. Ask us how we can get your digital product to market, saving you time and money. You can also just schedule a meeting with us on our website.

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