November 12, 2022   / Uncategorized

T&M Model vs. Fixed Cost Model- Which one’s the best? 

2 minutes Read

You struggle to make an informed decision when selecting the best pricing models due to the rising costs of software development.

For the majority of businesses, having an internal software development team is ideal for all of your initiatives. However, not all businesses have a steady stream of software development projects to support such a team. Therefore, they look for the best development team to produce their software.

Now, based on the project requirements, there are different types of models the company can finalize. And once the development model is decided, one can move on to the actual development process. 

So, here is a comparison between the fixed price model and the T&M model based on various attributes.

Software requirement

For a fixed-price project, at the beginning of the project, the requirements are fixed, and estimations are based on them.

And for the T&M model, the MVP’s requirements are laid out at the outset. For the sake of clarity, this MVP can be divided into User Stories. As the software is being developed, these requirements may change.


In a fixed price model, resource estimates are made in advance for the entire project. The number of resources needed at each step of the project is decided based on the designed Wireframes.

On the other hand, for the T&M model, depending on the user stories and new changes, different resources are needed. They can be reduced when the modifications are subtle and can be increased when the delivery is sophisticated and feature-intensive.

The Budget

Once the criteria are set in stone, a cost estimate for developing the full product is made. Each time a modification is made in a Fixed Price project, the cost is reviewed, and this requires realigning the plan.

For the T&M model, based on the resources needed to produce each element are estimated. These deliverables combined can be used to estimate the budget. Thus, once each User Story is completed, the resources and utilities for each can be defined (either simultaneously or sequentially).

Development model

The predictability required by a Fixed Price Contract is provided by a typical waterfall development process. Iterations are used in a few situations to raise the caliber of software. With predetermined timetables, each stage is carried out linearly.

A regular or agile development approach can both be used with the time and material model.

Managing change

The fixed price model is incapable of accommodating a change. Some businesses first agree on the cost of each change that will be made before creating a change request to have it carried out.

The T&M model can readily handle requests for changes. Resources and deadlines are nimble and can be modified in accordance with the altered trajectory.


The development company is contractually obligated to follow the predetermined timelines for the development of the full software in a fixed-price model.

Whereas in a Time and Material mode, each iteration’s timetable is specified. The delivery schedules for MVP are established with no consideration for dynamic changes in the needs.

Considering all the attributes, we can see that the T&M model proves to be the superior one. What are your thoughts on it?  

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