IT Outstaffing Models. Time & Material Model: Pros, Cons and When to Use?
Choosing a cooperation model is your second most crucial choice, right after selecting a reliable IT outstaffing vendor. Don’t hesitate to learn more about the IT outstaffing models, and how T&M, in particular, may benefit your projects.
What is Time & Material Model in Outstaffing?
From a certain perspective, IT projects are all about the profitability and expenses of time. That’s why having an app deployment completed successfully is half the battle when it comes to paying off the bills. The cases when startups fail with their digital solutions are not unheard of. One of the most expensive of them had total funding of about 1.7 billion and was shut down because of the overdue rent.
Time & Material (T&M) outstaffing model is a type of contract when you hire specialists for a defined or open-ended (no time limit) number of working hours. In this case, you bill a work scope based on hourly rates of labor plus the cost of consumables. This way, the end price fluctuates depending on the workload you voluntarily change.
The T&M model grants you a certain degree of agility and flexibility. With it, you can adjust the time expenses on your project based on evolving requirements. Besides, you can shift dev directions, change functionalities of the end product, and scale your digital solutions at a lower cost.
Looking for market-leading software outsourcing & outstaffing services? Share your project details with PM Partners and claim your free strategy session.
How is T&M Model Different From Other Models of Cooperation?
To determine the suitable cooperation form, you should consider Outsourcing vs. Outstaffing, Time and Materials vs. Fixed Price, and other concepts available. Let’s review all of them in a bunch and find out how exactly T&M is different:
Outsourcing. This type of remote employment implies assigning the entire project or its agreed part to an agency and letting their project managers (PMs) and other staff handle the rest. It may include multisourcing, project outsourcing, operational outsourcing, and other cooperation forms.
Outstaffing. What is outstaffing remote employment? Basically, you hire additional remote employees serving as a part of your in-house team. This concept is also split into several IT outstaffing service forms.
T&M. As mentioned, you negotiate a rough quote for hourly wage and cost of consumables, if there are any. The contractor usually sets a “not-to-exceed” price level to protect the client against excessive expenditures.
Fixed Price. These types of contracts have the end price agreed upon and indicated on them before the work begins. The fixed price concept is ideal for well-understood projects with predictable time and material expenses.
Dedicated Team. In this cooperation approach, a client hires an entire team to collaborate closely with an in-house team. Specialists are chosen depending on the project requirements and are paid based on their rates. Materials are covered by the client itself.
In essence, you may consider T&M the perfect fit for your project if the exact workload, tech stack, required dev expertise, and other aspects are hard to predict in advance. In both short-term and long-term projects, you may need to change planned functionalities, adjust the workload, implement user feedback, and more. T&M is such a smart outstaffing model that allows you to do so at the lowest cost and still achieve optimal outcomes.
Key Features of T&M Model
Let’s dive a bit deeper into the advantages and specificities of the T&M Model:
- Allows for adjusting the scope of the work explicitly during the project’s execution.
- Ensures the transparent dev process
- Ensures that the client receives regular updates and high-fidelity status reports from the service provider itself — the outstaffing company
- Provides superior resource control opportunities
- Ensures good knowledge retention
- Risk management is handled by the client itself
- Agreed-upon milestones protect the contractor’s workflow
- Not-to-exceed clause helps to prevent breaching the maximal price
- Any excess hours are absorbed by the contractor
When it comes to outstaffing development, flexibility is what you trade solid estimations for. It’s good enough for any complex or innovative project.
What are the Responsibilities of the Contract Sides Within T&M Model?
Outsourcing or outstaffing, one cooperation model or another; regardless of the chosen approach, you should be well aware of the scope of responsibilities of contract sides. Here are some important considerations to know before searching for outstaffing companies:
Scope of work. The client is responsible for defining the rough scope of work, managing priorities, and maintaining clear communication with the service provider. Naturally, the contractor may offer assistance in defining the scope of work.
Resources. The service provider is solely responsible for providing experiences and educated labor and consumables that the project may require.
Process management. The service provider is responsible for providing detailed timesheet reports concerning the service rendered.
Risk management. The client is solely responsible for the project management, quality of product, and deliverables. They also own risks related to the scope of work outlined.
What’s mentioned can be rephrased in a much simpler way: a client is to properly communicate, weigh the risks, and set clear objectives. At the same time, the IT Outstaffing company is to provide a specialized workforce, consumables, regular reports, and high-quality outcomes.
When to Stick With T&M Model?
Before you proceed with selecting an IT Outstaffing company, you should discover if your project is actually compatible with this approach.
Here is the list of cases and types of projects for which the T&M Model would be the perfect fit:
- Project resources, deadlines, and expenditures are difficult to estimate
- There is a high level of uncertainty in the work scope
- Technical specifications are difficult to define in advance
- Work scope changes are projected
- It’s the first-time engagement with an outstaffing company
- The client requires a high level of control over resource utilization
In a broad sense, the T&M Model is suitable for projects of all sizes and complexities.
Not Applicable When
And here are some instances in which it’s better to choose another collaboration model but T&M:
- The client requires the strict fulfillment of the exact work scope and meeting of the limited budget or timelines.
- The clients expect the service provider to manage the workflow with a high level of independence.
As an example, a simple, urgent project you don’t want to manage yourself is exactly what T&M Model is the worst match for.
Pros and Cons of T&M Model
When it comes to outstaffing benefits, there are many. Let’s mention all those applicable to the T&M model and place them against the limitations of the concept for a complete overview.
|Client has full flexibility in adjusting the work scope and the degree of resource utilization||Final cost and timelines may significantly differ compared to initial estimates|
|Low risks for the service provider||Moderate risks for the client|
|Easy to negotiate the contract and implement it||The service provider holds limited ownership over the project|
|Fully applicable for projects of all sizes and complexities||Requires continuous involvement of the clients and its in-house team|
|Faster project start and more dynamic decision-making process||May lead to misaligned incentive between the service provider and the client|
Outstaffing as a cooperation model is completely valid. The T&M concept falling within it is presented with solid strengths and some situational limitations. If you don’t mind being closely involved with the service provider’s team and flexible time and expense estimations are not issues, you will likely be fine with the T&M model.
Choose PM Partners as Your Trusted Outstaffing Service Provider
How PM Partners Can Help?
PM Partners is an IT Outstaffing, Ukraine-based company. We’ve been on the market for years, constantly delivering high-end outstaffing solutions and assisting small startups to large-scale enterprises.
We are a leading provider of Ukraine IT outstaffing service lines, some of which include:
- Blockchain and Fintech outstaffing
- Custom desktop and Mobile Software Development
- Web Development
- Data Discovery and Discovery Phase outstaffing
- Custom Big Data outstaffing
As a reliable IT outstaffing services company, we feature the end-to-end approach, covering every aspect of the partnership. You can rely on us on any matter, from forming requirements and selecting candidates to gather a team and launching a project. Be confident in the trustworthiness of the specialists assigned to your project, transparency of our workflow, and high clarity in our communication with you.
Smash the contact us link to request high-end IT outstaffing services. Let the PM Partners expert team get the work done.
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