Fixed Price or Dedicated Team: What To Choose?

Fixed Price Approach

    This model is suitable if you have well-defined and not large scope of work. Fixed Price, as its name suggests, presupposes that all potential risks are handled by your vendor company. Time, budget, and scope are fixed. This approach is characterized by the following:

• Minimum customer’s involvement
• Fixed timeframe and budget
• Well-documented and well-elaborated requirements
• One-off project delivery

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Dedicated Team Approach

    This model is favored by businessmen and corporate customers. It presupposes that all risks are shared between you and your contractor. There is no fixed price but a fixed payment. Dedicated Team model has the following characteristics:

• Maximum customer’s involvement
• Flexible timeframe and budget
• Changing requirements
• Team + regular delivery

Which Is Better?

Fixed Price contracts presuppose re-estimations of a cost in case of any change occurs. Dedicated Team contracts are more flexible in such cases. However, the latter approach requires your active involvement, while the former puts all potential risks on your contractor’s shoulders. The Dedicated Team approach is a preferable option when there is a lack of information on the project’s requirements. The Fixed Price method works best when all the requirements are understood and well-documented.

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As soon as you are done with your pricing model, it is time to choose your PM framework. The following are some thoughts on how to make this choice.

PM Frameworks

Generally, there are various PM frameworks allowing to manage processes. Cascade and Scrum are some of the most widely used among them. Both frameworks can help you in increasing output, and managing your projects more effectively. However, each of them has its disadvantages that you should know of before making your choice.

What is Cascade?

Сascade is probably the most widely used PM methodology. It provides a linear/sequential process which makes Сascade really easy to use. There is a defined number of stages in the project; once one stage is completed/approved, the dev’s proceed to the next one. This model is best used for the simplest projects with minimum changes.

Pros:

• Needs documented requirements
• Low risk to miss deadline
• Easy-to-use due to a rigid/linear structure

    Cons

• Identifying accurate project requirements is often a challenge
• No ability to easily accommodate changes

What is Scrum?

This is an iterative methodology used in managing complex processes. Scrum follows a set of elements that do not change. Sprints, or fixed-length iterations, last 1-2 weeks, allowing to deliver products regularly.

Pros:

• Cost-effective
• Changes can be easily accommodated
• High accountability
• More project visibility and transparency

Cons

• Potential inaccuracies due to vague requirements
• Too much depends on Scrum Master
• Requires a certain level of experience
• Possibility of scope creep

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The huge disadvantage of Cascade is how changes are handled. It does not allow bouncing between stages (if a critical change occurs). Once you finish a stage, that is it. While Scrum offers numerous pros, it also has some cons. The most significant one is that it requires a certain level of knowledge and preparation, which means it is much harder to use.

Dedicated Team works best under Scrum framework as it allows to manage difficult processes with changing requirements. In contrast, Fixed Price allows to go with Cascade framework, where the details of the project are known. If you have hard time choosing the right model for your business, please contact us so we can help you.