The three common models
| Model | Fixed price | Time and materials | Dedicated team |
|---|---|---|---|
| How you pay | One price, split across milestones | Hours or days actually worked | A monthly fee per team member |
| Scope | Agreed in writing upfront | Flexible, set sprint by sprint | Flexible, set by your priorities |
| Who carries the cost risk | The development company | You | You |
| Best for | Clear, well-defined projects | Evolving products and research | Long-term products with steady work |
| Your effort | Low to medium | Medium to high — you prioritise constantly | High — you direct the team |
| Watch out for | A rigid change process; padded estimates | Budget creep without limits | Paying for idle time if work dries up |
Fixed price: when it works, and how to make it fair
With a fixed price, the development company takes on the risk of underestimating. That’s valuable to you — but only if the scope is clear enough for both sides to agree what “done” means.
What makes a fixed-price contract work
- A written scope with acceptance criteria — what each feature must do to count as complete.
- Milestones tied to payments — you pay as working software is delivered and approved.
- A simple change process — the team estimates each change, you approve it in writing, then it is built.
- A stated support period — defects found after launch are fixed at no extra cost.
Time and materials: flexibility with guardrails
You pay for the time actually spent. It suits products where you will learn as you go — a new idea, a research-heavy feature, or ongoing improvements after launch.
How to protect yourself
- Set a monthly cap or a budget per sprint.
- Ask for timesheets and a short written summary of what was done each week.
- Review a live preview every sprint, so hours always map to visible progress.
- Agree the rates, and who is on the team, in writing.
Dedicated team: when you need ongoing capacity
A dedicated team works only on your product for a monthly fee. It makes sense once a product is live and growing, with a steady backlog of features — like an extended in-house team without the hiring overhead.
It needs someone on your side to set priorities every week. Without clear direction, a dedicated team can drift.
The model most businesses should use
For a new project, the safest path is usually a mix of the models:
- 01
Short discovery
The team studies the problem, maps users and screens, and chooses the approach.
- 02
Fixed quote for a clear scope
With the scope in writing, a fixed price is accurate instead of padded.
- 03
Milestone payments
You pay as each milestone is delivered and approved on a live preview.
- 04
Flexible work after launch
Once real users arrive, move improvements to a monthly scope or time and materials.
What every software contract should include
- Scope, with what is included and what isn’t
- Milestones, dates and the payment at each
- Acceptance criteria and how approval works
- The change request process
- Transfer of source code and IP on payment
- Accounts — domain, hosting, stores — in your name
- Confidentiality terms or an NDA
- The support period after launch
- What happens if either side ends the contract early
- Governing law and where disputes are resolved
On ownership in particular, read who owns the source code — Indian copyright law has a detail that many contracts miss.
Questions people ask
- Is fixed price more expensive than time and materials?
- The quoted number can be higher, because the company carries the risk of underestimating. But the total you pay is predictable, and on well-scoped projects it often ends up close to what time and materials would have cost.
- What happens if a fixed-price project takes longer than planned?
- If the delay is on the development side and the scope hasn’t changed, the company absorbs the extra time. If the scope changed, the change process applies. That’s why a written scope matters.
- Can we switch models midway?
- Yes. A common pattern is a fixed price for the first version, then time and materials or a monthly scope for improvements after launch.
- How much advance payment is normal?
- It varies, but an advance to reserve the team and start work is standard, with the rest tied to milestones. Be wary of anyone who asks for the full amount upfront.
Planning something like this?
Tell us what you want to build. You’ll get a written scope and a fixed quote before any work starts.