Fixed price – It sounds good: You know what you’ll get at what cost. But do you really? Before going after a fixed price, please consider the following.
No project is fixed
No matter how detailed your specs are, playing with actual test releases is always – always – going to make you rethink parts of you app. You will want to get rid of one thing, add another or maybe change just a small detail that turns out to have huge impact time and money wise.
Cost vs Value
Having a fixed price will make every single change to be about cost instead of value. For both you and your developer this won’t help to focus on delivering a great app.
Black box
A fixed price project is much like a black box. The input is your money, the outcome is your app. You will never know what parts of the app took more or less time than estimated. Sure, it’s nice to have the developer carry the risk of underestimating the project, but in return he will of course include a substantial buffer, with no incentive to be open about if and how he spends it. Wouldn’t you rather be in control, set priorities and decide what parts to drop, postpone, but also add within the same budget?
Additional costs = Failure
The invoice for a fixed price project will always – always – charge more then the fixed price. No matter the value of the changes and you having asked for them yourself, having additional costs will still feel like a failure to both parties.
Alternatives
I did fixed prices for a long time myself, but this blog pretty much sums up why I have been looking for alternatives lately. I already used parts of Agile and a talk I recently heard at DMC helped me see how to take this further.
Plan and pay per sprint
I think about working with an open ticketing system where you as a client are actively involved in deciding what needs to be done in what order. By splitting the tasks into short sprints of a fixed amount of time and price, we can test and reevaluate after each sprint and immediately see how pushing changes to the next sprints affects the overall schedule and budget.
Focus on value
By nature, this way the focus will be on the value that we can realize within the budget, instead of having additional costs for every added value. You will be in full control of how I spend your money and have a much better understanding of your app. This in turn will help you set priorities or even generate ideas for next releases.