Fixed Price vs. Time & Material Contract: The Right Option
What are best strategies to engage a game development agency? How to build awesome game within a given budget? How to effectively build and manage external teams? How to hire game developers? These are typical questions that run through everyone’s mind who is planning to develop innovative game, VR experience or even an e-commerce website or a mobile app. It’s also a primitive question that has to be answered upfront whenever you are hiring external agency. However, the answer and options to these questions require thorough understanding of options.
First of all, we have to understand that pricing creative and a game design service effectively at the start of the project is difficult. Not only games, but to be honest there isn’t really a ‘right way’ to price product development services. Currently, we have following options available:
- Fixed Time & Cost
- Agile, formerly known as Time & Material
The article discusses both engagement models in details, and highlight steps to ensure success of those engagement models. Both are established models, and can be picked based on client’s preference.
Fix Time & Cost
A fixed-time & cost-pricing model promises a definite deadline, definite cost; presented in a well-documented upfront proposal. This frees client from escalating cost, however requires well documented requirements shared at start of the project. The model allows clients to work within fixed budget. The model is ideal for projects with a strictly defined scope and requirements, and where references are available. However, your idea may evolve during course of game development, which will be termed as “Change Request”, and would require re-scheduling. The hourly rates hovers around $30 for offshore companies that is usually 30% higher then other model, as vendor has to spend extra hours on project management.
Milestones play an important part in success of the model. Milestones are measureable progress that depicts an important achievement in fulfilling the project. Our finding concludes that having fortnightly or monthly milestones contributes heavily towards success of the project. We also found that tying up payment schedule to milestone approval keeps all stakeholders involved in the project. After completion of each milestone, the deliverable is forwarded to the client for feedback, and its client responsibility to provide timely feedback. After approval, company starts working on next milestone.
- We strongly advice against defining a project as a single milestone – a typical situation to watch for is 50% upfront payment, and 50% towards end of the project. This is a disaster for project execution to an extent that we typically term it a scam.
- Its perfectly fine to divide a larger project into smaller milestones – you can think about dividing a game project into core game play, UI, adding more characters, levels etc.
- Keep aside some budget for missed requirements and changes that you didn’t envision at start of the project. Everyone wants to have some freedom of changes, once they see working product, as everything cannot be documented upfront.
- Timely feedback is critical to success of game delivery. After each milestone, you should get work in progress game. This ensures there aren’t surprising towards end of the project.
The model is ideal game, mobile applications and web applications meeting following conditions
- Small sized projects with very well document requirements
- When client is building MVP (minimal viable product)
- Have a definite budget in mind
- Have references, look a likes, and less dependence on creative tasks.
- Doesn’t have enough time to manage product.
Agile – Time & Material
Agile, which is improved version of time and material, has gained lot of momentum in technology outsourcing recently. The model allows you to assemble team for the project, and build games. The model allows you to evolve game as it develops, make iterations to improve the game. The model is very similar to hiring a team for your game; the only difference is team is hired for a shorter duration and remotely, without adding fixed cost. There are various skills required in developing a game, and it makes perfect sense to assemble a “casting crew” as you need those. The usual hour rates for offshore hires hovers around $20/hour. Having an hourly rate eliminates this problem to an extent since you only pay for the real time spent to achieve particular tasks and goals. Thus, charging hourly rate is usually more cost-effective. Furthermore, the model allows you to make iterations, change requirements and save time on debating about “change requests”.
- This model can provide cost advantage but requires more thorough planning at clients end.
- Remember to measure productivity and review product quality regularly.
- Setup communication protocols earlier and follow up on those regularly.
- Don’t opt for this if you aren’t ready to devote time to manage project.
- If you are building innovative game, it’s ideal to opt agile methodology.
- If your project is art intensive, it’s advised to follow agile development.
- If you have a large project and wants control on final output; and output quality surpass the budgetary constraints
- If you are willing to devote time to manage your project
- There isn’t a well-defined scope of work and requires flexibility.
So really there isn’t a clear winner here. Choosing an appropriate pricing model is dependent on many factors, like the scope of the project, the goals, budget, and type of the project and also on client. Please do not hesitate to speak to our consultant to discuss an option that suits you most.
We have attached the comparison chart for review
|Costing||Provides a fixed cost for agreed scope||Charged based on actual hours spent|
|Budget||Fixed budget||Variable Budget|
|Scope||Very well defined||Evolving features and product|
|References||Ideal for look-alike, or clear references available: e.g. building a game like flappy birds||Ideal for innovative ideas, like building a hyper-casual game that I have sketched|
|Project Size||Ideal for small size projects i.e. less then 6 months||Works well for large size projects, that are over 6 months|
|Control||Provide slightly limited control on final output, e.g. once art is approved, doesn’t allow client to change art or items from previous milestones||Provides total control and allows clients to change items as they desire; ideal if client wants to have|
|Project Management||Vendor performs project management and planning. Vendor adjusts feedback and change requests either during releases or towards end of the project.||Client takes responsibility of budget, schedule and resources. Provides flexibility to make changes in schedule as desired.|
|Costs||Can be cost effective if requirements are very well defined and have lesser dependence on creative tasks||Is cost effective when requirements are evolving and have more creative tasks.|
|Company Stage||Ideal for building Minimal Viable Product||Funded startups usually prefer this model|
|Communication||Requires less frequent communication, and can use emails, chats and weekly calls for communications||Requires frequent communications and must use Agile Development Tools like Asana, Assembla or Slack|
|Deliverables||Deliverables are divided into milestones||Deliverables are divided into fortnightly sprints|
We know its tough, but it’s not just tough for Game development outsourcing. These discussions hold true for all outsourcing. Clients use GenITeam Solutions to build games from scratch to finish, or augment their capabilities e.g. hiring game artists, hiring game developers, marketers when they need resources for shorter duration; or expand their capability deck to serve their clients better mostly true for digital agencies. Speak to our consultant to understand the options and discuss in details. We are always a message away!
You can contact us to discuss your next idea & we would be happy to help you up.