In today’s digital world, organizations across the world prefer to hire an outsourced development team from a staff augmentation firm like CloudVandana. This hiring process helps them to enhance their business and deploy the projects faster, but most of the time, organizations get stuck to a particular point. What will be the best pricing model that will suit best to their organization, the hourly-rate model or the fixed-rate model?
To provide a better understanding, CloudVandana will discuss the details of both the pricing model in today’s blog.
Numerous organizations face this challenge, specifically when they are hiring a remote team for the first time. An entrepreneur or an organization should know the difference between these two pricing models and select the best model that has a long impact on overall cost planning. Let’s have a look at the advantages and disadvantages of these two models.
Fixed Pricing Model For Outsourced Development Team
As the headline says, this model is fixed and won’t fluctuate in any situation. The price gets selected depending on the project size and the complexity of the project. When an organization chooses the fixed pricing model, the payment is made for the complete project and not for being on the clock.
Benefits Of Fixed Rate
1. This model provides a hassle-free process for both organizations and developers. Organizations do not need to track their hours or track their daily activities in this model. Only coordination is required to maintain the bonding among team members.
2. A clear understanding of the project and the brand is defined before the onboarding process of the developers. So developers do not face many challenges while working.
3. Organizations do not need to face any payment-related hassle frequently as the payment will be made monthly or quarterly.
Drawbacks Of Fixed Rate
1. This is not a flexible solution. A project usually needs various modifications at different steps of development. Developers need to re-analyze the various aspects like time, cost, priorities, etc., depending on the complexity of the project.
2. Sometimes, this may lead to less productivity and less quality control.
Organizations can choose a fixed-rate model where the task is well-defined. Projects with fixed workflow can adopt this model. Developers can work freely in this model as tasks, processes, deadlines, prices, and everything is fixed so they can work in a hassle-free way. Small projects can adopt this pricing model compared to bigger ones.
The hourly-Rate Model For Outsourced Team
When an organization hires an outsourced development team on an hourly rate basis, then the pricing model is called an hourly-rate model. The working hours might be tracked to see the performance of the team. With the help of the tracking app CV Timer, organizations can easily track the performance and productivity of the team.
Benefits Of Hourly Rate
1. A development team provides accuracy. Through the activity tracker, organizations can see the performance of the team.
2. In the hourly model, everything remains transparent, and organizations can check the progress or development whenever required.
3. Organizations can exactly pay for the tasks done by the developers
Drawbacks Of Hourly-Rate
1. Sometimes the efficiency becomes hampered due to the pressure to complete the project within the specified hours. Sometimes the chances of mistakes can be high.
2. It is tough to calculate the cash flow in this model. Organizations can’t predict the payments and the profit precisely in this model. If developers need to work for extra hours, that also becomes a matter of concern as this might go beyond the budget allocation.
This model is perfect for projects where both the developers and the organization are not sure about the process involved in completing the task. So, by tracking the developers’ progress, organizations can get to know the procedure and the progress of the development work and can pay the developers depending on that. The hourly rate is suitable for unstructured projects where a lot of subjective back and forth is involved.
So, from the above discussion, we can say both models are effective. Organizations need to select the model that suits them the best.
CloudVandana, one of the reputed Staff Augmentation firms in India, works in both pricing models suggesting to the client the best model for their business based on the project type, duration of the project, complexity, etc. So, please don’t waste your time searching for remote software developers for your organization; instead, TRY OUR DEVELOPERS FREE FOR A WEEK and select the best team of developers from the large talent pool of CloudVandana. Schedule a call now.
Digital Marketing Manager at Cloudvandana Solutions