Time And Material Model- An Outsourcing Engagement
If we say the two words together Time And Material
. What is the first thing that comes in mind? Or I should say how can we actually relate these two words? Answers to these questions provide us with a concept which is used for engagement, not only in IT industry but in many other areas.
If we relate the two words; we come out with an understanding about the output of material with respect to time. So output or material is dependent on the time the person contributes towards that work. Considering this as a concept it is an engagement model where the resources are paid according to the time they work on a particular project.
I feel it makes us clear about the concept of Time and Material Model. In this model a particular amount is fixed per hour and payment term are on hourly basis. There is no fixed timeline in such kind of engagements, as there is nothing fixed about the work that is to be done.
Lets understand it more clearly by listing out some important features of this model.
Features:
Both Vendor and client agree on Per Hour rate.
Maintenance of Time-Sheet for recoding of working hours.
Approval of Time-Sheet by the client before billing or Invoicing.
Sometimes minimum hours of utilization are also mentioned by the Vendor so that fixed cost can be covered.
This model is mainly used where scope of the project is not defined.
After having clear understanding of the concept as well as the feature list of the model, our focus comes on how this model can help the Client or the Vendor by using this engagement. By this we mean is the advantages that Client or vendor can get from this type of engagement-
Advantages:
Client gets the flexibility of revising the work during the period of execution.
Client gets regular work reports.
Workflow becomes smooth by effective and continuous communication.
Project Control is better in such model.
Processes are customized as per client needs.
Increased Transparency
Cost Effectiveness
Delivery timelines are customized
Management of Team size is flexible
Flexibility in working hours
Flexibility for enhancement in scope.
Contribution from an employee in a project can be easily evaluated.
Realistic patterns as per Clients advantage.
Adoption of methodologies is according to the client.
As we see above this model of engagement provides the client with too many advantages, however at the same time it also have disadvantages with it. Considering it must be used with the right project, it can be very advantageous but at the same time it may be very costly if taken with a project that is not actually compatible with this model. We can say it a model with Terms and conditions. We will surely be discussing about these terms and conditions but before that I feel its better if we get to know about some flaws that this model brings with itself.
Disadvantages:
Every Billing includes the profit.
This model is good for small Projects.
Only standard SDLC Projects.
Client controls the Budget(A disadvantage for Vendor)
Cost control is difficult
Now, after discussing the disadvantages of this model lets come back to the terms and conditions that I mentioned earlier. By these terms and conditions, I meant the conditions under which this model can be advantageous i.e. the projects for which such model of engagement should be chosen.
When to use:
Requirements not clear
Project is too big that is for several months
High flexibility in the scope
Tailoring of the project processes are required
Resources are required to be controlled
When the complexity is avoided and Simplicity is required.
Dedicated team required.
So after discussing every single area or I should say everything in detail about where it help ,when it should be used and where it can be disadvantageous, we come up with certain key points which are as conclusion of our above discussions.
Time and material model is model in which resource is paid according to the time worked on a project
Its advantageous but limited to certain type of project such as long term projects where requirement is not fixed.
It may be disadvantageous if used with a wrong project.
There are other types of engagement models such as Fixed price Model, Dedicated development model etc. with their advantages and disadvantages.
by: OTS Solution
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