Месяц: Ноябрь 2020

Before making a choice between Fixed Price vs. Hourly Rate let’s decide the comparison criteria.

Here they are:

• Total development cost
• Reaction on changes in the development plan
• Product quality and competitiveness

Let’s look at the Fixed Price and Hourly Rate options using a simple application for submitting support tickets.

Total development cost

When developing a web application, the developer company calculates its costs based on the amount of time it takes to create the product.

In our case the staff will be:

•  1 programmer for the Server-Side Development — 30$ / hour  (SSD)
• 1 programmer for the Client-Side Development 30$ / hour (CSD)
• QA — 20$/hour (QA)
• project manager — 30$/hour (PM)

Fixed price: The company calculates the number of people needed for development, takes into account the cost of an hour of their work, the complexity of the project, takes some money. stock.
Thus, the more accurate the terms of reference, the more accurate the project calculation will be.

In our case the hours required for this app will be:

• SSD — 40 hours
• CSD — 40 hours
• QA — 10 hours
• PM — 10 hours

Coef.  of the risks — 1.5…. This indicator is different for all companies.

Totaly, 2900$ (100 hours)

With Coef.of the risks —  2900 * 1.5 = 4350$  (150 hours)

Hourly: used methodology agile, scrum. According to which you plan the project 1-2 weeks in advance. After this time, you get a part of a workable product, which you can already look at, use, ask the developers to change something. This approach allows you to very quickly present your product to the market.
Development continues until the product is completed. The customer can decide at any time to stop or change the development requirements.

Real-time wasted:

• SSD — 60 hours (client’s server was not standard and took longer to set up)
• CSD — 35 hours (turned out a little faster)
• QA — 16 hours (slightly more than planned)
• PM — 8 hours

Totaly, 3410$ (115 hours).

As you can see, specifically in this example, with the correct terms of reference, that for a simple application, hourly pay is a more suitable option.

 

Reaction on changes in the development plan (something went wrong, needs to be redone)

When it can happen:

• The project does not have what the customer thought would be added by default
• The product was not what it was intended
• When customer trying to sell a product, they don’t buy it
• Customer’s clients asked to add functionality
• During the development, there were problems with the implementation (some modules do not work as intended).

Fixed price: not reworked if not specified in the contract. these are additional costs. In this case, changes are calculated and added at a separate cost.
If the customer does not have a complete understanding of the picture of the project or he has conveyed it incorrectly, there is a risk of getting a product that is unnecessary for the market, which will not pay off.

Hourly: Changes can be made immediately without prior approval and agreement. This allows the product to be adapted to market conditions faster.

It is very important to mention the size and complexity of the project here. If there are not many changes in our small, that in large projects changes affect the rest of the functionality, which sometimes increases the development time several times.

During development, there were problems with the implementation (some modules do not work as intended)

Today the developer writes 30% of the project code. The rest is a set of ready-made solutions that sometimes cannot work together. It is impossible to know all the combinations.
In this case, at a fixed price, the developer redesigns it at its own expense. When hourly — a decision is made on the need for this module in the project. The module is either replaced or removed from the project.

Product quality and competitiveness

Fixed price: high quality and competitiveness are possible with very competent planning and high qualifications of the customer. As a rule, in this case, there is a technical expert on the customer’s side.

Hourly: the quality is always high because the product is constantly adapting to market conditions. Also, in this case, developers can themselves propose to use new technologies and solutions that have appeared in the development process. Your product keeps pace with the times.

 

What should you choose?

If you have a complete understanding of how the product will work and the development time is less than 2-4 weeks, a fixed price is an excellent choice.

If the development period is longer, most likely you will not be able to think through everything. In this case, hourly would be your best bet.

If this is your first WEB app project. It is better to use hourly, having previously requested the estimated cost of development from the developer company.

Any web application that you want to create will have the following costs:

• Resource development
• Operating costs
• Marketing costs (if it’s a multiplayer platform)

Let’s take a closer look at them.

Resource development

How companies calculate their development costs.

It’s important to be clear that when you contact a developer company you aren’t buying a product, but rather a service.

The invoice you receive is based on the amount of time the company’s employees spent to create that product.

Therefore, when contacting the developer, don’t just consider the bill for services, but also their evaluation criteria. How many people will be employed on the project?
What are the stages of project implementation?
What are the options for implementing your product?

Based on this, an account is formed. And depending on the company’s experience, there will be different stages of implementation. Accordingly, prices will vary.

Here we describe building an app from scratch.

The goal here is to create the MVP (Minimum Value Product). The MVP will be sufficient to get your product out there and get statistics on whether your idea works in the real marketplace.

Our experience can confirm that usually, 2 to 4 months of work is enough to create an MVP (for simple web applications).

Participants in this process:

• architect
• UI / UX designer
• 2-3 programmers
• tester
• project manager

Naturally, not all of them work on the product continuously — an architect and a UI / UX designer are needed in the initial stages and at the stage of expanding the functionality (1-2 weeks).
Programmers and a tester are needed at all stages.

Each person has their own hourly rate.
The average rate of one web development programmer in Ukraine ranges from $20 to $100 per hour, depending on the company’s experience and the complexity of the project.

 

Operating costs:

As the project develops and the number of users on the site increases, improvements will be needed. Therefore, it’s important to indicate the number of users that you are targeting so that the developer company gives you the optimal solution.
That said, in 2020, the growth issue isn’t quite as pressing. Cloud solutions from Google and Amazon services provide a scaling system that help you to grow without the usual technical problems. This is more expensive than using a personal server, but it solves the scalability issue and you don’t need to worry about hiring a developer for this stage of implementation.

To support the project, you’ll need to hire a developer at the same rate — from $20 to $100 per hour. This is necessary at the project launch stage. And, in case of success, the development of the project.

The cost for maintaining your resource on Google and Amazon servers is about $100 / month for simple projects and scales up based on the project’s complexity. Oftentimes, the development fits into the free service limits.

Marketing costs

To properly utilize your application, you have to be informed and know what your goals are. If your product is targeted at a large number of users, you need to understand at the start what advertising costs you’ll need.

This is something that doesn’t apply to the developer — the developer won’t be able to help you with marketing, but the success of your project depends on it.

Therefore, when contacting a developer company, start with the MVP (minimum value product). That will save you money. You will develop the project gradually. If successful, you can add additional functionality — the bells and whistles. But in case of failure, you won’t complete the project with higher development costs than necessary.

The best-suited continuous-development models are Agile and Scrum. We recommend reading about the differences between Scrum and Waterfall when developing Web products.

Summary

Based on the average employee pay rate, an MVP will cost you $15-25K.

For this kind of project, your operating costs for maintaining the server and supporting the system by a programmer (if the project is developing) will be $1-2.5K / month.

You can take over parts of the development process yourself — like project management or testing — to reduce your costs. However, you should be aware that doing it yourself may put quality at risk.