Contracts! How to hire and work with offshore software developers

software developer

It’s a match! You found a great, dedicated development team to work with. 

What’s next? 

How to make it official? 

How am I going to be billed?

In this blog post, you’ll learn about the pros and cons of working with developers through T&M contracts and how to hire offshore software developers.

What are time and material contracts?

A time and material (T&M) contract is a combination of a fixed-cost agreement and a fixed-scope contract.

In other words, under T&M tech contracts, the company agrees to pay a fixed per-hour cost for the developer’s time, and the development work will be completed within a fixed amount of time. It’s a popular way how to hire offshore software developers.

It is the type of cooperation where the client gets billed on hourly wages.

Basically, you are paying for the time people spend working on your project. It’s up to you if you want to increase or decrease the number of hours people work or how many people will be involved. 

So it’s quite a flexible and transparent way of cooperation, which makes it the most popular one. We can say that 95% of our clients work with us on this model.

a person signing a contract

When is it good to work with a T&M contract model?

When working with time and material contracts, the advantage is time. If you have a project that requires a certain amount of time to complete, you can use the time as a constraint in the contract to control the project’s timeline.

Also, as the project progresses, you can adjust the budget or the number of hours allocated to the project. Then, to see the budget spending.

For example, suppose an offshoring software development company charges you a fixed amount of money, and you allocate this amount to one month of work. In that case, it may not be realistic to expect the project to finish in a month. 

On the other hand, a time-and-material contract allows for the creation of a project schedule that specifies when and how long the project should be completed and then for the project to be completed within that timeline.

This business model fits the best:

  • Long-term projects with changing requirements fit this contract model very well.
  • The projects where timeline and scope are not 100% defined, which is a very frequent scenario. When you kick off the new project, lots of things can change while developing it. You may find another angle, and external conditions may change, or you may think of a genius idea while working closely with a solution. 
  • People who want full control of expenses and the developers involved.

When is it NOT good to work with a T&M contract model?

Software development contractors must consider the project’s budget while bidding on projects. If the budget is not realistic, hiring through a time and material contract could cost the project more than it should.
For example, the client might have allocated $100,000 to the project, but the project takes six months. But on paper, the project has five months of work. In this scenario, the client might end up paying the contractor $10,000 for five months of work, which is not realistic.
The solution is to choose an offshoring software provider that charges a fixed rate for a certain amount of work and does not increase the price per unit.
  • If you need a fast MVP, you can get it from the designer team with limited software development. We recommend investing in the product design concepts for early-stage startups, which means working on clickable design prototypes. Most of the time, it’s fast and cost-effective. Also, it’s a great way to get the first traction and show it to potential investors.
  • Limited budget and clearly defined scope for a short-time project. If you have done your research, get all the info you need for development from tech experts, and have it all documented and calculated its budget, we may consider agreeing to a fix-priced, small project. 
  • For example, we may decide on fixed-price projects coming from charity or social organizations since we believe they are very limited in budget and want to contribute too. That’s why we did this Monkworx case.

The key advantages of time and material contracts

It can be challenging to keep track of all the moving parts involved in a project in today’s fast-paced business environment. 

When hiring through OSS contracts, you can work with your offshore software development contractor to track their progress and deliverables.

Another advantage of using time and material contracts is that the client gets guaranteed results. Your contractor is insured to deliver a certain amount of work in a certain amount of time. 

This prevents you from being scammed, which is an important factor for any project, especially the ones involving millions of dollars of investment.

To sum it up, the main pros of a T&M contract are:

/ 01

You can cut down or add up working hours

/ 02

Working with this contract also helps adapt to your needs and spending limit.

/ 03

You see what you pay for

/ 04

You will know how much will you pay for

What do you need to know before signing a deal?

big deal
  • Ask for code review, at least if you extend your team or change the software developers. It’s crucial to know what tech specialists will be dealing with to help you hire the best people.
  • If you are unfamiliar with the software development process, request a product discovery service. The top mind of the company will examine your idea, create a roadmap and write down the timeline, and go the extra mile to make sure you proceed in the best way for you. 
  • The contract should be divided into stages. A typical practice is for the service provider to check in with the client after each phase to go over what has been completed and see where they have any budget concerns.
  • List down all your requirements.

Why don't we do fixed-price contracts?

We don’t like fixed-price projects, and we had some bad experiences with them before. In particular, we can tell about:
  • While working with clients on a long-term project, they seem to make too many change requests, resulting in longer development, which means more hours to the developers but not an extra payment.
  • In the middle of development, together with the customer, we might see that the approach we persuade isn’t the best one, but we were restricted with a contract to make drastic changes.
  • We build long-term relationships with business partners, and it’s not only about business for us. 
  • We want to see the entrepreneurs succeed, and we believe that flexibility and trust are crucial to building a great relationship. If a person cannot trust us, neither a fixed-priced nor a T&M contract will probably make it work.

Wrap up

The advantages of working with time and material contracts are clear: You know what the project will cost and what work the developer must complete. You can also easily compare the different vendors to find the best fit for your project.

How to how to hire offshore software developers and find the right offshore software development vendor? The answer is to do your research and compare apples to apples.

With software development outsourcing, you can save time, money, and resources by hiring developers remotely. With this choice, you have to consider your project’s requirements and budget carefully and choose the best contractor for the job.

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