Time and materials (aka T&M) is a standard phrase in a contract for construction, product development or any other piece of work in which the employer agrees to pay the contractor based upon the time spent by the contractor's employees and subcontractors employees to perform the work, and for materials used in the construction (plus the contractor's mark up on the materials used), no matter how much work is required to complete construction. Time and Materials is generally used in projects in which it is not possible to accurately estimate the size of the project, or when it is expected that the project requirements would most likely change.
This is opposed to a fixed-price contract in which the owner agrees to pay the contractor a lump sum for fulfillment of the contract no matter what the contractors pay their employees, sub-contractors and suppliers.
A fixed cost pricing model is a model that guarantees a fixed budget for the project, regardless of the time and expense. The main advantage of a fixed price model is that it allows the client to plan and set an exact budget. Fixed cost pricing model approach is best suitable for projects with a strictly defined scope and requirements that won’t change. Any changes will require additional estimation and additional contract. So, one of the main requirements of using the fixed cost pricing model is to precisely define the scope and technical requirements up front.
Every aspect of the development process, project management, quality monitoring and assurance are on the service provider.
The pitfall of a fixed price contract is that if underestimated, the vendor may start managing costs and cut down expenses severely, which ultimately results in a poor-quality work.
Offshore captives are also increasingly partnering with startups to drive innovation in the areas of data integration, mobility solutions, big data analytics, cybersecurity, customer experience improvement and marketing solutions, according to Everest Group. “There is also early evidence of partnerships in process improvement and automation [such as] workflow tools and employee engagement platforms,” Dani says.
These engagements come in many varieties. Some in-house centers are setting up incubators or acquiring startups while others collaborate with startups on hackathons or open innovation initiatives. In certain instances, captive centers are working with startups as part of their relationship with an external IT service provider.
The benefits include faster speed to market, decreased cost of innovation, and brand enhancement that helps with captive center talent recruiting, according to Dani. Captive centers working with startups may also be laying a foundation for broader startup engagements with the parent company and facilitating internal cultural acceptance of increased agility and responsiveness, he says.