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Various Pricing Models

August 7, 2009

Every organizations offer multiple engagement and delivery models to meet needs of its clients across the globe which ensures their competitive advantages in a changing market place.

Clients can choose from the models offered based on the size, complexity and delivery requirements of the project.

The major pricing models supported most outsourcing service organizations

1.      Fixed Price

2.      Fixed Price +Model

3.      Onsite Delivery

4.      Time and Material

5.      Offshore Development Center (ODC) or Dedicated Resource Based

6.      Service Request Model

7.      Build-Operate-Transfer (BOT) Model.

8.      Managed Application Service Provider (ASP).

1. Fixed Price Model:

  • Fixed Price Model for the project is, defined in terms of their requirements, schedules, and project path.
  • This model is preferred by the clients who have a clear project scope available with them at the onset of the project, along with the detailed Software Requirements Specifications (SRS).
  • This model is suitable for small or mid size projects.
  • Under this model, organization work with their client to define the required output at mutually agreed fixed price based on efforts involved.

Procedure:

On receiving SRS from the client, Organization provides an estimate on the time and cost of the project to the client. Once both parties are convinced about the association, Organization starts work immediately.

Cost:

*   The cost or payment depends on the project size

*      Some payment is made in advance, some at the delivery of the project, and remaining after user level testing and acceptance.

*     For big projects, the tasks specified in SRS are divided into modules known as milestones. The payment is made as per milestone and the time required to complete each milestone

*      Sub Module: Milestone-based Billing – Milestones-based payment schedules supports to client for progress monitoring. It helps justify payment based on achievable milestone and visible progress.

2. Fixed Price +Model:

  • Used when requirement and schedules change during the change of course development.
  • This model consider the things followed in the fixed pricing model in addition to reason or instance for the organization choose the Fixed Price +Model  as follows

>>    During the course of the development there might be changes in scope/requirements, then we change the pricing model to be a Fixed Price+ Model

>>      When number of man-hours/number of resources /time frame exceed then organizations revise their pricing model. Here they can combine the available pricing model.
3. Onsite Delivery Model:

*        Onsite Model depending on the clients￯﾿ᄁ￯ᄒタ￯ᄒル requirements and need of resource to their place.

*        The client can specify the skill sets and experience level of the resources required. The client can also specify the number of resources and the duration for which the resources are required.

*       This model is suitable for the projects that are complex and require proper and constant attention.

*        In Onsite Model, team works at the client’s location under the direct supervision of client’s manager.

Procedure:

>>      To get the Onsite resource(s), the client needs to specify the requirements, such as skill sets, experience level, number of resources, and duration to service provider or organization.

>>      Based on requirements, they identify the resources and forward their resumes to the client.

>>      The client can conduct their interview. Once the client is satisfied with the resources, organization will make arrangements to send them at the client site.

>>     The client will also be responsible for the boarding, lodging, and traveling expenses of the Onsite resource.

Cost:

The payment is made on monthly basis and in advance every month. Organization will give a customized quote to the client depending on the following factors,

  • Skill sets of the resources
  • Experience level of the resources
  • Duration for which we provide the resources to the client
  • Total team size

4. Time and Material:

*      Organization follows Time and Material Model for the projects where scope, specifications, and implementation plans are not clearly defined at the initial stage of its development.

*        This model enables the client to change the specifications based on the upcoming market trends.

*        Time and Material Model is suitable for the scalable projects where the team size and total efforts can not be estimated in advance.

*         It provides the flexibility to manage the team size and total efforts.

*        This model follows a strict project management and reporting practices where task sheets are generated on a daily / weekly basis for each person working on the project.

*        This model is followed in certain period and then it moves to another model according to their needs.

Procedure:

>>      The client needs to specify the task and period of time for the project.

>>      Based on they specify the rates (hourly fee) charged for the efforts of the resources to the client.

>>      Client may revise the team size and at the same time optimize the cost and project duration.

>>      Once the client is satisfied with organizations rates, organization are sign a contract with them.

Cost:

>>     The cost of the project depends on the team size and the efforts of each team member.

>>      The client may pay

>>      The payment for the provided efforts is usually made on the basis of monthly or bi-weekly invoice issued to the client depending on the effort reports

5. Offshore Development Center (ODC):

  • This model follows when the client have continuous requirement for a resource on a particular technology.
  • Organization provides the dedicated resource to the client and who act as its virtual employee.
  • Organization associate a project leader with every dedicated resource or team for which they do not charge anything from the client.
  • On this way, the client will get the advantages that the project is being executed under the close guidance of a senior resource.

Procedure:

>>      First the client needs to send us a request to the organization with the requirement specifications.

>>      On receiving the request, organizations Development Team will get back within some business days.

>>      Once both parties are convinced about the partnership, Organization can start off immediately.


Cost:

>>      The cost or payment is made on monthly basis based on the allocated resources.

>>      Therefore, this model is also known as monthly model also.

6. Service Request Model:

  • A service request is a unique configuration element for a repeatable action or a function, which help to map, request and track the required service to ensure service excellence.
  • They internally maintain a Service Request Glossary for each of our practices. The Service Request Glossary is the bible of our Service Requests.
  • It contains a set of unique service requests which contains Service Request ID & Service Request Description.
  • This will also contain the procedure to execute the service request.
  • Every service we offer would be broken down into Service Requests and is associated with a price.
  • The client requirements are broken down into service requests and can be priced accordingly.

7. Build-Operate-Transfer (BOT) Model.

*    BOT delivery option is designed for such clients who are focusing on important strategic areas of their businesses while wants to bring new service offerings to the marketplace.

*    Many companies needs a flexible combination of application development and outsourced system.

*        Under this model, dedicated infrastructural facilities, team, and other resources are assigned to the clients. This facility is like an extension of the client’s own facility. The captive facility is staffed on a dedicated or on a hybrid basis. Like, either by existing Daffodil’s resources or by Client’s resources or by resources hired specifically for engagement or a mix of them all. Daffodil offers well-defined mechanism for the smooth transition of the facility to the client. Clients see the following benefits by working with this model:

  • Faster Time to Market
  • Lower Establishment Costs
  • Risk Reduction
  • Flexibility
  • Process Expertise
  • Option of owning the facility
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