Irina S
Marketing manager and Technical writer at BCS-IT (www.bcs-it.com - custom applications development - Java, .Net, C++)
Don’t you feel like “being sold”? Let us discuss the advantages and shortcomings of Price & material engagement model…
When you choose Price and Material engagement model… Who does manage the situation in the main: the engaged specialist, CEO of the offshore company or the client? How often do you prefer to obtain the developers reports (every month, every week or every day) to feel yourself safe? What do these reports need to contain? (the detail level?)
Good Answers (1)
Nick K
Experienced Technology Executive
Best Answers in: Offshoring and Outsourcing (6), Software Development (3), Corporate Governance (1), Project Management (1), Small Business (1), Computers and Software (1)
T&M model doesn't only shield provider, it also reduces dramatically enviable scope creep wars on fixed bid projects. In many aspects it is good for both sides. The main challenges it presents for the buyer are somewhat hidden and thus create serious traps. Here are just a few to consider:
* T&M promotes sloppiness in handling scope and thus T&M projects unless handled properly (good point on PMP Roque!) have a high probability of costing more
* T&M projects require meticulous time tracking which is an overhead and is bane of existing for developers
* T&M projects are more difficult to budget for and are real pain in GL allocation when services cover multiple cost centers / etc.
Overall T&M projects put much large burden on the buyer, yet when properly handled they offer cost savings and better risk mitigation.
Now a couple specifics
Q: Who does manage the situation in the main: the engaged specialist, CEO of the offshore company or the client?
A: CEO!?? – you got to be kidding… well, I guess you are talking about a very small vendor. It quite simple, you have two PM counterparts, offshore PM submits the figures, onshore PM approves them. Both must know each and every detail.
Q: How often do you prefer to obtain the developers reports (every month, every week or every day) to feel yourself safe?
A: Depends on a degree of a “control freak” in you. I’m fine with monthly attached to invoice; but I require my vendor to submit info in web-enabled time tracking system on daily basis; so the figures are always up-to-date.
Q: What do these reports need to contain? (the detail level?)
A: Monthly report must contain resource name / role / rate and hrs. In time tracking I expect substantially more details
Thanks for the good question; It deserves some discussion in my blog – stay tuned.
Links:
More Answers (6)
It would be both as there would be discussions that would define a particular model. Monthly reports would be fine if both the teams are in constant touch. There are plenty of project management system which will enable to track the progress as well as gather reports. The most important factor is communication, if that medium is proper then the other things will fall in place.
Ram
www.xminds.com
Robert C
Group IT Director, Asia Pacific & Africa at Avery Dennison
Best Answers in: Offshoring and Outsourcing (2), Government Policy (1), Treaties, Agreements and Organizations (1), Business Development (1), Small Business (1), Green Business (1), Software Development (1)
I believe the answer depends greatly on whether the deal is a water fall solution or a time box extreme programming model.
If the latter, then you would want your representative engaged on the project from start to finish and you should get reports from the vendor as well as from your representative.
If water fall, then weekly reporting is okay, provided you have someone who is closely monitoring progress.
Hello Irina,
Your statement "Don’t you feel like “being sold”?" is subjective to me.
Price & Material model provides flexibility to balance team size and project workloads. Here is a classic example, a company could bid for partial phase of a project on a fixed time, fixed price basis and the remaining parts on price/time and material basis. In such engagements, the client has complete flexibility in using company's associates in tasks that match their area of expertise. A client can handpick associates after assessing their technical, communication and interpersonal skills.
This is a win-win situation for both the parties and helps in building a stronger relationship.
Thanks!
-Manu
Irina;
The goal is to achieve the most for your dollars. I suggest you never really start a project without a price tag associated. All a T&M project does is insulate the provider from having to worry about cost overruns. All your projects should have a project plan with dollars associated to every task. You then need checks and balances to ensure what is being marked as complete is complete and within the specified budgeted cost. Only pay for changes which are documented in a change control which by the way should have a dollar associated to it.
These ideas are not mine but part of the PMP training which is available widely. If you need any help with these concepts please email me at rmartinez@rmtechsys.com.
Nicholas, great answer.
Nothing to add except several words about in what cases you should consider T&M approach.
1) Research projects - you can't define requirements, scope and goals, you just need to do research, discuss results with customer, correct the research directions, and research again.
2) Support and maintenance projects - contractor get new issues every day and needs to solve them according their priorities; no plans at all.
3) "Dedicated team" aimed to extend customer's IT-staff - usually the team performs several projects simultaneously and customer is able to change team's tasks on-the-fly based on his priorities - "Lets freeze this project for a week, because we have urgent request that is more important"
Abhiram M
Head of Integrated Business Development & Global Marketing Communications
Irina,
First off, it is better known as Time & Material (T&M) as against price and material.
T&M is a tricky business because the client is always finicky about the cost and budget. It could be tricky for the service provider if the estimations are off the target. The client will always revert with a question on why the cost/schedule overrun is happening. Therefore, it takes a significant maturity and substantial experience to be successful with T&M.
But, who said that being an offshore/ outsourced service provider was easy?
Any successful engagement must have a solid reporting mechanism and escalation route. I say this from my experience of being in software service industry for well over a decade. Ideally, there will be a vendor Project Manager (PM) involved with the engagement. Based on the size of the deal, the PM could be a dedicated one or shared among multiple projects, of the same client or different. Any client will have a dedicated/ shared stakeholder, who will interact with the client PM.
Daily reporting is essential. Not because it is fashionable, but because the client will have a daily visibility on the ground covered vis-à-vis as promised. Daily report will be followed by Weekly Status Reports, which generally fly on Friday nights. On Monday, there is a PM-PM telecon/Videocon. There is also a fortnightly/ monthly telecon/ Videocon between the higher client and vendor stakeholders. If the deal is really substantial, there could be a monthly face to face.
Until the weekly level, it is within the PM domain. After that, it is in the domain of Programme Management and beyond that it is generally C-level.
However, I would not have a CEO in this picture as she/ he will be wasting time on operational issues rather than on strategic.
Abhiram Mishra
abhiram.mishra@espireinfo.com
