Why a customer is prefer to choose for fixed bid project. (Software Project)

Let me start this by answering a few high-level logical questions…

• What model vendor prefer? Ans: T&M
• What model customer prefer? Ans: Fixed Price

Why customers prefer “Fixed Price”?

Because in T&M future cost of service & requirement is uncertain, customers don’t know how much time & cost will be for what they are looking for.

Why vendors prefer “T&M”?

Since the requirement from the customer is not clear (As always😊 ).

In both, the above case requirement clarity is a common cause…

Now another big question… “Why the customer is not able to give clear requirements”

Customer’s lack of knowledge & confidence in requirements.

Let me explain, normally, the customer would like to start with giving a vague requirement, now it is the vendor’s duty to break down the requirement and gets a clear picture.

During this requirement understanding phase the “Test of patience” comes into the picture which plays a major role, more the customer’s patience, clear more requirements. It means that customer should not irritate during requirement gathering session, customer should try to answer maximum question asked by vendor which would really help both of them while finalizing the price & time.

When the requirement is highly clear and vendor confidence is also high then this situation vendor will happily supports the fixed price model.

But, in most of the case, either party fails the “Test of patience”. So, result ends with challenge to finalize T&M vs Fixed Bid, again one of them compromise and slect the model which they didn’t liked it.

But why “Test of Patience” fails?

• For the customer, requirement explanation/breakdown is a time-consuming process and overhead.
• And for the vendor, they are more eager to give solutions even without listening to the full requirement and get the deal.

We already know, in competion world, it’s always a customer driven, so no need to discuss why vendor’s “Test of Patience” fails. However, another question comes to mind that “Why customers think requirement explanation is time-consuming & overhead?”

Generally, the customer’s main business is not the development of software instead works on the business operations which are directly connected to their company’s objective, vision, and mission. So, the motivation towards requirement explanation is low, which results in Fail in the “test of patience”.

So it’s about the prioritization and utilization of the company’s resources for the activities which are directly pertaining to the company’s vision, mission, and objective or utilization of resources for other activities such as software development.

So, if I would conclude this by saying that everything is about the utilization of company resources efficiently which is a top goal for any organization. So, organizations think let us go for Fixed Bid and let software vendors should assume our requirement, deliver and support us even though cost is high but that’s the final cost will go from my pocket!

But a big big issue in Fixed Bid is it “High Cost” because of lot of uncertainity. I think company should think over it and try to involve right resources for requirement gathering and explanation, so it would save lot of time and cost of customer and vendor.