Product designing and development is a tricky process and you never know what you may end up with at the end compared to what you aimed for in the beginning. Since ideas, circumstances and other aspects around it may evolve and change during the entire process, it is very difficult to ascertain prerequisites around it. For this basic conceptual flaw, fixed price engagement model is not a really productive way to approach Product development. Let us look at all the reasons in its entirety as to why fixed price engagement model is a BIG NO for product development.
1. Continuous evolution of product
A product development may start off with an idea or a concept but you further into the product development cycle, one stage may lead to a lot of other possibilities. Adoption of one of these possibilities may lead the product into a different direction and result in something entirely different, which may or may not be better than the original end product in mind. Therefore fixing a quote for the entire project would not be feasible as the number of stages may increase and likewise for the cost required for executing those stages.
2. Error and deviation from the quality required
As discussed previously, there has to some room for both parties to explore improvement of the existing ideas and if possible turning it into new one. Smother functionality of an operation may require high end software platforms or other high end software capabilities which now is not under the affordable range. This may lead to substandard results that are not beneficial for either parties.
3. Exceeding timelines
This is very much a realistic possibility based on the same logic that was discussed above. There a good chance that the clients are not able to communicate the exact requirement to the developing party and that miscommunication can come back to haunt them in the future leading to adjustment of the existing framework. The change in framework could be minimal or more than a handful that may extend the predefined timeline by a long way.
4. Decrease in quality
This is obviously going to be a natural inference from the points that have been discussed above. If one is not able to keep up the evolving idea of the product and exceed timelines with addressing the errors since the parties want to stick inside the decided budget, quality of the end product would suffer. Ultimately clients would not be able to get the desired results or worse would not get smoother results from it that would again be nothing short of counterproductive.
The above list shows the various aspects that should discourage you from adopting Fixed price engagement model for your project. So what are the alternatives to approach a project development?
Well, there are other methods that are more productive including time and material engagement model. Then there is the dedicated resources engagement model. The latter of the two makes resources used as the foundation of the project. If an ideal approach is used along with a likewise execution, your project should finish within deadline and emphasis remains on the kind and scale of resources used. If time is an important ingredient for your project then we suggest that you go for Time and material engagement model that would look at the end product in terms of time taken and resources used to accomplish the results. Time and material engagement model is a better judge of the efficiency of a project and is a great option for bigger firms.
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