Quote vs Time and Materials

When it comes to writing custom software, there are two basic ways to have something developed.

Fixed Price Quote.
Where both parties agree on exactly what will be developed and how much it will cost.

Time and Materials.
Where both parties agree on exactly what will be developed and development is charged by the time the developer spends on a job.

From a customer's point of view obviously a Fixed Quote lets them know what they are going to be up for, which can be comforting.

The developer on the other hand, likes to know they are going to get paid for all the time they spend on a job. Because of this when a developer creates a Fixed Quote they generally pad it out to cover any unforeseen circumstances (including bugs).

This will generally make the cost of a Fixed Price Quote more expensive than Time and Materials.

There is one more very important factor in making the Fixed Price Quote more expensive and that has to do with testing. A major part of developing is testing and in a Quoted situation this function relies mainly on the developer as they are being paid to deliver a finished product.

In a Time and Materials situation the job of testing can be shared between developer and user and as the rate being charged by the developer is likely to be greater than the user, any time the user saves the developer the more they save on the project... and as this user will ultimately be one of the users, their testing is likely to be more efficient than a developer who may be unaware of a normal user's thought processes.

In our experience at nuSoftware, we have found that a combination of Fixed Price Quoting and Time and Materials seems to work well.
Fixed Price Quoting, when we are dealing with a new customer (giving them peace of mind) and Time and Materials, once they have become comfortable with the way we do things.

Its important to keep in mind that at nuSoftware we develop all our applications in nuBuilder (our open source product available to anyone).
Which means if we develop something for you, your own IT people or other companies that know or are willing to learn nuBuilder (via our Wiki and especially our Video Tutorials), can take over from us anytime you want, so no one has you by the proverbials.