SCMS offers various contract propositions to our clients. Some of these are as follows:
In this model, timeline, delivery and price all decided at the beginning of the project. We charge based on the "milestones" that are agreed upon before the commencement of the project. First payment is made before the start of the project and rest based on the milestones.
In this case, Pricing is based on direct labor hours at specified fixed hourly rates including all sorts of expenses. These contracts are suitable for situations when the requirements are not fully known, or are expected to change and can be used, when the client wishes to augment their development team, by off-loading some parts of the application to be developed.
The most common contract is the Time and Materials contract (or T & E Time and Expenses as is often called) contract, but while this style of contract protects the supplier it does not provide any protection for the customer. The customer is fully exposed to the entire risk, while the supplier shares none of that risk. Therefore, a common extension of T & E contracts from SCMS is a Capped T & E contract. These contracts are T & E up until a fixed agreed upon upper bounds (or cap). Capped T & M contracts provide benefit to the supplier early on by fully covering their expense, but also provide benefits to the customer towards the end of the project by providing a limit to the total exposure. It is in both parties interest to deliver high value functionality as early as possible and to avoid cost over runs.
Incrementally, Delivery contracts are structured with regular inspection points, and at each inspection point, the customer makes a decision that they can continue with the development of the product or they can stop development. If the customer stops the development, they can push the product into production and save the remaining balance of the contract. This style of contract works quite naturally for agile teams because they simply work in an iterative fashion until the point of inspection.
For example, consider a year-long contract that has inspections points every quarter; a team working with two-week sprints would work for six sprints and then present their work to the customer, who then decides to either continue the contract, or not. We can adjust the interval between inspection points to allow for how aggressive the customer wishes. If the customer wishes to inspect more often, then monthly inspection points will be written into the contract.
This type of contract is a perfect solution for businesses wishing to augment their software development productivity without bearing too much of additional expenses like hiring extra staff or investing into other resources. Software development outsource based on ODC/ODT models works well for start-up companies aiming at reducing expenses and being guaranteed results. The client is the manager of developers and is able to manage their offshore team in the appropriate way, adjusting office hours to the convenient time zone and reporting practices. The client does not need to worry about routine matters and waste time on organizational tasks like hiring qualified developers and project managers, renting an office and so on.
Finally, it is worth discussing Cost Targeted contracts. Some organizations have attributed these contracts to their long relationship with their suppliers. With Cost Targeted contracts, both parties agree on a realistic final price of the product. Then, if the supplier comes in under budget then both parties share the benefit of those savings. However, if the supplier goes over budget then both companies pay some penalty. The amount of benefit or penalty that a company has to pay is usually in line with the ratio of the two companies, so the large of the two companies receives a larger share of the benefit, or pays a larger share of the penalty.