Why we’re changing our pricing and support strategy – and why that’s good for your organization

Talking about pricing is awkward. Most people and businesses don’t like to do it.

Part of what has made us successful as a company is that we don’t shy away from tough conversations, and that includes talking about how we price our services. We’ve traditionally used an hourly-rate model for custom software development projects. That approach is no longer the right fit for how we work with clients.

We’ve started moving to a fixed-fee structure for specific scopes of work, and a recurring model for support and development. For clients with specific business needs, we may offer a hybrid of those two approaches.

Here’s why we’re making these changes and why we believe this will benefit both us and our clients going forward.

The problems with hourly-rate development

An hourly-rate model doesn’t fit our mission.

While today’s technology makes it faster and easier to code, the problems we’re solving are becoming more complex. Enterprises use more types and sources of data, more software tools and services, and new types of technology (like generative AI) that fundamentally change how people work.

Even when our team spends less time coding, we’re spending more time on discovery and planning – understanding the organization and its people, identifying their most pressing problems, and then building and deploying the best solution.

And when we say “the best solution,” we mean it. Building solutions that address the causes of problems and not just the symptoms takes time, which is why we hold discovery sessions, map user stories, and work to find the most valuable and impactful approach before we start coding.

Our clients have told us time and again that this process is valuable and that it sets us apart from other providers. Pricing by the hour doesn’t accurately reflect the greater long-term value that those additional hours deliver.

Hourly-rate billing doesn’t incentivize quality.

An hourly-rate model also reinforces the false narrative that all developers and solutions are created equal. The truth is that in the world of software development, you usually get what you pay for.

Competing on price per hour and number of hours incentivizes developers to quote low in order to win business. This opens the door to cutting corners in order to deliver the bare minimum of quality required. What you get might be “good enough” for the moment, but will it last

Hourly billing adds risk and doesn’t build trust.

An hourly-rate model doesn’t incentivize either party to get the project done right, as quickly as possible. When an estimate is off and the hours keep piling up without a workable solution, all of the risk falls onto the client’s plate.

Business consultant Jonathan Stark sums it up best:

A software project is a goal oriented, ongoing collaboration between client and consultant. A project can’t be a true success for both parties without this mutual trust. Mutual trust is the natural result of the two parties sharing in the risk (and reward) of the undertaking.

Moving to a fixed-fee model for projects is the best way to make sure our goals and our clients’ goals are aligned in a way that’s fair to all concerned.

The benefits of fixed-fee development

A fixed-fee model for quoting software development projects means that any risk is shared between the client and the developer. If anything, the developer is taking on a bit more risk – but that’s as it should be, because we should know enough about the technical requirements to set a reasonable price and delivery timeframe for a particular type of project.

Fixed-fee pricing also means our incentives are aligned. Both we and our client want the right solution, delivered quickly, with high quality and rapid time-to-value.

It’s also easier to determine the ROI of a fixed-fee project in advance. The client knows what they will pay, and if we’ve done our job well they’ve calculated the value they expect to gain from the solutions we provide. Hourly-rate development can’t make that same promise.

Finally, fixed-fee pricing avoids the pitfall of all parties collectively paying too much attention to the time spent solving problems rather than the outcomes we’re working to achieve.

The benefits of ongoing support

In a perfect world, teams would always work efficiently, using the best tools and software to their fullest potential.

In the real world, change is constant. New business needs, marketplace demands, and technologies create gaps in efficiency that existing solutions and processes can’t fill. Often the clients we meet are spending time and brainpower trying to bridge those gaps – and risk burning themselves out in the process.

We build solutions that address these issues, closing the gaps and saving time, money, and stress. But change doesn’t stop. Before long, new gaps start to open as different needs, marketplace demands, and technologies come into play.

Seeing this cycle play out led us to ask:

• How much are our clients sacrificing in money, time, or customer satisfaction because solutions we built are no longer optimized for today’s needs?
• How can we best help clients avoid or navigate the inevitable gaps and issues that come up over time?

After all, most of us are good about maintaining things we invest in. For example, if you own a home you’re not just reacting to issues (like getting your roof repaired after a hailstorm), but getting proactive maintenance (having the roof inspected and cleaning out the gutters each spring). The alternative is a leaky roof and lots of problems that are much more expensive to fix.

We’ve recognized that we can be of more benefit to clients when we promote and provide continuous support and proactive maintenance. We’ve seen the value that this close collaboration can offer, which is why we’re moving toward a recurring service and support model. Also, for clients who could benefit from it, we’re offering a higher level of priority support along with managed development services to help them plan and build the future of their organizations.

We’re already piloting these new approaches with clients, and we’re confident this will allow us to continue driving meaningful change for all the people we serve.