When it comes to developing custom software, before diving into code or hiring developers, there’s a critical decision every business must make: choosing the right pricing model. This foundational choice defines how your business will work with a software development partner, manage resources, control costs, and ensure project success.
Whether you’re a startup building an MVP, an enterprise modernizing legacy systems, or an SMB scaling digital operations, the pricing model you select will shape the project’s flexibility, speed, cost, and outcome. With multiple options available—Fixed Price, Time & Material, and Dedicated Team—each comes with its own set of pros and cons.
In this blog, we’ll walk you through the most popular types and guide you in choosing the best-fit model for your unique business needs and project goals.
A software development pricing model is a framework that defines the working relationship between a client (your business) and a software development partner. It outlines how collaboration happens, resources are allocated, payments are structured, changes are managed, and responsibilities are shared throughout the project lifecycle.
Think of it as the contractual and operational blueprint that governs your development journey.
Choosing the right pricing model is not just about budgeting—it’s about aligning with your project’s scope, flexibility needs, timelines, and risk tolerance.
A well-chosen model helps avoid communication gaps, missed deadlines, and unexpected costs, while a poor one can stall progress or drain resources.
When partnering with a software development company, you’ll typically encounter three primary pricing models: Fixed Price, Time and Material (T&M), and Dedicated Development Team. Each is tailored to different project types, budget considerations, and collaboration styles. Let’s break them down:
In this model, the project scope, timelines, and costs are agreed upon upfront. You pay a fixed amount for a clearly defined deliverable.
Best for:
Pros:
Cons:
This model is based on the actual time and resources spent on development. You’re billed hourly or daily for the team’s effort.
Best for:
Pros:
Cons:
Here, a team of developers works exclusively on your project, often functioning as an extension of your in-house team.
Best for:
Pros:
Cons:
Each model has its place. The goal is to align your choice with the nature of your project—not just budget, but also clarity, speed, and future plans.
Selecting the right pricing model requires a deep understanding of your project’s specific needs, your internal capabilities, and long-term goals. Here are the key factors to evaluate before making your choice:
Choosing a pricing model is ultimately about striking the right balance—between control and delegation, flexibility and predictability, and cost and value.
Choosing the right pricing model can be easier when you compare them side by side. Here’s a quick snapshot of how the three primary models stack up across key business criteria:
Criteria | Fixed Price | Time & Material (T&M) | Dedicated Team |
---|---|---|---|
Scope | Fixed and clearly defined | Evolving and flexible | Broad or evolving |
Budget Predictability | High (pre-agreed amount) | Medium (based on time spent) | Medium to High (monthly cost model) |
Flexibility | Low | High | High |
Client Involvement | Low | Medium to High | High |
Project Duration | Short to medium-term | Medium to long-term | Long-term |
Speed of Delivery | Fast (if scope is fixed) | Medium (dependent on iterations) | Fast (once the team is ramped up) |
Risk | Low for client, high for vendor | Shared | Shared |
Best For | MVPs, small projects | Agile development, uncertain scope | Large-scale, ongoing development |
This table helps visualize how each model aligns with different project needs and risk profiles. Use it as a quick reference when evaluating your options.
To make this decision even clearer, let’s explore how different types of businesses and project scenarios align with specific pricing models:
Startups often operate with limited budgets but need flexibility to tweak features as they receive market feedback.
Best Fit: Time and Material (T&M)
Large businesses with long-term visions and ongoing development needs benefit from having a consistent, scalable team.
Best Fit: Dedicated Development Team
If you’re an SMB with a specific app or feature in mind and a fixed budget, predictability becomes a priority.
Best Fit: Fixed Price
For AI, automation, or innovation-focused projects where outcomes evolve with experimentation, flexibility is key.
Best Fit: T&M or Dedicated Teams
Ongoing maintenance often doesn’t require full-time staff but needs timely availability.
Best Fit: T&M
Evaluating your project against these scenarios will help you gain clarity on which model aligns best with your current business stage and future goals.
At Charter Global, we understand that no two businesses—or projects—are the same. That’s why we take a consultative approach to help you choose a pricing model that aligns with your goals, timelines, and budget.
With over 30 years of experience delivering successful software solutions across industries, we’ve guided startups, mid-sized firms, and global enterprises in selecting models that work for them. Whether you need a clearly scoped fixed-price engagement, the flexibility of a time and material model, or a dedicated offshore/nearshore team, our experts ensure the model fits your workflow—not the other way around.
We go beyond implementation. Our teams help you assess risk, define scope, manage change, and optimize resources for long-term success. From initial consultation to delivery and support, we tailor our approach to your needs at every stage.
Need help deciding?
Charter Global can help you make the right call. Our experts evaluate your project’s requirements, risks, and goals to recommend the best-fit pricing model—customized just for you.
Contact Charter Global today for a consultation.
Email: info@charterglobal.com | Phone: +1 770-326-9933.