| My experience has been the opposite, and I think fixed price benefits both sides. Of course, it depends on the circumstance. Fixed price and hourly each have their place. I will say that a fixed price contracts can be tricky. My primary point of reference is a medium sized fixed price project that was delivered early, and the customer loved the solution and came back for more business. I've also worked countless hourly contracts from both the customer and consultancy side. 1. Assuming a fixed price project requires a big up front spec is wrong. Follow lean/agile principles, iterate and refine. The contract should specify high level basic functionality and the problem being solved. 2. Hard to quantify, but hourly is plenty risky having worked both sides of the relationship. I've seen hours and hours burned building things that are not at all necessary. A fixed price helps everyone focus on building precisely what is needed. 3. Hourly rates put customer and consultant's priorities in line? From a short term view, if I'm paid hourly I'm going to milk the deal. If the consultancy is taking a long term view, everyones priorities are in line. Consultancy delivers fantastic product on time, it's a win by bringing the customer back, and word of mouth. 4. Again, it's how you structure the contract. If a giant spec is written up as part of a contract, you're doomed before you begin. 5. I'd argue the fixed price is a risk balance between the customer and consultancy. If the consultants finish early, they're rewarded. If they are late, they are penalized. This is in contrast to hourly, where it's win-win for the consultant. |