By Alex Polezhaev.
Taking advantage of the new LinkedIn feature – LinkedIn Answers – we published a small poll there, asking about preferences in software outsourcing.
We consider the best answer is by Shimon Keren, as it reflects our views:
I have used fixed price for projects in two scenarios. The first was small scale projects where the likelihood of frequent requirements changes was low. The other scenario was where I did not have a previous experience with a particular outsourcing partner and I wanted to run the first project in a more controlled manner.
Mostly I use hourly based contracts since I use outsourcing to develop products in multiple long release cycles for a competitive market that mandate frequent requirement changes. The key is to create a partnership with the outsourcer that is based on trust but put some performance matrices in place which you should monitor until you build this trust.