Employers: IT services firms, software vendors, IT departments
The main employers in tech, what each one sells, and the ways of working: time and materials, fixed price, application maintenance outsourcing. Who pays, who directs and who invoices when an IT services employee is on assignment.
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IT services company: what is it?
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A company that sells its IT staff's work to other organisations, on consulting, development or operations assignments.
It does not sell a product: it sells time or a result. Its employees often work in the client's premises.
A services firm accepts a 40-day fixed-price project, then spends 60. Who bears the extra 20 days?
- The services firm, whose margin shrinks
- The client, who pays the days actually spent
- Both, in equal shares, as custom has it
- The employee, through unpaid hours
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The services firm, whose margin shrinks
Under a fixed price, price and result are set in advance: any overrun falls on the provider. It is the reverse of time and materials, where the client pays the time spent.
A vendor selling access to its software for a monthly payment follows a … model; one selling a right of use sells a ….
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A vendor selling access to its software for a monthly payment follows a subscription model; one selling a right of use sells a licence.
In both cases the customer does not own the code: it buys the right to use it.
Software vendor: what is it?
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A company that designs a piece of software and sells it to many customers, through a licence or a subscription.
The same code serves every customer: producing one more copy costs almost nothing, which sets the vendor apart from a services firm.
A client wants to hand a provider the fixing and evolution of its applications, with a maximum incident response time. Which way of working does it choose?
- Time and materials
- Application maintenance outsourcing
- A fixed-price development
- A software licence
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Application maintenance outsourcing
A continuing service committed to service levels is application maintenance outsourcing. Time and materials sells time, a fixed price sells a finished project, a licence sells a right of use.