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Why IT Services Firms Must Rethink the Balance Between Time & Materials and Fixed-Price Models to Meet Evolving Client Expectations?
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Why IT Services Firms Must Rethink the Balance Between Time & Materials and Fixed-Price Models to Meet Evolving Client Expectations?

Julie Sergent
Content manager
April 17, 2025
5 min

Introduction

For IT services firms, the delivery model is a core strategic decision. Traditionally rooted in time and materials (T&M) engagements — known in France as régie — many IT services are now under increasing pressure to embrace fixed-price contracts.

But in a fast-changing, uncertain economic environment, is a full transition to fixed-price really the answer? Or should the focus be on rethinking the balance between these delivery models? And how can platforms like Napta support this strategic shift?

Time & Materials: Still Relevant, but Under Strain

For years, T&M has enabled ESNs to allocate resources flexibly, with billing based on daily rates. However, this approach is now showing signs of fatigue:

  • A limited value perception from clients, as it focuses on time spent rather than outcomes delivered.
  • Margin compression, due to constant downward pressure on daily rates.
  • Lack of differentiation, in a market where clients increasingly demand niche expertise and measurable impact.

Despite these challenges, the 2025 Consulting, Audit & IT Services Industry Report confirms that T&M remains relevant — particularly in contexts of innovation, uncertainty, or loosely scoped initiatives. In these cases, T&M offers the agility needed to iterate and redefine scope on the fly.

Fixed-Price Delivery: A Strategic Growth Lever — with Strings Attached

Fixed-price engagements offer a more structured approach, focused on outcomes, milestones, and measurable results. For forward-thinking IT services companies, this model unlocks both commercial opportunities and operational excellence:

  • Contractual clarity from the outset, with agreed timelines, budgets, and deliverables.
  • Recognition of expertise, as fees reflect value and capabilities, not time logged.
  • Greater team engagement, with consultants more invested in mission-driven projects that yield tangible results.
"Shifting to fixed-price or ‘outcome-as-a-service’ models repositions value around results, not time. With precise forecasting, rigorous staffing, and digital assets, we grow margins while capturing the full value delivered to our clients."
Stephan Weber, COO, Bearing Point

That said, fixed-price delivery demands sharper operational control — particularly in forecasting, resource management, and risk mitigation.

Towards Hybrid Models: T&M, Fixed-Price, and Success Fees

Rather than abandoning T&M, many IT services firms are moving towards a more diversified portfolio of delivery models, blending flexibility and predictability:

  • Success-based fees: Contracts that reward impact, such as deliverables achieved, business outcomes, or user adoption.
  • Mixed models: Projects may begin with a T&M discovery phase, followed by a fixed-price delivery phase.
  • Outcome-as-a-Service: Still emerging, this model prices engagements based on business value — sometimes usage-based, sometimes results-driven.

How Napta Enables Strategic Model Hybridisation

Whatever the delivery model, success hinges on intelligent resource management — a space where Napta’s Smart Staffing™ makes a tangible difference:

  • Intelligent matching between skills and project needs, powered by detailed competency mapping.
  • Proactive planning, to forecast needs and reduce unproductive bench time.
  • Real-time financial visibility, tracking margins, deviations, and risk exposure.
  • Stronger collaboration, with greater transparency for HR, managers, and consultants.

Strategic Imperative: Mastering Delivery Model Agility

The real question is not “T&M or fixed-price?”, but rather “how to maximise the value of both?”. In an environment defined by:

  • Shrinking margins,
  • Growing demands for client-perceived value,
  • And a need to rally teams around meaningful impact,

IT services companies must build contractual agility and elevate their strategic resource planning. These capabilities — more than the model itself — will define competitive advantage.

Conclusion: Embracing Strategic Flexibility

In 2025, IT services firms must strike a balance between economic rigour and innovation in their commercial approach. The key to long-term resilience lies in:

  • Meeting more demanding client expectations,
  • Showcasing and leveraging internal capabilities,
  • And scaling a future-proof, adaptable business model.

With platforms like Napta, IT services firms can orchestrate this complexity: building the best teams, adapting to the most relevant contract structures, and delivering measurable value to clients.

Interested in exploring how Napta can support your firm’s hybrid delivery strategy? Book a personalised demo to discover our Smart Staffing™ approach.

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