An introduction to Price Per Point
15th June 2016
What is Price Per Point? Price Per Point (PPP) is a new way of charging to build a product. PPP balances the risk of a project between the client and the agency, and it incentivises the agency to work efficiently - and to frequently deliver completed parts of a project while keeping the quality of the work high. Using PPP we bill clients based on the components that we complete and deliver to them. This has obvious benefits over traditional ways of billing. Let’s look at how… The problems with fixed-priced billing The benefits of an agile approach are clear. It encourages efficiency and reduces the time wasted on a project by allowing the business to make multiple iterative changes to the specification while the software is being built. But, if the scope of a project is flexible - and changes as the project progresses - it is impossible to fix a price against it. The problems with paying by the hour There are a two fundamental problems with paying by the hour (or sprint):
  1. There is no incentive for the agency to work more efficiently - in fact, they get paid less if they do
  2. If the agency’s estimates for a project are incorrect, the client is hit with unexpected costs (conversely, the agency actually makes more money)
The client shoulders the risk. No link between payment and delivery With no link the agency can get sloppy - perhaps components remain uncompleted, or technical debt starts to accumulate. In many organisations Agile has a bad name, not because the methodology is flawed, but because the commercial basis of Agile contracts encourages sloppy practice. How PPP actually works There are four straightforward steps to PPP billing:
  • At a distance we break the project up into its component parts, usually in a workshop with our client. There may be 100s of components.
  • We then estimate each component using ‘points’ . Using a consistent method, we make estimates of the effort, in ‘points’, that it will take to deliver each component of the software.
  • In batches the project’s component parts are scheduled for build. We document the specification (acceptance criteria), review the ‘points’ estimate, and fix it for each component. At this point we guarantee that we’ll deliver each completed component for its set cost (or points value) - meaning we carry the risk.
  • We deliver working software in incremental pieces. Each component is designed, built and tested before we send it to the client. If it doesn’t meet the client’s criteria, it is passed back. And we only get paid after the acceptance of each component.
White October will be an Exhibitor at this year's Venturefest on 29 June. Dave Fletcher will be speaking at the session on Digital Product Development at 9.30am and a session on Procuring an agency at 16.15. Get connected now.  

About the author

Dave
Fletcher
White October
Dave Fletcher is founder and Managing Director of White October, a digital agency that works unusually closely with its clients to create web and mobile products.

Latest news

Finalists announced for the Trusts’s 2019 Enterprise Awards

Finalists announced for the Trusts’s 2019 Enterprise Awards

The judges for the Trust’s 2019 Enterprise Awards gathered on a hot July day at the new Wood Centre for Innovation at Stansfeld Park to READ MORE

Using Artificial Intelligence in Recruitment

Using Artificial Intelligence in Recruitment

The hiring process is a critical gateway to economic opportunity, determining who can access meaningful employment and who can achieve ... READ MORE

The new Milk-Round: if students all want jobs in start-ups these days, how do you attract and retain them?

The new Milk-Round: if students all want jobs in start-ups these days, how do you attract and retain them?

Oxford University runs many careers fairs annually where established organisations present their graduate programmes, to attract the ... READ MORE

 

PARTNERS

Book Now!

Now in its 21st year, Venturefest Oxford continues to bring together entrepreneurs, innovators and SMEs with investors, support services and a host of like-minded people who want to be part of the county’s business success.

All tickets include: complimentary bus travel to and from the event, access to all Venturefest Oxford sessions, exhibition, showcase, complimentary tea & coffee, lunch and closing drinks reception. Early bird tickets on sale from 23rd April!

Student entry is free of charge – valid ID will be required.

 

Keep in touch

Sign up to the Venturefest Oxford newsletter to make sure you are the first to hear the latest news. The next newsletter will be coming out soon! Make sure you're on the list!

 

 

 

 

Email Preferences

 

Wednesday 11th September 2019
Oxford Brookes University,
Headington Campus