Custom software by subscription or a fixed-price project?
There are two common ways to pay for custom software. Neither is right for everyone. Here is how each works, what to watch out for and who each one fits.
By Carlos Rivera Alvarado5 min read
Key takeaways
- A fixed-price project buys a defined piece of software once. A subscription pays for building it and keeping it running and improving.
- Fixed price fits a stable, well-defined tool and a team that can maintain it. A subscription fits a business whose process keeps changing and that has no technical team.
- Whichever you choose, get in writing what is included, how changes work, who owns the code and the data, and what happens if you leave.
If you have asked for quotes on custom software, you have probably seen two very different offers. One is a project: a price for a defined scope, usually with a deposit. The other is a subscription: a monthly payment. They can look like two prices for the same thing. They are not. They buy different things, and the right one depends on your business.
We sell the subscription model, so take this with that in mind. We have tried to be fair to both, because the wrong model makes even good software painful.
How a fixed-price project works
You and the developer agree on what will be built, often in a scope document. You pay a price for it, usually split into a deposit and payments tied to milestones. When the work is delivered and accepted, the project ends.
What you get: a defined piece of software, delivered once.
What is usually not included: hosting, maintenance, security updates, support and changes after delivery. Those are often a separate contract, a separate quote or your responsibility.
Where it works well
- The tool is well defined and unlikely to change much, such as a calculator, a one-time migration or an internal app with a stable process.
- You have someone in-house who can host it, keep it updated and fix it.
- You prefer a one-time expense over an ongoing one, and you have the budget for it up front.
What to watch out for
- A large payment before you see much. Deposits protect the developer; make sure milestones protect you too.
- Change requests. Businesses learn things once real people use the software. In a fixed-price project, each new idea tends to become a new quote.
- The day after delivery. Who fixes it when something breaks? Who updates it when a service it depends on changes? If the answer is "it depends on the contract," read that contract carefully.
How a subscription works
You pay a monthly fee. It covers building the software and, after launch, hosting, maintaining and improving it. Many subscriptions include a monthly allowance of work for changes and new features.
What you get: software that is built, kept running and keeps changing with your business, from a team that stays.
What is usually not included: work beyond the monthly allowance, which is quoted or moves you to a bigger plan.
Where it works well
- Your process is still evolving, and you expect to keep asking for changes as you learn.
- You don't have a technical team and don't want to hire one to host and maintain the software.
- You would rather avoid paying for the whole project up front and spread the cost.
What to watch out for
- What the fee really includes. Hosting, maintenance, support and changes should be spelled out, not implied.
- The size of the monthly allowance and what happens to unused time.
- Ownership and exit. Who owns the code? Who owns the data? If you cancel, what do you get and how? These matter more in a subscription, because the relationship is ongoing.
- Total cost over time. Over several years a subscription can cost more than a project. The comparison that matters is the subscription against the project plus the maintenance, hosting and changes you would pay for anyway.
A quick comparison
| Fixed-price project | Subscription | |
|---|---|---|
| How you pay | Project price, usually with a deposit | Monthly fee |
| After launch | Usually a separate contract | Hosting, maintenance and improvements included |
| Changes | Often a new quote each time | A monthly allowance of work |
| Best for | Stable, well-defined tools | Processes that keep changing |
| You need in-house | Someone to host and maintain it | Nobody technical |
Questions to ask either way
- What exactly is included, and what is quoted separately?
- How are changes requested, estimated and prioritized?
- Who hosts the software, who updates it and who answers when it breaks?
- Who owns the code, and who owns the data?
- If we stop working together, what do I get, in what format, and how fast?
A good provider of either model will answer all five in writing.
Why we chose the subscription
At Ponuz, we sell custom software by subscription because the businesses we work with change constantly, and we would rather stay and keep the software up to date than hand it over and disappear. You pay a monthly fee, with no setup fee and no paying for the whole project upfront.
These are our plans, in US dollars:
- Essentials: USD $249 a month. One tool for one process.
- Growth: USD $649 a month. Several connected tools.
- Scale: USD $2,500 a month. Large operations or several locations.
There is no setup fee on any plan.
Every plan includes hosting and maintenance, support from people first, a client panel, training at launch and a monthly bank of development hours. Unused hours don't roll over, and larger builds are quoted separately. You can cancel with one month's notice and we send you your data in a ZIP file. The code belongs to Ponuz; your data belongs to you.
If a fixed-price project fits you better, that is a perfectly good choice, and we will say so. Book a free 30-minute call and we will help you figure out which model fits your case.
More detail in our guide on what custom software costs and in how custom software with Ponuz works.