An agreement wherein the total cost for developing a software application is established upfront, before work commences, offers clarity in budgeting. For instance, a company needing a customer relationship management (CRM) system might solicit bids from several development firms, ultimately selecting one that proposes a complete solution for a pre-agreed sum.
This method provides financial predictability, reducing the risk of cost overruns for the client. Historically, it has been favored in scenarios where project requirements are well-defined and unlikely to change substantially during the development lifecycle. This approach can streamline project management and foster greater accountability from the development team.