What is Time and materials?
Time and materials (T&M) is a pricing model in which the client pays for the actual hours worked at agreed rates, plus direct costs such as licenses or infrastructure. It suits projects where requirements are expected to evolve, since scope can change without renegotiating the whole contract.
Why it matters for your business
T&M gives flexibility to adjust priorities as you learn, and you pay only for work done. It needs active oversight, such as budget caps and regular reporting, to keep spending predictable.
A company building a new customer app sets a monthly budget cap, reviews hours and delivered features at each sprint review, and reprioritizes the backlog as feedback arrives.