At SoDA's 2026 conference - a major gathering of Polish software development vendors - I heard a number that stuck with me: only 2.6% of software vendors have actually moved to value-based pricing.

Another 26% have edged toward some kind of hybrid - a base fee here, a bonus there. The remaining 71% are still selling pure hours.

Time & Materials was already a flawed model even before AI. Any vendor clinging to T&M is performing a direct transfer of their AI productivity gains into their margins - leading their clients to drop them as soon as they understand what a rotten deal this is.

Few vendors are actually fixing this. What follows is a look at what the 2.6% are actually doing differently - and why everyone else is still stuck selling hours.

Three ways out of the T&M trap

Phased Fixed Price. Break the engagement into stages - Discovery, Design, Build - each with its own fixed price. As the client, you buy certainty at every checkpoint, while your vendor keeps whatever efficiency gains AI hands them. Every phase is a separate decision point, which makes this the easiest model to start with.

Let's think of a practical example - imagine "an app where people trade rare stamps with pictures of marmots on them" - the cost for such an app might be €5-15K for Discovery, €15-45K for an MVP (though AI has pushed early costs almost to zero), €90-180K for the full build.

You might worry a fixed price invites corner-cutting once the number's locked - that's why each phase gets its own sign-off, not one commitment for the whole build.

Ask your vendor this: is each phase priced without assuming the next one happens? If they can only quote the whole project as one number broken into installments, "phased" is just a word on the invoice.

Hybrid Success Fee. A safe base fee covers the vendor's costs. On top of that, a bonus tied to measurable KPIs - one-time at a milestone, or incremental, say for every 1% lift in your revenue. Split it three ways when it pays out: 25% to you, 25% to the vendor, 50% to the team that actually built it.

You might think this only works with a vendor you've already trusted for years - fair - in that case, you could pilot this on a renewal or a second project, not a first contract.

Ask your vendor this: what % of your business is success-fee or outcome-based? Under 10% means you'd be their practice run, not their proven model.

Revenue or Equity Share. The vendor takes a fixed cut of the value they generate, or equity in your company. Highest risk, but highest possible upside on both sides.

Fraud-prevention vendor Riskified runs on something close to this - they get somewhere between 0.5% and 1.5% of every approved transaction, but they get nothing if the transaction fails. It's a narrow example, but it proves the model works at scale when the outcome is genuinely measurable.

You might assume no vendor would take this deal without cutting quality elsewhere - the honest answer is most won't be so keen to try this - but that is exactly the filter you want, leaving only those vendors that want to seriously support your business goals.

Ask your vendor this: can you name one existing client you're already paid for with revenue or equity share? If they can't come up with any previous experience with this model, you'd be funding their first experiment.

Just to give you an example from one of the biggest players - McKinsey now earns roughly a quarter of its global revenue from outcome-based work. When the firm everyone still hires at €500 an hour prices a quarter of its business this way, any vendor that tells you "we're not ready for that" is confessing to a troubling lack of confidence.

Why almost nobody makes the switch

Barrier #1: Poverty Mentality. Ask a vendor why they haven't left hourly billing, and you'll rarely hear "we're scared" - you'll hear "we want to be flexible" or "the client prefers it." Underneath that is what Alan Weiss calls Poverty Mentality: the unconscious belief that without a clock running, nobody would pay them what they're worth. It's an identity shift, not a negotiation tactic - which is why most vendors never make it.

Ask your vendor this: if we removed the timesheet tomorrow, how would you know what to charge us? If they don't know how to answer it - that speaks volumes in itself.

Barrier #2: Conceptual Agreement Triangle. Never accept a proposal that skips three things: shared business goals, clear success metrics, and a defined financial value of that success for your company.

Weiss puts it bluntly: "A proposal is neither a negotiation nor an exploration. It is a summation of conceptual agreement. The sale is made prior to the proposal." If your vendor sends a proposal before you've agreed on what success actually looks like, you're not buying a true partnership.

Barrier #3: Inertia and the Economic Buyer. The move away from T&M never happens at procurement level - their job is counting rates, not ROI. It has to happen peer-to-peer, you to your counterpart at the vendor.

As Weiss puts it: "The big firms... are calcified in their accounting methodology and audit backgrounds. Always go back to your buyer, with whom you have a peer-level relationship."

Ask yourself: who at your vendor has the authority to actually change scope or pricing without escalating three levels up? If no name comes to mind, then you don't have a peer relationship - you have a subscription.

What sets the 2.6% apart

The vendors who moved away from T&M didn't just change their pricing model - they invested in a brand that creates fee "buoyancy." Weiss puts it well: "Effective branding actually creates a fee 'buoyancy'... No CEO ever said, 'Get McKinsey in here'... then followed up by saying, 'I think they're too expensive.'"

Nobody negotiates price with McKinsey, or with Bentley. You don't shop them on hourly rate, because you're not buying hours - you're buying certainty that they'll get it right.

The vendors stuck at T&M are still selling themselves as bodies to rent. The 2.6% sell themselves as the people you call when the outcome actually matters.

Ask yourself which one your current vendor sounds like in their own pitch.

The 90-day pilot

Reading about this and doing it are two different things - most people stop at reading. Pick one engagement for a 90-day trial run, and check these five things before you start the trial:

1. Is the person approving this the Economic Buyer - someone with a peer-level relationship at the vendor - or is it being routed through procurement?
2. Have you agreed on shared business outcomes, not just a list of technical deliverables?
3. Do you have reliable baseline data and monitoring in place to verify results objectively?
4. Are both sides accepting the asymmetric upside - the vendor's win if it works, your risk if it doesn't?
5. Have you agreed on who measures success and what standard they're measuring against?

Five blanks means you're guessing, not piloting.

Closing

T&M has become something both vendors and clients tolerate more than choose - not because it works, but because changing it takes a first move nobody wants to make.

The 2.6% already pricing on value aren't smarter than everyone else - they just closed the door on their old habits first. Most vendors and most clients already sense T&M isn't working. They're just waiting for the other side to say it out loud.

In an AI era where productivity gains are real and measurable, the ones who win won't be the ones who work the most hours. They'll be the ones who get paid for the result.

Thanks for reading. For more on this, read my previous article: Are You Subsidizing Your Vendor's AI Investments? (The Time & Materials Problem)

Sources

• SoDA Conference 2026 (Poland) - presentation by Valueships on software vendor pricing models

• Value-Based Fees (Alan Weiss, Third Edition) - "The big firms... are calcified in their accounting methodology and audit backgrounds" (Chapter 5 footnotes) and "Always go back to your buyer, with whom you have a peer-level relationship" (Chapter 8, on avoiding negotiation with procurement/accounting)

• Million Dollar Consulting (Alan Weiss, Sixth Edition) - "A proposal is neither a negotiation nor an exploration. It is a summation of conceptual agreement. The sale is made prior to the proposal." (Chapter 5)

• McKinsey outcome-based revenue disclosure (Business Insider, Nov. 2025)

• Riskified transaction-based pricing model