Why are Businesses Willing to Spend More for Software? 643
"I recently had a the chance to bid on a contract, which I didn't win because of my estimated project cost. The winner of the bid had an estimated cost of $15,000 whereas my estimated cost was around $5,000 for the same project. The contract was not a complex project: a system comprised of database-generated web pages, with file submission and minor document management features.
I had, in about 8 hours of preliminary work, 50% of the website and associated back-end completed and had the rest of the site roughed out for what they wanted. The work is simple and I think almost anyone who has done similar types of site designs would agree with me.
The reason I got for not winning the project was that my proposed bid was seen as too low.
Does this make any kind of sense to anyone? Why would a company prefer to spend $15,000 on a project instead of $5,000."
heh (Score:3, Insightful)
Re:heh (Score:3, Insightful)
If they start out with the $15k contractor, they probably have a higher probability of getting the job complete. If the higher bidder under-bid, at least he has more profits from the initial bid to eat into than the guy with $5k does before he walks away.
Re:heh (Score:5, Insightful)
Bidding is about risk management on both sides. Even the process of giving a bid is a calculated risk. If you spend a day or more to really understand the customer requirements and write up a good proposal, you're already in the hole on a project. Obviously you can reduce the initial cost by using the "two weeks and $5k" approach but that doesn't inspire confidence.
Once you've established a relationship with a client you can often dispense with the detailed written bids, but it's often important for that first foot in the door.
bidding process (Score:3, Informative)
I don't know if this is incidental to Georgia or to the construction industry, though.
Re:heh (Score:4, Informative)
Re:heh (Score:2, Insightful)
Admittedly, if you don't know the market rate for your services, you may be ignorant in other aspects of the business.
There may also be a certain amount of belief that someone is less likely to blow off a $15,000 contract than a $5,000 one.
Re:heh (Score:2, Insightful)
Re:heh (Score:3, Interesting)
You comment regarding a "15 year old doing the same in half the time" is just ridiculous. The gap between working, full scale, well designed systems, and the beginnings of a test site that a kid put together, are the difference between shooting off a model rocket and then claiming that you can go to the moon for half the cost of NASA: Cheap words. I've worked with so many clients that have a pot pourri of absolute garbage systems put together by people with just such an attitude.
Re:heh (Score:3)
Assuming that this reason they gave is the real reason, you're looking at the whole situation backwards.
You see the competitor's price, and you think "Why is this 3 times more?" The client saw your price and thought "Why is this 3 times less?" If the client sought other bids were closer to the 15K mark, then your price would really stand out as unusually (and perhaps suspiciously) low. (Conversely, if all the other bids were closer to the 5K mark, then the 15K would stand out as unusually high.)
You need to revise your pricing model to better suit the market rate. (I'm an ex-coder gone marketing -- I speak with some knowledge here.) Pricing is sort of the black art of product marketing; it's very difficult to know when you have it right, and there never seems to be a logical way of getting to that figure.
Going far above or below your competitors often puts you in a different market segment, even if the end-result is the same. It may seem bizarre and illogical to you, but unusual differences will raise questions in your client's mind -- you want to make sure that the simplest answer is in your favour.
Good marketing is not about advertising, but about managing customer perceptions (key word: perception) consistantly in everything you do. That includes your product/service, your price, your website, your professional manner, your support -- everything that the customer may see or interact with. All of these must be consistent with each other.
Check out Postioning and Marketing Warfare by Al Ries and Jack Trout to get a better understanding of how to market yourself.
if it's anything like a government contract... (Score:4, Insightful)
Re:if it's anything like a government contract... (Score:3, Interesting)
From what I've seen, they just like to spend lots of money no matter what time of year.
$200,000 of software on a 2-CPU server for a *very* low-volume website? Yup, because they can use all the buzzwords and brand names in their reports, they like the important feeling when signing big purchase orders, and they forget that they are flushing public money that could be spent on painting lines on roads and buying books for school libraries.
I think truly realistic contract bids clash with the egos of those choosing the contractors. I think many people prefer saying "I'm in charge of a $3 million contract" rather than saying "I saved the city/state/country $1.7 million dollars by making conscientious purchasing decisions."
bid evaluation (Score:5, Interesting)
this is how most government contracts work. ignore the high bidder, ignore the low bidder, and hope for the best when you pick one of the middles at near-random. you just don't have time to be thorough when you evaluate a bunch of bids.
Re:bid evaluation (Score:5, Insightful)
- Price is often the last thing bid evaluators look at. While it is true that stupidly high and stupidly low bids get tossed without evaluation, price usually doesn't have any effect early in the evaluation process.
- Company size really does matter. The point of view is that the more developers work on the project, the more likely it is to be completed and delivered on-time. In the project I recently awarded, we had two proposals that were even in every way, except that the $55,000 proposal had four developers (one graphic designer, a DBA, and two programmers), and the $74,000 proposal had seven developers (one graphic designer, a DBA, and five programmers). Guess which one we chose?
- Company history is VERY important. Gaming and personal sites don't count, and neither do projects you completed while employed for someone else. If you are approaching me as XYZ Web Inc., then I want to see an impressive portfolio of websites that were actually built by XYZ Web Inc. I personally don't care if you've worked at Yahoo, Amazon, or Ebay, because I'm not hiring them to do the job. I'm hiring your company, so I need to see your companies credentials. It's amazing that such a simple concept can be so consistently forgotten by bidders.
- You need specialists, or you need to go out of your way to show that your general developers have specific training in multiple fields. If I put out a bid for a website that requires graphics work and a database, then you had BETTER show me that there will be a professional graphic designer and a DBA working on the project, in addition to the web developers. If that's not possible, I need to know the certifications and training that your general developers have had in those fields. "Self Taught" earns your bid a short trip to my circular file.
- Did you submit a proposal, or just a price? You cannot write a good bid that is less than 20 pages long...period. We need your company portfolio, your developer histories, the list of the technologies you plan to use, timelines as well as a quick development plan and at least one use-case scenario to prove that you really understand what the project is all about. I've seen far too many bids that basically said "We're XYZ Web Inc., and we can build your website for $5,000". Maybe you can, maybe you can't, but either way you have to give me enough information to base my decision on.
- Never ever argue technology with the client. Our datacenter is pretty standardized: We run IPlanet on the webservers, Oracle on the databases, and Solaris as the OS for everything. When we put things out for bid, we make it clear that our websites/software must run on this platform, and that our web sites MUST be written in JSP. Given that, I've never understood why so many bidders see fit to argue the point; "PERL is better!", "Linux is cheaper", "Apache is more stable", "IIS is the web standard", and other pitches may or may not be true, but I really don't care. If my RFP says that you must use technologies A, B, & C, then that bid had better use those technologies. Anything else gets you dumped.
- What about goodies? Maintentance? Most good bids (read:expensive) include statements that the developer will train internal staff to maintain the webpages, construct the site so that a secretary or merketing lackey can edit it, or otherwise pile on peripheral site features that aren't neccesarily included in the bid request. Showing the client that you're willing to go above and beyond what they asked for is a good way to get their attention.
- See any room for improvement? Suggest it! The bidders who won the last eval I chaired partially did so because they improved our own requirements. When the developers saw our RFP and saw the requirments and features, they realized a better way to solve one of our problems and suggested it. We were so impressed with the improved suggestion that they got the project.
- Be professional. Bids will often have bidder meetings where some of the top proposers get called in to answer questions or clarify their proposals. If you get called to one of these, you need to remember this: These are not your friends, or your bosses, or your co-workers, they are your potential clients and you need to treat them as such. This means no bluejeans and t-shirts with Google logos on them. Put on some slacks and a tie (and a coat if it's a large or formal institution), and toss that big pile of papers in a briefcase. If you can't present yourself properly, how can we expect you to rpesent us properly?
Price gets weighed in AFTER all of these factors are considered. If we evaluate our bids and find that two companies offer equally outstanding proposals, make equally compelling sales pitches, and have equal backgrounds and development staff, then we might weigh price in as the deciding factor. But that's actually a pretty rare situationYou need to learn basic software engineering (Score:5, Insightful)
For instance number 2 on your list is that the more developers that you have working on a project, the more likely it is to be completed and delivered on time. In fact software engineering literature from The Mythical Man-Month on comes to exactly the opposite conclusion. Adding bodies to software development creates basic infrastructure problems that make the project more difficult to accomplish, let alone to accomplish in a timely manner.
Real world project data supports that. Most large projects fail. Larger projects fail worse, more often. At one point Sun had an internal rule that no project would be accepted that was supposed to take more than 6 months or cost over $1,000,000. The odds of failure were just too high.
Now of course a given project has minimum realistic needs in terms of how many skills are required, and how much work will be needed. There is a minimum team size for a given project. But for the optimal productivity and probability of successful completion, you really want a team that is close to that minimum.
And that gets us into your technology decisions. Agreed that when you are trying to bid on a contract for a client, you do what the client wants. If the client wants a series of unproductive technologies, you have to increase your development costs because of your projected unproductivity, but that isn't the time to sell them on the benefits of their letting you work more productively.
However at this moment we are not dealing with an RFP. So I am going to point out to you that if there are real software engineering reasons to want development teams that are as small as feasible, then there is good reason to want a development environment that makes developers more productive and therefore reduces the minimum size of development team that you need for your projects. I won't say which tools and what environment that is because the answer depends on a lot of hard to evaluate factors (though I admit to thinking that your choices "leave room for improvement"), but I can point to Beating The Averages [paulgraham.com] for a sample essay showing how much of a difference it can make. And I cannot emphasize enough that it is a very powerful experience for a developer when they see first hand what kind of difference it makes for them to be in a productive environment.
That said, there is a good business case for not experimenting with your development environment. It is one that puzzles most techies, so it is worth explaining.
If you start making changes in areas that your company does not personally have a lot of experience in, then some of your decisions will be good and some will be bad. The problem is that the bad ones will cost you far more than the good ones win you - you are essentially gambling on your ability to pick correctly in an area that you know nothing about.
Therefore outside of areas of strong company expertise there is a lot of pressure to try to make similar decisions to your competitor. Those are no more likely to be good or bad than trying to make your own choices would be, but they have the decided advantage that you won't accidentally choose badly where your opponent chose well, in an area that turns out to be the deciding factor.
Incidentally this is a principle that explains the advice offered by Paul Graham in Revenge of the Nerds [paulgraham.com]. In that special case Paul is talking about how a nerd should take advantage of their area of expertise. And the answer is to pick a line of business to which your special knowledge applies, go into that business, and let your correct decisions tell. But when you do that, do not simultaneously attempt to rethink every other area of business that you must deal with, because you will get a lot of that wrong!
Re:You need to learn basic software engineering (Score:5, Informative)
For instance number 2 on your list is that the more developers that you have working on a project, the more likely it is to be completed and delivered on time. In fact software engineering literature from The Mythical Man-Month on comes to exactly the opposite conclusion. Adding bodies to software development creates basic infrastructure problems that make the project more difficult to accomplish, let alone to accomplish in a timely manner.
As a programmer myself, I agree completely. The debate, however, comes into play when deciding just where that line should be drawn. My personal standard is that there should never be more than 2 developers per use-case, but that it is preferable to limit teams to 1 developer per use-case and "cross-develop" features to ensure that a project stays developer independent. Using that theory, I would have accepted up to ten developers for this website.
then there is good reason to want a development environment that makes developers more productive and therefore reduces the minimum size of development team that you need for your projects
Fundamentally I agree with you, but a bid is NOT the place to propose architectural changes to a potential client. I once took on a $15,000 project to add several features to a website that was written in Delphi, running on an ancient HTTPd server running on NT4, and connecting to a really old Informix database. I wrote my proposal to the clients specifications, and won the bid. After I won the bid and began developing the new features for the client, I presented them with a list of suggestions to improve their website. These ranged from implementing WCAG-AA design rules, to switching to a Solaris/Apache/Oracle architecture to improve performance. I also didn't argue for these changes "because they're better", but instead made solid business arguments as to why the changes should be made (reduced maintenance costs, improved reliability, better performance, greater expandability). The client eventually OK'd the upgrades, and my $15,000, 30-day project became a $160,000, six month project. So, yes, architectural changes CAN be suggested to the client (and they can often lead to much more lucrative contracts), but they should NOT be placed within the bid itself.
I'll actually agree with you there, but that brings up the other half of the "suggesting platform changes" issue: The people evaluating your bid may not have any control over the technologies used. In my position, for instance, I make web decisions daily that directly impact website development for more than 40,000 people. Despite this, I don't get to choose what goes in our datacenter. Decisions about what we run on are made by Datacenter Operations, the Director of IT's office, and the CIO herself. While I can make suggestions regarding what goes on our servers, I can't arbitrarily order them changed. So when I put out an RFP requesting a web-app that will run on IPlanet and Broadvision, and someone gives me a bid suggesting Apache and Slashcode, there just isn't much I can do with it...no matter HOW convincing your four page manifesto on the superiority of Apache might be. I've seen far too many proposals get chucked because development firms don't take this into account.
I pretty much agree with everything else you say
Why you shouldn't be hot to tinker (Score:3, Insightful)
I have my own illustration. I live in a 70 year old house. The main bathroom was fixed up by the previous owners about $10 years ago, but it had problems. Among them, the old wall mounted toilet used a lot of water. It had a short bowl (I like elongated bowls) It was cracked at the base. It oozed unknown stuff around the base and it had started leaking where the pipe from the tank joined the base and the wall wasn't holding the weight from the tank very well.
We could have fixed the wall and installed a new wax seal and we might have fixed the oozing problem (assuming the cracked base wasn't involved), but we thought this was a good time to upgrade to a new water efficient modern toilet with a nice roomy elongated bowl. Sounds simple, right?
Well, first thing, the distance between the center of the drain and the wall was about 15.25" rather than the now standard 12" So, we had to custom order a new toilet. The custom order, even though it was discounted from retail, was still 3x as much as the same toilet at Home Depot for a 12" offset.
For another thing, no one, as far as we could tell makes toilets for a 15" offset, so we had to order a 14" and figure out what to do about the extra large gap between the tank and the wall, because, once we got the new toilet in there, it was obvious that it was too damn big.
We are still going to have to patch the wall, since the new toilet is smaller (but we knew that).
We had to get new studs to hold the toilet to the wall and I had to look around a little more to find ones long enough for our situation.
The old stud hole was too rotted out, so I ended up having to epoxy the stud in, but not until I made another trip to look for more options. Plus, this still may not hold and I might have to try something else.
The toilet sticks out into the room further than I would like. Their solution for 14" offsets is to sell the same base as for other applications and make a tank that is built up at the back so that it comes closer to the wall.
Now, the addage of "If it ain't broke, don't fix it" doesn't quite apply to my situation, but the reasoning is still the same. Seemingly minor changes can be much more involved than they look at first glance.
Some of the problems we ran into could have been mitigated, but they would have required significantly more planning, and some of them would have required exploration which itself would have been disruptive and might have created other problems that needed to be solved.
Changes to ones systems platform can be similarly disruptive.
Self taught (Score:4, Insightful)
Eliminating the "self taught" out of hand seems like a bit of throwing the baby out with the bath water. I've seen many a person who had a number of certifications and couldn't program their way out of a paper bag. Certificiations, depending on the type, can be almost completely meaningless.
Personally the only certificiation I have is as a Java programmer and I will tell you right now that all this means is I read the book. If you want a good measure of skill, get a sample of some of the developers and what their real-world experience is. Most of the good developers I know have few if any certifications.
Re:bid evaluation (Score:3, Interesting)
Before I can offer any advice, I need to know more about your situation. Are you a one-man team trying eagerly to get your first contract, or are you working for a larger company with dozens of websites under their belt.
I have personally done websites as an individual where I knew the client well enough to get the job with little or no interview process. I have also been part of a company bidding 6 and 7 digits contracts. There are MAJOR differences between the two situations.
BrianH was right on track for the later situation, but let me add to his wisdom. Here's the typical story...
Company A invites several companies to bid for a contract. They send a RFP (request for proposal) to the various bidders. Those bidders explain how they will get the job done, and WHY company A should choose them. They list key personel assigned to the project, and similar projects they have done. My company includes screenshots from our previous work, and letters of recommendation from previous clients. We give a brief paragraph or two about each person assigned to the project. We also get paid a small fee (compared to contract price) just to submit a proposal. It's not uncommon with larger contracts, considering the work (research) that goes into the project.
However, I believe your situation is different. You are probably an individual, competing with small companies. So here are a few pointers to help you get started.
1. Spend some time doing research on what other people are charging, it is not uncommon (at the low end of contract sizes) to get turned down because a bid is too low.
2. You are most likely to get turned down because you did not impress your client. Take some time to put together a proposal that impresses people. Be sure to understand your client. If they are not tech-savy, don't overload them with tech-jargon.
3. Make your company look bigger. Clients love the idea of a small army of talented people working on their project. After all that's why they are hiring someone else, rather than doing it themselves. If neccessary, ask friends to join you when ever you meet the client. One person alone gives a bad impression of either not caring, or being understaffed.
4. Consider a worst case scenario and possible problems when bidding. Does that website need to look absolutely perfect on all browser, all platforms, all vesion of each OS ?
5. (stolen from BrianH) Make suggestions. Show you understand the request, and understand what needs to get done.
It's hard to build a reputation. It will be tough in the beginning, but learn as much as you can about how other people are going about it.
The most important thing you can do when you start out is to make your company stand out. In you proposal, make suggestions (suggest, not tell), talk about follow-on work, but don't get too techincal or complex.
No one with a MBA wants to read why you have chosen Apache, PERL, mySQL, PHP or whatever. Just explain how it is going to work to the user, how easy it will be to use, not how your going to write some code.
The only part I have been uncertain about is how to handle clients who can't explain what they want in any detail. When a client asks for a website with "forums", but doesn't explain how they want them to work, you can't submit a proposal asking them to clarify, and determing a fair bid is nothing more than guesswork.
Re:bid evaluation (Score:3, Insightful)
That was the idea.
I have NONE of such certifications you require. And I have a strong disbelieve in specialization, especialy in computer science. It is VERY likely that one of the guys who win a bid by you are trained BY ME. And I learned it by DOING
As a college dropout myself, I can certainly sympathize with your argument, but it won't get you anywhere. This discussion is about people wanting to know how to win bids, and the easiest way to win a bid is to prove that you know your stuff. Portfolios are easily faked, and I don't have time to meet with you, so how am I to determine whether or not you know the technology? By asking an independent and unbiased third party source. That's what degrees and certifications are really all about. When I hold two bids, and one has certified and/or degreed developers while the other has nothing, I'm forced to compare a known minimum to a completely unknown quantity. Given the typical ten minutes per bid that we're given, which would you chose? Now, since 90% of bids are reviewed by MBA's and purchasing departments with little technical background, which do you think they would choose? We're not talking about what's fair or how things SHOULD be, we're talking about how they ARE. This is how things are, and people need to take this into account when bidding projects.
Would you ask Ivar Jacobson wich certifications he has?
You know, I've got one of his UML books floating around my office somewhere, and I seem to recall that his proper title is Dr. Ivar Jacobson. A PhD in programming kinda speaks for itself
Also your rant about XYZ Web Inc versus personal projects
You're missing your own point. First you say it's the person who does it, then you say it's not technical incompetence (i.e. "the person") who causes the project failures. This is my point and it's EXACTLY why I want to see portfolio projects from the company, not the individual developers.
You could, for example, put together 10 of the best web developers, graphic designers, and DBA's on the market and create a new company. On paper, if you list their individual projects, it might look pretty impressive. But what if the new company has bad management? Poor development processes? Unrealistic salesmen? The best developers in the world can't overcome working for a bad company, and their personal histories are no gurantee that projects taken on by this company will succeed. That's why we have to see projects done by the COMPANY. It not only shows us that you have competent developers, but that you can all work together and get things done. That's more important to a company than individual skill...I'm outsourcing to a company, not hiring a programmer.
Re:bid evaluation (Score:3, Interesting)
bragging rights (Score:3, Insightful)
Re:bragging rights (Score:2)
Yes, it's crude and somewhat bigoted, but nobody said being a Chief made you somehow enlightened towards humanity.
Diffrences in costs of living (Score:2)
You get what you pay for. (Score:3, Insightful)
Re:You get what you pay for. (Score:2)
There are a lot of hidden costs in 'developing' a project.
Evaluating, producing the bid and assessing workloads before you even place a bid.
This should take not less than half a day (for a very small project!) charged at between $700-$1200 a day.
Then there's the closing down of the project when your 'finished' again not less than half a day.
You also need to take into account full cycle development, say 1 months critical support post completion charged by hour or on a service contract there afterwards.
If your prepared to take on the 'very small' $3000 projects fair enough but there soooo much hassle, the client will expect all of the above to be thrown in, larger companies realise that there's a lot of pre , post and peripheral project work that needs to take place and will expect your bids to take this into account.
see
It's about the budget (Score:3, Interesting)
I would imagine most places have a budget for how much they're allowed to spend for a certain project - I know my office follows this. The upside of this is, they can't go over that spending limit. The downside is, they have no incentive to save any of that money.
Of course, the ideal thing to do for the project manager is to get the most bang one can for the money available. But what you often see instead is the project manager going for the bid that comes closest to the company's estimate for how much it would cost them to do the work themselves.
Insurance...? (Score:2, Informative)
This week in history... (Score:2)
Just the same... if your product isn't selling, and your selling it cheap - question your product (or your saleforce) - not the potential customers.
You see this in the wine [ETOH] industry (Score:2, Interesting)
You also see this in the wine bidness. Many California vintners find that they can't sell their wines at the natural price point [typically $7.50-$10 a bottle], but when they jack the price up to $30 a bottle, and slap on a trendy art deco label, they find that their sales go through the roof.
If you have to play hard to get, then play hard to get.
Possible Reasons (Score:5, Interesting)
1) You appeared amatuerish. Cheap often *does* mean its a little bloke sitting alone in a room hacking out stuff. There no guarantee you might just get bored and fuck off.
2) Did they offer more? Putting in extra features, and charging for them, is commonplace.
3) Are you sure you actually lost on price? Was their bid of a higher quality, and you were fobbed off with the price as an excuse?
4) Did they offer support? Updates? Full IP/Copyright? Training? Sort of comes in with number 2..
Cheaper does not always mean 'the same thing at a lower price'. Theres a reason for the 'cheap and cheerful', and 'you get what you pay for' adages after all.
Re:Possible Reasons (Score:3, Interesting)
What keeps *any* of the bidders from goofing around and sluffing? Being a singleton does not increases the chances of goofery in any way I can see.
Usually there is a "references" section where you describe prior projects you have worked on. If you slack on too many, then you have no quality references for the next project, and quantity of decent references is a good thing.
Plus, you won't get paid if you sluff.
Its a trade of values... (Score:2, Interesting)
Yeh right. (Score:2)
And the answer is... (Score:5, Interesting)
There's also psychological data that shows that people tend to hold dear those things that they have invested more in. Social psychologists have demonstrated that an excellent way to increase someone's opinion of you is to get THEM to do something for YOU, and often times the more onerous the task, the higher the resulting opinion. One interpretation is that they internally conclude they must like you more, in order to explain to themselves why they would do something difficult for you. Conversely, if something comes easily, it won't be valued as much, and people know this at some level.
Re:And the answer is... (Score:2, Informative)
Also known as, "cognitive dissonance."
I love it when people pull out the psychology stuff. :)
No, you're wrong. (Score:3, Interesting)
The idea is that people want to have a consistent view of themselves. They want to believe that they are rational or whatever. So, whenever something happens that they wouldn't normally expect themselves to do, they change their ideas about themselves. The reason they do this is (theoretically) to avoid cognitive dissonance. It is believed that cognitive dissonance is actually a physically uncomfortable condition or emotion.
So an example would be if, for example, you helped a girl with her car, you might think she was better looking then if you hadn't.
"cognitive dissonance" does not refer to the conclusion you draw, nor the theory.
---
The other odd thing is that tmark even brought it up at all. Is he saying the manager or whoever took a social psych class and wants to pay people more because he believes that if he pays more money, then people are going to work harder for him and thus like him more? Does he want to pay people more so that he can manipulate his own emotions and make himself like the contractor more?
Either way, it's a pretty bizarre conclusion.
cognitive dissonance.. (Score:3, Informative)
They choose the smart ones (Score:2, Interesting)
Its not just in software development . . . . (Score:5, Interesting)
The catch-22 of the whole thing is that the client will bitch about how much money you're costing them . . . then you'll hear through back channels at the end of the project that they aren't happy because they don't think they paid enough for the high quality product they got.
I've got untold colleagues in other professions who have had essentially the same experience. I think it boils down to this - people want to feel violated. There's a mindset of "if it doesn't hurt, it can't be good" . .
just2cents.
Colleges too (Score:2)
Maybe it's the same with software. "If it's that cheap, you couldn't have done a very good job."
Having seen the same thing (Score:5, Insightful)
Business people don't think in terms of how "hard or easy" a particular project is. It's about gaging what a potential client percieves as the value of that service. I was told by friends who have been running their own business for 20 years you have to give a high bid, but let the client know the price has room for adjustment. If you're quote is much higher, 90% of the time they will contact you to ask "why is your bid so high?". Whereas a substantially lower bid gets tossed out.
So the lesson I learned after having made the mistake is to bid high and then adjust the price later. In the end, it says two things about the service you provide:
1. your time is valuable
2. you take your profession seriously
Having a lower bid most often is precieved as "amatuer".
Irrational pricing (Score:2, Insightful)
In the early 90's K Swiss was doing badly in Hong Kong and the sport shoes were pulled from the market. They did some research and relaunched as a premium brand at three times the price - with the same product.... they sold like you would not believe... they sold many times the previous number of shoes.
It is a problem. If something is too cheap - it is under-valued.... if it is priced high then its perceived value is increased. There are implications for Open Source projects here. If the product is free, is its value nothing as well?
Re:Irrational pricing (Score:2)
I agree with you here.
If you ever have a garage sale, try having a 'free stuff' bin where people don't even have to pay. Some people will walk right by it because they think that if it doesn't cost anything, it's not worth anything. (Admittedly, garage sales may be a bad example because it's where bargain hunters lurk.)
Another example (Score:2)
Re:Another example (Score:2)
It all depends on the evaluators... (Score:2, Interesting)
They told me it was a price based decision, I heard from back channels it was because the $5k bid came from a "friend".
Just remember that most sales are made based on the decision makers *feelings* about the project and about the bidders. If you never get a chance to talk to the decision maker directly about why you didn't get the contract, you can never know why he/she made that decision.
implied value (Score:2)
Disclosure: I am a student, not a contractor or consultant. I have worked closely with Professional Engineers and managers who have worked with as and with a variety of consultants and contractors so I have picked up a few tidbits of knowledge.
I think that expensive consultants and contractors with fancy contracts, names, etc give a sense of implied value. The businesspeople who hire them do know a lot about business but not software development, and thus cannot gauge the real value of a project in terms of a software developer's time until they either do some development themselves or get screwed over enough times by consultants.
The story below has been modified slightly to protect the innocent, but the meanings/morals in it are unchanged.
Now a certain very large company I worked for recently had hired, before I had come on board, a well known worldwide consulting firm to develop some software for them. And the end of this and with ~$20k paid to the consultants (which was at about the time I was hired,) the company I worked for was quite unhappy with the work the consultants had done. They already knew they would be unhappy about half way through the project. Although (according to my sources) the consultants had built what was asked, it was at first insanely buggy, and even after the bugs were fixed, the entire design behind it was flawed.
That is one reason why I was hired. The company had learned its lesson and redefined its criteria and constraints. Then, working as a ~$20/h university student, I built something much closer to what the company wanted and they seem to be quite pleased.
So here is the moral of the story as I see it: One main reason (but not the only reason) why companies will pay too much for software is because the don't understand software development values and what makes something easy or hard to develop. Only by getting screwed over a few times (i.e. by trial and error) will businesspeople and managers really learn how to gauge the value of software development. Until that time, they will believe that high cost == high value.
Image vs Common sense (Score:2)
Do you really think that £150 pair of Nike trainers are that superior compared to the £50? No, of course they're not - but people will swear blind that they're much, much better and worth the money. They cost a tiny fraction of that to produce, but the companies selling trainers that are making only a small margin, and say selling for £30 are seen to be lower quality simply because of the price - even if the exact same amount of money was put into developing the trainers!
Unfortunatly you can't always be aware of what sort of money the client is prepared to pay, if they're running on a tight budget or if they have lots of money to play with. Do you put in a slightly cheaper than normal quote to try and grab that big contract, or charge a premium to make it look like you're doing a much better job?
One manager may look at a low price and think "Bargain! That'll save us some money.", and another will think "That's all? He can't know what he's doing!". Get it wrong and you'll either not win the contract through charging too much, or too little, or possibly still win but be underselling yourself.
Re:Image vs Common sense (Score:2)
Gossy wrote:
Unfortunately you can't always be aware of what sort of money the client is prepared to pay, if they're running on a tight budget or if they have lots of money to play with.
Does it make sense to make two offers? One cheaper, a "solid, bare bones" approach, and one expensive one with more features, neater looks, bigger machines, etc? Anyone have experience?
liability (Score:2)
they can't believe it's that easy (Score:2)
Also, consider that most CTO-level decisions are heavilly influenced by the fraternity atmosphere with the sales guys, buying the CTO drinks and leering at the women in the bar. It has less to do with software than you might think, unless you're bidding on contracts to write a dating sim.
It's the same in consulting. (Score:5, Interesting)
This is CRAZY!
What I get from customers is that those who charge more most have something more to deliver because they charge so much. It is the same stupidity that means a person in a three-piece well-fitting suit can open a bank account with obviously bogus ID, while a hippy with lots of good and valid ID gets the runarround.
If things look rich, then people, especially business people tend to trust them more than things that don't look rich. This is a major flaw in the only society I am familar with, North American Society.
ttyl
Farrell
Sssshhhut up! (Score:5, Funny)
coz half-decent software makes tons of money (Score:2)
Bearing that in mind, budgets on the order of 15-30 grand for even small projects (which ultimately this was) are pretty easy to justify, and quotes for smaller amounts make people worried ( and often rightly so).
Business Logic? An Oxymoron? (Score:5, Insightful)
In the eyes of a business (or its PHB [dilbert.com], at least), cost is seen as directly proportional to the quality of a product.
This isn't just true in terms of software, but extends to all industries and products. Take a regular cup of coffee as an example:
You walk into a shop and pay $3.00 for a cup of coffee. You'd expect it to be a pretty decent cup of coffee, right? What if you bought a cup of coffee for $1.00? Would you expect it to be more or less good than the $3.00 cup of coffee? The majority of people would expect the $3.00 cup of coffee to be nicer than the $1.00 cup of coffee, but until they taste them both, they don't know.
If a business asks for quotes for a project, and someone is outbidding you 3:1, then they are likely to perceive your project as being underdeveloped, whether or not this is true. :-(
If a project needs to be completed within a certain timescale, it stands to reason that the company will pay over the odds, rather than going with the cheaper option and running the risk of having to pay for someone to take over a project if it goes tits-up, along with the added time that situation implies.
Re:Business Logic? An Oxymoron? (Score:5, Funny)
Kintanon
Vide Game Slave
Not true... (Score:2)
When you bid do you break everything down? Breaking it down is about two days of work depending on the size of the project.
(it's a bad) business.... (Score:2)
If they got one bid in radically below the going rate for the work they will probably think there is somthing wrong with the bid, either they are cutting corners or they are pulling a fast one. They will have already set aside a budget for teh project so it really isn't a big issue to them payin less but they will worry about the quality on a lower bid. It probably comes from a building mentality whereby if you see a builder giving yo ua low quote you will worry about the quality of teh bricks and craftsmen he has.... Unfortuantley people don't realise software doesn't work to the same mirco model....
Leonardo Leonardo (Score:2)
Randal: The expensive kind.
Leonardo snatches fuming box of Descreto Burritos from Randal
Leonardo: I must have them... ahh, exquisit!
Leonardo turns green after having taken a bite, but forces himself to take bite after bite.
I've seen this sort of behaviour all my life. I doubt it will ever change. It seems like to me though it is a lot like the ol' East/West Arms Conflict of yester-year. One great big penis envy match.
Cialdini: Influence, Psychology of Persuasion (Score:3, Interesting)
Authority - This software comes from the acknowleged leader in the field.
Reciprocity - We want people to pay us a ton of money for our own products.
Consistency - We paid millions for our network, we're not willing to pay six figures for the software?
Social Proof - Everybody else is buying this software, there must be a reason.
Scarcity - It's the only solution in its price range, must be unique and valuable.
Liking - They have the best (paid) salesmen.
Pricing and value (Score:3, Interesting)
Basically, because they can't do what we do, they want to believe it is valuable. Buisness people gauge value using economic measurements, like cost. It is important to recognize this, and not undervalue your own work (you don't hear about accountants cutting prices because it's easy for them).
Its about CYA (Score:5, Informative)
Business don't see the support structure behind Open Source - without that support structure, there's no-one to lay the blame on when things go wrong (Software is always the root cause of problems from a manager's point of view). So, somehow, just having the option of turning around to IBM and give them a royal bollocking is worth the exorbitant price.
Our company has recently switched from using Netscape's IPlanet to IBM's HTTP server -- on the basis of IBM's product being much cheaper per CPU than IPlanet (and it comes with Websphere 4). Did we mention IBM's HTTP's server is basically a rebadged Apache? Yep. Did we say Apache was Open Source? Yep. "Can't use a free webserver to run a professional website."
A few months earlier we were using an out-of-date copy of JRun on the main webserver. Something didn't work. Called the support line - being a product that Allaire no longer supported, there was no valid support contract. So the co bought a few copies of the supported JRun 3.0 (hence buying a new support contract and licenses). The bug was found, in one of the JSP's - not the servlet engine itself. And we still have shrinkwrapped copies of JRun 3.0 gathering dust in the filing cabinet. And we still run JRun 2.3.2.
How's that for logic!
So it seems... (Score:2, Funny)
They declined the offer saying 'that they only trust something that costs money'.
Who will ever understand...
Blame game (Score:2)
Do not underestimate the CYA factor.
Cost of software (Score:4, Insightful)
I've stopped (mostly) thinking about how much it will cost me to do something, and instead think of what it's worth to the company, and charge THAT rate. I don't do it to companies that I've done a lot of business with, because they already know they will get good work for a fair price.
If I feel really guilty about what I charge, I give them back enough so that I don't feel too guilty, and tell them it's a discount because of unexpected savings doing the work.
It's a fine balance to chage enough so that they know the work will be there, vs. estimating so much that I lose out. Sometimes I want to send two estimates: One for how much I think I need to make, another for how much I think it will take to be considered a player.
Because of this? (Score:3, Insightful)
Cardealer: Ok, excellent choice, that'll be 50 dollar.
You: What? Why is it so cheap? What's wrong with it?
Cardealer: Nothing, it's perfectly ok. Nothing wrong with it. First owner, has had regular checkups, handles like a dream, 50 bucks.
You: Erm thanks, I'll go somewhere else.
CYA (Score:5, Insightful)
If you choose the lowest bidder and it doesn't work out, it's your fault.
If you choose the highest bidder and it doesn't work out, it's the contractor's fault.
And remember, it's not your money that your spending. It's budget money. And where do you, Mr. Manager, want to be at the end of the budget year?
Slightly over budget with good results. That way you get a bigger budget next year.
capital costs vs labour (Score:2)
Also, capital costs (such as software) can be depreciated over time to realise tax savings for a company whereas an employee is a cost centre -- he costs the same each month and will until he leaves. Most of the new economy ideas were bunk, but the concept that the people are important is true...they end up costing the company much more long term.
Finally, say you're buying a large enterprise product like Peoplesoft or a portal or MS exhcange for 10,000 users. How many people, no matter how efficient the product is, are going to be required to support that product throughout a year? How much consulting time? Even after a $10 million web platform deployment at my company, I can comfortably say that by end-of-life that we will have paid much more in labour costs to support it than the physical or software costs in total.
Perhaps decision based on "unstated requirements?" (Score:2, Insightful)
Perhaps you *needed* to install Win2000, SQL server, and IIS--your technology was "wrong." Or perhaps you needed to have an office address, an answering service, or a listing in the Business Journal--your business status was "wrong". Or perhaps you aren't related to the company president's golf buddy--your social status was "wrong". In any of those situations, you wouldn't be given the job if you paid THEM for the privilege of doing it.
Of course, there might be the notion of perceived value at work here as well. Because you came in SO cheap, you obviously can't bring the same "level of expertise" as the "big guys". Maybe your system would "work"...but it obviously won't be a "quality solution." Maybe they're looking for someone that they can (and this is my favorite term) "partner with"
(Reminds me of the story of the street artist who was selling "bare" watercolors for $10, and starving with only 5-10 sales per week. Some kind person set him up with a small stipend to purchase frames. The story goes that he then began selling 20-50 framed prints per for $50-$100. Same art, cheap-o frames, and 10x the perceived value and appeal.)
Or, perhaps the people involved aren't spending *their own* money, and they're trying to build a little buffer against blame. If a company charging $15,000 for a $5,000 job fails, then obviously the contractor failed to deliver. If an individual charging $5,000 fails to deliver, then obviously the people that chose that individual over a higher-priced but "more capable" company are lacking in business sense.
At any rate, it doesn't matter. You're out of the running, and chances are, due to those "unstated requirements", you never would have been granted the contract. Suck it up, try again, and work on building your reputation as someone worth "partnering with". Then perhaps you'll be on the *right* side of the equation.
Because (Score:2)
When outsourcing was a new phenom, we (a large corp where I worked) decided to outsource a billing system rather than buy a big expensive system. Big back pats for the manager who came up with this one. The corner offices were expecting to see big results so they could justify outsourcing the whole shop. Instead, the project ran out of money and died on the railroad tracks with Amtrack on the way. Next thing I know, the manager is cruising a shopping cart on the parkway with a sign saying "Will Leverage Synergy Across the Enterprise For Food".
After that, the managers spent the big dollars on software.
Some other points that most people missed (Score:3, Insightful)
If that didn't kill your bid, mabye your elitist attitude did.
Don't get me wrong, I've seen buisness spend more money on internal development than I had ever expected, but they won't pay for simple computer upgrades for the developers..... weird.
Been Burned Before (Score:2)
Previous contract (Score:2)
They don't care about how much work it takes (Score:4, Insightful)
Maybe it is easy, but so what? It makes absolutely no difference how easy it is to the overall value they get.
The only thing you'd need to look out for is idiot MCSEs with over-inflated egos, but beyond that, it's probably better to go with someone with more experience, a better presentation, whatever if you've got the money.
The Switch (Score:2, Informative)
I have helped companies secure millions of dollars in technology business and based on my experience those purchase decisions tend to follow a similar pattern.
An individual or team responsible for making the decision will pick a solution early in the purchasing process and then go into the "Switch". In this mode they become less rationale and very emotional about promoting their choice. Once they have switched, it can be very difficult to change their minds.
It usually comes down to relationship. Do you have a strong sponsor/inside coach at the client/prospect? Without the right one your batting average will be pretty low. Communication leads to trust and when people trust you, it is easier to get things done, including winning contracts.
Cheers,
Winnipenguin
X-Corporate Soldier
Sweet Sally sullied shameful Sammy's shining sig
You cant pass the buck when theres no buck (Score:5, Interesting)
You can't pass the buck when there's no buck. Why do you think CTOs love MS and are scared of OS? Because you can't say that you spent top dollar unless you do spend top dollar. It divests the commissioning employer from having to be held accountable if your work sucks; if they went for your contract, the dude above him could easily say "Well, of course it fucked up, you didn't spend a shitload of money on it."
The fact that theres little correlation between price and quality has little to do with the fact that its way easier to be unaccountable for a project if you pay a premium price. Its totally backwards, but hey, so's this continent, so just think of it as being a neccessary bit of stupidity for consistancy's sake.
(BTW, this is why its so hard to break into new markets using price as a differentiator. Yet another example of how classical free market economics don't exactly model the real world. When you are a newcomer to an industry, its hard to undercut the competition using price because people don't want to be left in a situation where they have to explain to their senior manager that the reason shit fucked up was that they went for a bargain.)
Which DOCTOR would you choose? (Score:2, Insightful)
So... Faced with life-saving surgery, assuming that you have the resources, would you choose the doctor who charges $5,000 or the one who charges $15,000?
To paraphrase George Carlin (?)... Somewhere out there is the world's worst doctor. And somebody has an appointment with him first thing tomorrow morning.
It was probably from kick-backs (Score:2)
What probably ended up happening, is that the winning company bought the buyer. It is a very common practice. They are taken out to be smoozed at some kind of sporting event, or given tickets to a concert.
Kickbacks are a huge part of the reason that you may have lost the bid. The reason you were given was simply to "let you down easy."
The next time that you are up to bid and give them a $15k price tag that matches your competitor, you might still lose out. Then they will say something like, "What they were offering was much more robust, yadda, yadda, yadda."
Sure, it is unethical as all hell, but that is unfortunately part of doing business with many companies these days. I guarantee you that if I was the buyer that you were working with, you may well have gotten the contract. That would have depended mostly upon what you could show me in comparison to what the other company would be able to show me. I am more concerned with saving the company money, that is what my job as buyer is.
Vendors that offer me special 'tickle my ear' incentives are told, flat out, that if they wish to continue doing business with me, then they will offer me only the best product they can at the lowest price that they can.
Sorry to hear that you lost the contract. Unfortunately, some businesses have very unethical buyers and that is what hurts their bottom line more often then not.
Good luck, but also make sure that you don't put yourself above offering a special incentive to your potential clients. Of course that does mean that you will need to start padding your quotes and may still end up losing some jobs. Look on the bright side, at least those are somethings that you can write off durring tax season.
-.-
It's not just software... (Score:2)
I don't pretend to understand it, but the phenomenon is real and not limited to software. OTOH, it's not universal, either; the company for which I work now seems excellent about carefully considering the merits of any purchase - be it talent, software, hardware, or what-have-you - and while they don't skimp on valuable tools & talent, they count low price as a good thing.
OK,
- B
People buy people (Score:2)
Honestly, $15000 was under bid... (Score:2, Informative)
The amount of time spent on testing should be at least as much as the time spent on design and implementation if not more!
If you want to release a product that is ready for consumer consumption you cant just slap some code together and expect a Microsoft quality (subjective) product.
Database design (even simple) and web development (at least what you are describing) should take no less than a month for design work (a week for layout and design/prototyping), implementation (1 week to implement final design), and test (2 weeks... including different environments, browsers,
And we haven't said anything about the document management piece. Are we talking just file storage? version control? access control?
I would say $15000 is closer to the mark depending on the complexity but in my opinion that's even a little low.
Spend It Or Lost It Budgets (Score:2)
Shoddiness? Service? (Score:2)
In my experience the big corporations don't want to pay $500 or $2500 for software because they're going to want some hand-holding, repeated site visits for training and troubleshooting--a lot of extra time above and beyond cranking out the code. They may not come out and say it, but they know you can't afford to do much hand-holding at those prices.
In a way you could say the $500 bid is for shoddy work, but they look at it more as paying $500 for a raw pile of bits that they can't use without some bright geek hanging around for comfort. Or fine-tuning.
David Copperfield (Score:2)
It works best if you have two expensive products that work together then you point your fingers at both vendors at once. With two or more gratuitously expensive contracts/software a PHB can race to to the a pay raise on the next job or retirment while the vendors publicly fight, their superiors none the wiser.
If a PHB has a dozen contracts to blame he dosn't even have to try.
Inteligent, capible business people seem to turn into uneducated newbies as soon as a CUm-peU-Tor is mentioned. "Snake oil 3.0 here, get your snake oil 3.0"
Time and experience and open source will fix industry lies, but perhaps you should think of a hiring a salesman to pitch for you in the meantime.
The snob effect (Score:2)
Consulting economics (Score:5, Insightful)
So, non-geeks like to procure software from people they know are going to be around later. A geek doesn't give a rats ass if you fell off the end of the Earth tommorow, so long as he has source. A non-geek wants to know that you have a sustainable business. It looks like you lost because your lack of business savvy showed too obviously.
Probably the number one problem I've seen is that geeks often don't do a good job of including cost of sales and overhead in their estimates. Look at it this way. Suppose you wanted to tkae home about 60K$ per year out of your business. Suppose you run this out of your home, so your overhead is very low (good for you). Your only expense is say $50 a month for internet connectivity. Suppose your computers, consumables, wear and tear on your car and everything amount to $1500 per year. You need to gross $62100. But, you want to take vacations; say two weeks a year, plus miscellaneous sick time and what not. Figure that you must make $62,100 over 48 weeks, which amounts to very roughly $1300 per week. Furthermore, you can only count on having work for three out of five days, so you need to bill 433 per day. I look at the project and running it through the handwaving machine it looks like about ten days of work, or 4330, so I round it up to an even 5000 or 11 1/2 days. Piece of cake, right?
Except it's taken you a week of meeting with the client, writing, revising, and meeting with the client again. So, while you've estimated for 10 days, quoted for 11 1/2 days, you actually use fifteen days on the project; 1/3 of the time has been spent on sales costs. You have a target of being paid 433 for each day of work, thought you was going to be paid 500 for each day of work, and ended up being paid 333 per day of work, counting the effort to sell. If you bid all your projects this way, you are going to be making less than $46K, rather than the target of $60K. Plus you have all the hassles of having your own business. If you were making less than $46K somebody comes along and offers you $50K to be a clock punching 9-5 employee, just to code with no responsibility for sales or accounting or that other stuff, what would you do?
And, in fact, this assumes you win all your bids like this. The fact is, you have to pay yourself whether you win or lose. If you win half your bids, then you have to essentially double your estimate for how much to include to cover your proposal writing time in every estimate.
Of course the customers don't necessarily go through this, but they can sense when somebody is not making realistic bids. The smaller the project, the higher a fraction cost of sales will be of the total labor costs. This means there are project sizes below which it makes no financial sense to bid, unless you can simply dash off a boilerplate proposal. If you spent more than two or three hours and came up with a bid of $5000, then any sensible businessman realizes you are not going to be paying yourself much. The only people who hire you would be people who are financially unsophisticated or don't care if you decide to close up shop and get a regular job.
The more overhead you have, the higher the minimum practical project becomes. I work with a geek who simply finds it impossible to spend less than three days on any proposal. This means that for him he cannot efficiently bid on a project smaller than $15,000 (we have an office, leased line internet, office manager, accountants, phone lines etc.)
One way to handle this is to try to find ways of making the $5000 project into a $15000 project. You can simply pad the project with $10,000 of fluff, but this goes against most geeks' sensibilities. One thing we do is to offer our clients a "General Services Agreement." We say right up front that it isn't worth our while to bid on a $5000 project, but over the course of the year we know that there will be numerous small jobs that will add up. So, we will bill up to $5000 for the immediate job, and include $10000 of unspecified work to be done in the future. This allows us over the next year to do a day of work here and there, or even the occasional hour, without going through the rigamarole of bidding and contracting. The client just picks up the phone and tells us what needs to be done and we do it, unless it is going to take over a thousand dollars in which case we give him a written estimate. If it turns out that they don't want this service, they only pay $5000 (and we lose out big time). But once they have the contract in hand, and find out they can call us out on a one or two our job, then they always do use it.
This kind of agreement helps because the client knows that (1) we are planning to stick around and (2) they will not only be taken care of, they can get common day to day hassles taken care of quickly without fuss.
Seen it in the gov't (Score:5, Funny)
Then, for the second iteration we went to java and built a much more sophisticated, interactve app. The brass loved that even more.
They decided it was really worth doing and therefore they must spend money on it. They initiated the monstrous government procurement process. It took some eight months or more, but finally a coalition team with Oracle and IBM and others won the $35 million contract.
After much hoo-ha, meetings, requirements gathering, countless billable hours, and the generation of untold linear yards of documentation, they finally decided to build something quite similar to our first prototype. And, after several years of work, with a team of dozens of contractors, that's what they have.
It's like the management said, "We love this, therefore we must spend millions of dollars to have it be exactly the same." But surely some assistant director's budget doubled, thus increasing their dominion, and people got to put on their resume that they oversaw a $35M contract. I'm sure everyone got awards and promotions for successfully disposing of all those unwanted taxpayer dollars.
Sigh. No I'm not bitter, I swear. :-)
Re:Seen it in the gov't (Score:5, Funny)
I can believe this. An organisation I once worked for wanted an IT-based staff directory to replace the paper one which was becoming increasingly costly to keep up to date. This was in about 1996. I put togther one exactly meeting their requirements using perl and html in a couple of days. The CIO (who was a very senoir grey-haired-suit who liked to talk down to the junior IT staff) looked at it and said, "How many days did you waste doing that? I suppose it can be used as a protoype to show the bidding companies when we put it out to contract..." Eventually they decided to get an IBM shop to implement it with Lotus Notes. After much expense, many months and countless meetings, they had their system.
Meanwhile, I had sneakily put the version I created on the intranet, and many staff were using it. Of course the CIO didn't know anything about it because he didn't pay much attention to the intranet - thinking it was just a toy put together by the junior IT staff that was going to be replaced by Notes in the future.
He decided to unveil the Notes system at a huge meeting with all staff present. The IT Manager thought it would be his moment of glory. He did a slick presentation, including saying how much he had spent on the development and how leading-edge it was. He then demoed it and asked for questions. When the mic was going round the hall, staff were asking things like "why have you spent so much money on this to copy what we've already got?", and "that looks much more difficult to use than the current system, what's the point?" etc.
He successfully deflected the first few questions with management-speak, but the staff detected they were being bullshitted and got increasingly angry with his answers. He dug himself deeper and deeper into a hole until he had bring the meeting to a premature end and leave in a hurry.
It was one of the most joyous moments of my professional career. It was a complete disaster for the CIO. His contract wasn't renewed a few months later. I was promoted.
They eventually got rid of Notes, and they're using the system I developed to this day.
They asked me to charge more... (Score:4, Interesting)
I wrote a demo, spec, etc. and put a bid in. They thought it was good so I had a meeting with the IT Director. He was happy with what I was planning but he questioned how much I was charging - at the time I thought it was a bit expensive, however, I was shocked when he said he thought it was too low! In fact I ended up charging 400% of my original estimate! They paid up, I was happy
Why, I don't know. Maybe my outsourced development was making their in house development and IT work seem overly expensive. Happy to take the wonga though.
It's simple... (Score:3, Insightful)
End result? Well, both applications look the same and feature set, but the latter should have fewer bugs, be more reliable, and a cleaner interface. The two are nowhere near the same end product.
Think of the this like a car sale. The Audi S4 quattro is an all wheel drive car burning 240 hp. The Subaru WRX is a lighter all wheel drive car burning 227 hp, gets about
I run into the same thing all the time where I work. I'm the $20 jr, working with some "past their prime" fellas. When I do something, there's a good chance it'll be fast and great, and an equal chance it'll be buggy and not work. I jump for the brass ring and have been known to bit off more than I can chew. My expensive peers always aim low, take their time, overestimate, take lunch rather than caffeine it: and the result is, their stuff passes QA while mine languishes.
Not all the high bidding is "perception of value." Some of it is insurance of value.
This is true at all levels of consulting (Score:5, Interesting)
Red Hat and my boss (Score:5, Insightful)
In our discussion, he still wasn't listening with a serious attitude... until he asked if we could buy it... and when I said "yes", then the lightbulb went off in his simple little mind. He repeated with, "You mean, they have pricing and licenses?" I replied "YES", just to make him happy... and with that freshly learned knowledge, he now takes Red Hat seriously.
Bids are frequently a farce (Score:3, Insightful)
Still, I'm a bit surprised... I thought that usually in such a case the bid specs were so crafted that only one company could properly fill it. That's the usual technique. OTOH, it's amazing just how many bids are non-responsive. It's as if they didn't read the specifications. (But I can't see why they would hide it from you if they found your bid non-responsive. That's one of the really valid reasons.)
Perhaps what happened was that because they knew who they wanted to win the bid, they were careless with the bid specifications. In that case they could hardly admit the real reason, but they would still have a valid reason to prefer the person who would do what they wanted, rather than what they asked for.
That said
It's a matter of control (Score:3, Insightful)
"Borrow a dollar and the bank owns you. Borrow a million dollars and you own the bank."
Paying a consultant more gives the company more leverage with that company. Anyone can walk away from a $10,000 per year contract since you probably have other contracts, but it is a whole hell of a lot tougher to walk away from a $100,000 per year contract. The company can threaten you with cancelling the contract to get you to do things not in the original deal. I've personally had that happen. I've also worked for a company that finished a project before the contract was signed. The client never knew it was done because we had to get them to pay for it first. It was 80% paid before the contract negotiations were even finished.
Budgets and Giffen Goods (Score:3, Interesting)
There is also a definite effect related to the famous Giffen Good, defined as "a special type of inferior good that's quantity demanded rises when price rises". http://www.cr1.dircon.co.uk/TB/1/giffen.htm
Although this was first proposed in the 19th century related to economics of poverty, it has a very real effect in other contexts. The most obvious is in goods sold to the rich, where they want to have spent more for X (so as to be perceived as being rich enough to afford it). This effect is also clearly present in the business environment, but more related to the perceived secuiryt and accountability related to higher prices.
The account was short, but you probably need to talk more closely to your customer. If your price is low (or high), they need to be sold on WHY it is low or high. If you have a cost advantage that can be passed on to them (pre-developed libraries, low overhead, etc.), let them know, otherwise, they may assume that you are just cutting corners. If your price is high, but you are taking extra care in certain areas that will benefit them, again let them know or they will make other assumptions.
Mostly, don't just throw a big cold wet fish on their desk. Explain to them how great it will taste with your expert preparation and why the price is right.
Cheers,
J!
Look at it another way... (Score:3, Insightful)
Looking at it that way, the reasons seem pretty obvious:
- Quality
- Service
- Atmosphere
- Accountability (you know where they'll be if something bad happens)
Cheers
-b
Think Different (Score:3, Interesting)
1. Style. Like it or not, The Macintosh still beats a WinTel box (especially cheaper, no name boxes) when it comes to style. They have nicer looking hardware out of the box. The user interfaces is simple and streamlined. Although Mac OS X adds a little more complexity, but not as bad as Windows.
2. Psychological Security. "It costs me more, but it's got to be better just because of that reason." This is an extension of the "you get what you pay for" concept.
3. A known quantity vs. fear of the unknown. If you are familiar with a system, why change? Even if the alternative is cheaper, there is a learning curve. A Mac user is already comfortable with their knowledge of the Mac OS. If they've never worked with a WinTel box before, and have a little fear of doing so, they probably are not going to change, even if it can save them some money.
4. "Added value". There are some things that a WinTel box just can't do that a Macintosh can. Although they are very specific niches, they still require a Macintosh. (*Professional* Audio Production is a prime example. Not the "multimedia" crap or Semi-pro stuff that a WinTel box is well suited for.) Yes... there are some pro packages for Windows, but look at answer three to see why a Mac user is more likely to stick with a Mac.
Getting back to the original post: Who's to say that the company that got the bid at $15,000 didn't have a previous relationship with the company who requested the bids? Where I work, we pay out the nose for some things that we could get elsewhere a lot cheaper. But the added cost to us is worth it because we have a very close relationship with our vendors/consultants, etc... Those close relationships allow us to get our work done faster, instead of working with someone new and cheaper who may not be interested in fostering a long term relationship with us. It's unfair and in-efficient IMO, but I don't make those decisions. Whenever the subject of a cheaper alternative has been discussed, those that do make the decisions deride the lower cost by asying that there isn't any security in that since the cheaper company is an unknown quantity.
Another factor that doesn't workk with the Mac analogy, is "Bigger ass to whip if something doesn't work." The company that charges $15,000 for their work rather than $5000 is likely to have larger coffers to raid in the event of a lwa suit. That ALWAYS makes suits feel more secure. If the only assets that a company that charges less for their work has are a car and a house, "litigation happy corp" isn't going to get much in reparation even if they sue for millions.
An aside "rant" (those who aren't interested in my politics can skip this part):
This always brings me back to my conclusion that captalism is failing. (You can call me a troll at this point if you wish, but that doesn't change things.) I am not saying that communism or some other system is better. But, I AM saying that another system is destined to replace it for better or worse. Jump off the sinking ship while you still can and work on developing your own approach to "coding for food". Just keep in mind that the two failings in humanity (fear and greed) are any system's stumbling blocks. Oddly enough they are also responsible for getting us where we are today, both good an bad. Think about it for a bit... Hiroshima. Why? Fear. Gulf War. Why? Greed. Discovery of fire. Why? Fear? End of communism. Why? Greed. Even more interesting is the inextricable link between competition, greed and the advancement of civilization.
Just give it some thought if it interests you. I think we are seeing capitalism fail for the same exact reasons that communism did. Enron? Greed. etc...
Re:Set up a second company (Score:2)
(It's called 'shilling' and it's a type of fraud)
Re:Set up a second company (Score:2)
You're (mostly) smart people, fill in the blanks. Most people here have worked in the tech industry long enough to have seen plenty of crooks.
For scams the mob ain't got nothing on tech.
Re:One word... (Score:2)
That accountablity should be part of the service agreement, not the fact that you wrote the software. I mean, if charging lots of money means you will jump when the customer said "jump", then why isn't Micorsoft look like a jack-hammer going up and down very, very fast?
ttyl
Farrell