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Why are Businesses Willing to Spend More for Software?
"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."
It's not that higher prices imply quality, it's that lower prices imply shoddiness.
slashdot!=valid HTML
It's business as usual. Management has to be doing something with their time.
Maybe big business is trying to mirror federal spending...
..and especially this time of the [fiscal] year, people are sometimes looking to spend more money so they use up their whole budget (otherwise they get less money next year).
having evaluated bids like this a lot, i'll have to put "evaluated" in quotes. you don't have time to really go in depth and really check out each bid. if you get five bids, one is for $100,000, one if for $1,000, and the other three are for $10,000, that makes it an easy first cut down to the middle 3, because obviously the 100K people are insanely out of our budget, and the 1K people are obviously missing something.
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.
MORTAR COMBAT!
what do you think the Chiefs talk about when they golf with and have lunch with their friends that are Chiefs at other companies? They one-up each other with how much they spend. A company that can afford to spend more is seen as more powerful. It's the same old pissing contest, just in a different venue.
Come on... think!
Most companies are not in the business of learning the config files of Apache! They are in the business of making money. If they buy a product, they have someone to call and say "Make it run now!". If they get a free product, there is no one to call.... it's a security blanket.
That being said, my company deploys on Tomcat because they have the talent in house to support it. (So there is no need to call support).
Businesses assume that the low bidder will do shoddy work, and you get what you pay for. In tangible things like building contractors, the rule of thumb proves true. Cost cutting usually is quality cutting.
The Uncoveror: It's the real news.
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.
!#@%*)anks for hanging up the phone, dear.
Too low a bid may seem un-realistic to the client. I've noticed that many times they *expect* their project to be heavy duty-expensive work. In this case you would need to project what they are expecting.
:-P
It's all about giving the client what they want, not just what they need.
"Ignorance more frequently begets confidence than does knowledge"
- Charles Darwin
Set up a second "company" and have a different customer REP visit each of theese places. One of your companies could bid what you seem is fair and the other with a few modification, and a guy in a slick suit could bid 2-4x as much. See which company gets more jobs, or better yet see what types of clientele each company gets then bit appropriately for those clientele.
-- Tim
TKrabec Pahh
It could be several issues:
- The budget for a department is based on last years expenses. So why cut back next years budget?
- Experiences with other low cost projects.
- You needed a programmer AND a manager so they don't have to talk with you (and your tech-hubba-bubba language).
Or they just like buisness-suits.
When I assess a bid, I look at the bidder's track record and attempt to assess their ability to deliver and support the goods.
.. $15k) doesn't really add up to much.
The differential in bids for what is in reality a very small dev project ($5k
Maybe your competition won the business because they have more credibility or experience in that sector. Get over it.
Surely the higher prices the development firms charge act as some sort of insurance policy? If you're producing software for a large company, and it goes wrong, your development company will be sued for ALOT of money. By charging higher rates, you are not only giving across an assurance of quality, but also ensuring your own company can afford to handle it if anything goes wrong.
What would managers be doing if they had to put a case to the big wigs to buy free software? Right, they wouldn't have anything to do. More so, they like drawing up Service License Agreements to keep them more busy, and since they're not programmers, they probably think that if something is free there is a catch to it. So the big tech companies flash a few marketing gimmicks here and there, get a representative in and away they go with a purchasing agreement. It is up to us the programmers to put the case foward to upper management as to why we should use free software and not sit on our hands and whinge and whine about it.
Analytic & algebraic topology of locally Euclidean meterization of infinitely differentiable Riemmanian manifold
I suspect that for the majority past history of poorly designed 'on the cheap' products plays a serious role in these types of snap judgements.
Just the same... if your product isn't selling, and your selling it cheap - question your product (or your saleforce) - not the potential customers.
http://windows.scares.us
Possible reasons:
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.
http://twitter.com/onion2k
How much back end support did your bid provide? That will be a determining factor. No matter how simple the project, IT shops always end up using the back end support. Maybe the other company had a more established support structure, hence the higher cost. An IT manger who has his ass on the line because he's spending company money will sleep better at night knowing that when (not if, but when) the software breaks, he can get it fixed.
Freud was asked a similar question as to why would he charge for therapy since his main focus was simply to help the patient. His reply was - to paraphrase- the therapy would not work as well because the patient needed to put something of value into it. Low or no cost software can and should work, but we will have to show a dollar value for it: Savings over current development plans might be just what the bean counters need to see.
Firstly, you assume that the client was honest with you when he told you that you lost the job because your price was too low. A lot of times clients will say that to small contractors in an attempt to avoid hurting their feelings when really, the reason is that they don't think you're good enough to do a good job, and THAT'S why you're charging too little. You have to know your market. If you went shopping for (say) a wedding ring, and some guy offered you a perfectly beautiful ring for 1/3 what they were selling elsewhere, what's the first thing you would do ? Run off and have it appraised, because YOU would be sitting there wondering what was wrong with it. Businesses are no different, except there is no appraiser for software.
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.
Your competitor is obviously smarter than you are: They know they can charge more!
My firm does Landscape Architecture, Land Planning, and Architectural Visualization. We run into the same thing all the time. Because we're much smaller and leaner, we can generally offer better service, better product, at a MUCH lower cost than larger firms.
.
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.
anything i tell you will cloud your opinion.
Hardware is the male of the relationship. It just has to be there. (I had to fit an allusion to Clerks in there somewhere)
Pretty reasonable outlook when you think about it. Hardware isn't really that important any more, relatively speaking compared to the past.
-Vic If you can't figure out my email, then don't.
Maybe it's the same with software. "If it's that cheap, you couldn't have done a very good job."
I worked on a db project for a client who insisted that the Gartner Group needed to be brought in to design the database. They paid an obscene amount of money for a high-level conceptual schema for a relatively small and unimportant database.
So not only will companies pay large amounts of money for software, but they'll do the same just for some useless high-level consulting.
But at least it was professionally bound with pretty pictures.
My sig sucks.
I think the answer is the same as to the question why Pointy Haired Bosses are Pointy Haired Bosses and not Pointy Haired Janitors, as their skills would suggest. Now, if I only knew the answer... =P
CHARGE MORE!!!! Go with the system. If people arent going to take your bids because they are too low that is their own fault, charge more.
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".
The Linux server appliance resellers are doing the same thing, selling high relative to their costs but still below what it would cost to install a similar solution with a proprietary OS. What many have found is they can sell an $8-15k server successfully against a seat licensed competitor but not a $1500-$2500 one, the latter is just too "cheap".
If you had come in at say $10k or $11k you would have had a chance.
The trick is to learn what the competing bid average is going to be...
This question reminds me of the story about 'K Swiss' shoes in Hong Kong.
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?
I have had this happen to me the other way around. I bid the $15k and they took the $5k bid. The site never got built. No even close.
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.
Where I used to work, execs were wooed by software vendors whowere selling $100,000 packages that would "solve all ourproblems". Once we did a technical internal review we learned that our data was captive inside these applications and that we'd be better of developing something similar internally that *really* met our needs.
A few points on this:
* These execs didn't have the technical abilities to make a sound purchasing decision.
* The budget for capital expenditures was easier to justify than the expense of an internal development project.
* The execs want to be the heroes by bringing in these packages rather than putting their necks on the line for leading a development project.
Any contract work is really the same way.
i had a friend that was a contract sound engineer that ran into the same problem. He charged time and material about half of what his competition. He had a hard time getting work that way.
The mentality isn't that they need or want to spend more money. The general mentality is that if you charge less than the competition (a lot less in both the original posters question (1/3 of the other) and mine (1/2 of the competition), that the potential customer questions whether or not you are compitent.
If you bid a lot less hours, they think you are going to cut corners on their project. If company A says it will take 100 hours, and they have a good reputation, and Joe Blow bids 20 hours, a company is going to have a real hard time believing Joe Blow can give them a solid product in 20 hours.
The trick isn't to low ball the estimate, or the hourly rate. The trick is to be the lowest on the block, but on the same block as everyone else.
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.
I wish you'd actually put some effort into your trolls.
slashdot!=valid HTML
If I go out and charge $20/h to do consulting, I can't get any business, but if I go and charge $200/h, I can get a fair bit of businesness!
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
CAN-CON 2019 - Ottawa's only book oriented Science Fiction Convention! October 18-20, Sheraton Hotel, Ottawa, Canada h
One TLA for you - SLA
The reason companies pay your 'overpriced' competitors is that in the corporate world the last thing thats needed is a quick and dirty fix by an individual where you have no come back. A bigger company will not only develop the application, but unit test it, install, train the users, document the system and provide a Service Level Agreement of some kind so if anything goes to shit thay can sue.
Thats why your competitors are charging more, nothing to do with the stupid comments made by the students and geeks about 'management' etc
You may be able to knock out an app for a few grand, but can you support it? What's going to happen if you are ill or on holiday?
Thats wher the extra $10K goes my friend
You'll ruin it for everybody. Just sit back, and bill the extra hours while you play quake, no one will tell, really.
___
Cogito cogito, ergo cogito sum.
When bidding you must bid with two thoughts in mind...
1) What is the customer's budget.
2) What is their estimate.
If you come to far under their budget, their managers will wonder about their ability to manage and estimate. Because by the time you come in, the project been around for a while. So they are all ready prepared to payin a price range.
You need to talk to your cleint and bring them into your thinking while understanding the pressures in their enviroment.
When writing the proposal, you can also set up two amounts - a minimum and maximum bill. This way you can place your actual amount (min) and give the client there interal estimate (max). Then bill the contact by the hour and not flat amount. Gives the cusomter filling they are right, and bid the project to what is right for you. If you are wrong, then there is leaway for you get a liitle extra and the customer is still protected.
Finally, you can always underbill for the work. This way you stay ethical to yourself.
If the customer is publicly traded, I'll bet that the shareholders would very much like to know why the company is spending $10,000 more than they have to.
Always try to get a rough idea how much someone is spending and go up to that in testing. a project plan with plenty of itterative testing cycles looks good and gives you plenty of time to get on with the other project you have to do as no one really tests things anyway.
you can even send reports to be ignored at the end of each cycle send the same report 3 times. send the same report to all you clients. use a random number generator.
they get protection because they have opted for a project with in built early failure warning and you get protection because it is a load of rubbish that they didn't read when they should have
Given that this was posted as Slashdot, the irony drips.
::install::
"Hey, a free OS!"
"No wonder it's free. You couldn't give this shit away."
of acceptable risk. There are endless amounts of
human factors involved which makes it pointless
to try to define them. Some approaches that will
usually fail to mitigate uncomfortable risky feelings:
(that doesn't make it less risky - it obviously makes it more risky)
every time I heard that!)
You must continuously ask yourself,
"How can I make this pointy-haired-boss believe there
is virtually no risk associating with me?". This involves:
1. building trust - I'm not going to tell you how, just
get good at it.
2. learn from your failures to build trust, and
your competitors successes at building trust.
3. Put yourself in the phb's shoes, and assume the
phb will be fired for failure - then build a plan
based around this. (this is indemic in some of the
richest fortune companies)
4. Be willing to place risk on your own shoulders wherever
possible. There is not enough space here to detail
how important this is.
Why post as Anonymous Coward? I will only _ever_
post as AC because of people's general inability
to accept the fact that individuals change, learn, and
grow. What's the difference between AC and
'Lost Canadian' tied to a bogus yahoo account
anyway? The solution is in the rating of the
post, and the current implementation is broken.
MS is expensive and their stuff is Awesome so it makes sense
Who are you, his mother?
Why skimp when the potential returns are so high? Case in point: our company spent 25k from Nov01 to Feb02 developing a new software product for a relatively niche market. It's so far made them over half a million, without too much of a marketing push, and can probably make twice that again before we have to consider any further development work beyond bugfixes.
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).
-- Proud descendant of semi-nomadic cattle-herders.
Accountability.
If you pay someone a large sum of money for *anything* then you expect them to be at your beck and call to help you fix it when something goes awry. When a system (software, hardware, process) that a company relies on goes down they want it fixed and fixed fast. They want someone they can get on the phone and get a fix from pronto.
Companies are paying for uptime, and assurances (contractual or implied) against downtime.
Please be patient, I'm a work in progress! --Alan Jackson
In the eyes of a business (or its PHB, 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.
As Director of Consulting for a company that does custom application development, my experiance in submitting and winning bids has given me the following insights to the process:
1) A small one man shop bidding against a larger company will often lose simply because many companies don't like the thought of doing business with that small of a company. There is a much higher chance that the one man shop won't be around in two months when problems arise.
2) Client relationship management is what wins business. This is what I call bedside manner. I don't care how good your price and service are, if they don't like you they won't buy from you. Many people who get into this business have no respect for the importance of client relationship management. You may be the best programmer in the world, but if you don't know how to talk to your customers you won't be successful. This is key to winning and keeping customers.
3) The quality of your proposal is indicative of the quality of the work you will do for them. You must always put forth a top quality proposal. Formatting and grammer must be dead on. The proposal must be written with the target reader in mind. Don't try to impress them with your knowledge of java, impress them with your understanding of their business problem. Your proposal is your first chance to impress them with your attention to detail, if you deliver a shoddy proposal they will assume your programming work will be the same.
We are but the sum of our experiances
I have been mocked by a company, and asked whether I really understood the work involved when I quoted 600 U.K. pounds and three days to make a site which was basically a glorified shopping cart with management utilities.
I also under-quoted for a piece of work once, (90 quid instead of about 350 - don't ask my why, I wasn't really concentrating on what I was doing). I did the work, and got the 90 quid cheque in record time, (about 2 days).
I was approached to work on a project that I was told would take 6 weeks of my undivided attention. I estimated about 3 weeks of my divided attention, but quoted about 3500 - 4500 pounds anyway, and got mocked again. I was like, "Well, you should accept that you got a good deal the first time. Now that you know the very high quality of my work, you shouldn't mind paying the proper rate.". They said that I was being greedy, or words to that effect. Bet they were a bit gutted when I told them "OK, I won't work for you anymore, whatever rate you offer. There are plenty of people who want my high quality work". The point is, there ARE a lot of people who will pay me a good rate for high quality work done insanely quickly.
Their loss.
A significant number of large corporation's software development cost is thrown down the rat hole because of the "interactive friction" that is inherent in any large development project.
The best written, most cohesive code is only possible in a zero interactive friction environment (a single mind understands 100% of the functional requirements, software design issues, object modeling objectives and system architecture imperatives).
As teams grow larger, decisions are compromised, requirements are mangled via misinterpretation, refinements are precluded due to politics, action is hamstrung due to consensus building.
The worst miscommunications result from the belief that a communication has actually occurred
You got to realize that in a way saving money can cost businesses more money in the longrun. I mean it's like a balancing act when it comes to the books. You want to be able to not pay taxes, to be able to write off as many expenses as possible. Also, it's a budget thing as well. In a way, by purchasing higher priced software, you are helping your self in the future. If you cut costs today, you will have to cut costs tomorrow. Management will expect that. It's the same penny game that corporations would do on earnings that stock analysts predict. They always have their books fudged or whatever it took to be a penny above the earnings estimates each quarter. This way the analysts aren't going to expect the world from you next quarter. It's like survival and the tale about the tortoise and the hare. Unfortunately, and I apologize in advance for the generalization, business has been about just doing enough to not get fired or just enough to last another quarter.
Lowest bid wins. Is that what you asking for? Do you feel the government is getting the best deal? How about Quality?
I'm not sure what study he was quoting, but he keeps his costs down be having us imagine that we're shopping for ourselves. In a way we are...
Imagine if you weren't allowed to use roads because a bus company complained about your driving 3 times. --skunkpussy
When I bid on a project often I come lowest because of my hourly rates. However, people are not irked because I always break down all of the costs. Typically the client will get a spreadsheet of features and their individual costs. Of course there is a padding built in, which both parties realize.
When you bid do you break everything down? Breaking it down is about two days of work depending on the size of the project.
"You can't make a race horse of a pig"
"No," said Samuel, "but you can make very fast pig"
It's very simple. The guys who work for peanuts do a half ass job. They have no talent, they have no experience, they make elemntary mistakes, they do not know how to deliver a working project anywhere near on budget.
I've seen it a million times. Companies pay me $60 per hour to rescue them from drowning iin the piles of spaghetti the $20 per hour guys throw them in.
It's more a lack of understanding of how people work on these things.
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....
Working for the (other) man
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.
It should maybe be noted that I'm not hiring software developers, but network contractors and maybe it's easier to just there knowledge as I usually could do what I'm hiring them for if I had the time and a good book to tell me how to do it.
MG
Randomly distributing Karma whenever possible.
tmark is also in the middle of writing top ten tips for getting a bird. (i've only glimpsed the first couple but they seem top tips!!)
#1, Be a wanker, if you too nice women will pay no interest because your niceness is valued less than the niceness of a wanker.
#2, Take lots of drugs. 1/2 a G of speed or coke is a great pulling technique (for a geek). You will be filled full of confidence and start to turn into a bit of a wanker after a while. women will find it 'harder' to get your attantion so they value it all that much more.
Large corporations (such as the government) frequently change funding levels to different departments rather arbitrarily. The way to avoid having your funding cut is to use every last dollar you are alloted to do your job successfully, even if it means spending more than you really had to. The last thing a department wants is to have itself red-flagged for budget review by the accounting people.
If they were allotted 15K for a project, you'd better believe they'll look to spend exactly that and not a penny more, both to ensure a successful project, and to meet budget expectations as to gaurentee themselves similar future funding AND to avoid internal audit.
Many people often under estimate time to complete and costs associated with a project. A very low quote tends not to be believable that the person making the quote can deliver on time and on budget, as their estimating skills are suspect. When making a quote remember to build in the following costs to you:
- Marketing costs (How much does it cost you to find and close deals for projects?)
- Downtime cost (How much time between projects
when you are not making money do you need to cover?)
- Fixed plant / equipment costs (How much does that fancy computer cost? etc. Spread the cost over your projects.)
- Office supplies
- Health & Other insurance
- Any costs specific to the project
- Taxes
On top of all these costs you should be building in a nice margin for yourself. If you have built all these things in, a way to make the estimate believable is to share this information (but will decrease your bargaining power later.) Also a higher estimate tends to show more self confidence in the value + quality that you can deliver.
Businesses are run by people stuck in the 70's.
There is some truth to this. Gartner Group has a law for their clients that goes something like "If a development job costs less than $10,000, you don't really need to do it." While I think that is silly, there are a few realities:
.pdf if delivered electronically - I hate adobe too but people expect it) Did you wear a suit to the pitch? Do you have a portfolio of other projects and comany names to drop? (my first client was a fortune 50 company that everyone knows well, and has opened countless doors). When clients call you do they get the same answering machine your friends get ("hey, it's Bob, leave a message after the beep" doesn't cut it.
;-)
1) Experienced, established companies know what they need to charge to be profitable.
2) Experienced, established companies can afford to charge premeium prices. It works that way for all services: Lawyers, Accountants, Maids, Restaurants - everything.
3) Big comanies don't want to make decisions on price alone. That gets you fired. Their thinking (and it is 100% correct) is that selecting experienced, established professionals is the safe way to go - you can't be blamed when things go wrong. Pick your neighbor's nephew and when things go awry no one will care how much money you would have saved if things were not fvked up. You said "Do you think that businesses might be better off if they took a risk and tried the lower end of the costs spectrum?" The answer is a resounding NO. There's many, many ways to save costs in a big company -- the amount of waster is incredible - but choosing lower-grade vendors is not one of them (please note that I make no statement about your ability to do the work).
4) Don't be bitter, go after different business. Yoy may disagree, but I promise you, with metaphysical certitude, that there were reasons other than price you didn't get the bid. If they thought you were the better choice they would have hired you happily.
Look at everything else. Do you have a good business card? A professional looking website? Was your proposal writting in a professional form printed on raised letterhead (or in
If you think those things shouldn't matter, you are right. If you think they dont matter, you could not be more wrong.
Also, you should charge market rates
As a software developer I have always found it strange that large companies are willing to spend obscene amounts of money for software development.
Shut up and take the money...
The opposite of progress is congress
Sorry, but if I were an organization contracting someone to do work for me, I don't want it to be the first time that person will learn how much to estimate a project to be. Oh it may look nice that someone thinks they can do the project at a very small percentage of everyone else, but chances are they do not know what they're doing when it comes to estimation of time and effort. I'd hate to get that phone call from the guy, "oh, our project's now 1500% over budget, sorry".
"I'm a leaf on the wind. Watch how I soar."
-Hoban Washburn
How Robert Cialdini, who has thought more about this kind of question than all of Slashdot put together, might break down the problem, according to the six principles set forth in his remarkable book "Influence, the Psychology of Persuasion":
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.
I work at a recently profitable startup, and we had a very similar experience. Initially, we had a low cost package deal that covered what our clients needed. The problem was, they all thought it was "too good". Essentially, they mistrusted it because they thought we had to be cutting corners somewhere to provide it. So, we itemized everything, doubled the prices, and all of a sudden they all wanted to buy it. Not a damn thing changed from a technical perspective, but our customers found our pricing more acceptable.
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).
CYA - Cover Your Ass. Its a blame-culture thing.
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!
Well, the school i used to attend had a hack-in problem (IIS). We offered to set them up a linux-firewall using iptables with stateful inspecting and everything on it.
They declined the offer saying 'that they only trust something that costs money'.
Who will ever understand...
Business pay obscene amounts of money not just for the software, but to have someone to blame and pass the buck to when it doesn't work right.
Do not underestimate the CYA factor.
Software Wars
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.
Necessity is the plea for every infringement of human freedom. It is the argument of tyrants; it is the creed of slaves.
....ask the customer what his budget is? would this not solve the problem? Or is it a better idea to assume that a customer will have NO idea what the system will cost?
This is the unscrewable pooch syndrome (see:"The Right Stuff"). If I approve spending $5K, I can be in trouble if I buy crap. If I approve spending $15K with my supervisor's signature and I buy crap, the blame is spread out. If we contract $5 million for a global enterprise solution with the CEO's signature, it cannot be a failure. No matter how disasterous the result, the project will be declared a success, and members of the organization will criticise its obvious flaws at their peril.
If Slashdot were chemistry it would look like this:Cadaverine
You: I'd like to buy that car.
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.
Be wary of any facts that confirm your opinion.
Volkswagen hadn't sold well in the US since the Beetle (the original). So they added some chrome, made them look more like luxury cars, jacked the price $10,000, and now everybody wants one. It has gotten to the point that they are considering dumping Audi and competing with BMW and MB with the VW marquee.
The masses are the crack whores of religion.
Suppose your a manager of some sort.
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.
What's a sig?
If one bid comes in far below the rest and the bidder later says that he made a mistake in figuring his bid, then the court could use the large differential as evidence that the person asking for bids should have known something was wrong with it and can't rely on it.
If you are evaluating bids and one is far lower, then you open yourself up to this and you'd better make sure that the person who submitted that bid knows what he is doing. You also have to remember that he can come back later and say he made a mistake and probably get away with it.
The average middle-aged businessman knows NOTHING about computers... he just wants them to work. He wants to go to a business meeting at another company with a floppy disk (or a CD-ROM), put it in the meeting rooms computer and be able to run his slideshow, print his word processing document or show off his spreadsheet. Businessmen can do that kind of stuff with MS Office, not with KOffice or any Linux distro Office. Don't get me wrong, I like Linux like anybody else on here, but I also don't mind trying to get drivers to work, figuring out how to convert files to MS or updating the thing through the command line. The fact that nobody is on the hook when a Linux distro doesn't work strikes fear in the heart of any businessman... they want WARRANTIES. Microsoft may need to give warranties for the crap they peddle, but the fact is that they do in fact give warranties. In the end, a 400 dollar piece of software is a writeoff anyway.
A rough estimate that keeps getting repeated to me is that an employee costs the company 3x his salary. This includes his salary, corporate tax, rent on space, facilities, HR people to support him, benefits, managerial oversight, pension contributions, etc etc. So if you figure an average developer is getting paid $50k a year, and that is costing the company $150k in total costs, are you really saving that much money if you buy WordPerfect office suite for $500/seat instead of MS Office Professional for $1000 or $1500?
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.
John Maynard Keynes: "When the facts change, I change my mind. What do you do?"
You use the tools of your choice, you wind up supporting it less thanks to your choice of tools, and the client pays the same amount. Everybody happy.
Yes, you are cheaper, faster, and do the same job...but maybe your solution wasn't really "right".
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.
They would be spending their time working out how to support it, and what the risk is, same as any other project. For the money they save on the software, they will probably have to hire someone with dedicated skills to support it. Probably two people (in case one is sick/on vacation). And that is a recuring expense ...
Management will spend large amounts of money to cover their ass. They have lots of money but only one job.
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.
If you aren't part of the solution, there is good money to be made prolonging the problem
At my company [part of a global publishing company] bids are also evaluated against known metrics. They do a function point count, figure the number of hours and then budget accordingly based on staffing and timeline. They have thousands of projects cataloged and they can (based on each developers metrics) come fairly close to what we are telling them. Your bid was probably way too low compared to the # of hours that the project was expected to take. They don't want to give the project to you and have you unable to complete it becaue you bid to low. I don't care who you are the first %80 takes %20 of the time to do the last %20.
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.
I once heard of a company that submitted a written proposal to a major restraunt chain. They were competing with a few other companies for the job and had spent some time working on it. Anyways, when they finally met with the restraunt chain about the proposal, the restraunt chain promptly told them to make the proposal thicker. When asked why, they replied because the other proposals were thicker. There was no feedback as to whether the proposal was going to meet their needs or anything like that.
IMHO, We are told that more is better through advertising. And somewhere along the line we believe it.
Sometimes, more is just more.
Star Pirates
Whether it is software development or paving the parking lot, if you've been burned in the past by going with a bid that is one-third the going rate, it is unlikely that you will go there again. Business do want to save money, but, more importantly, they must prevent damage to their operations and infrastructure. Saving $10k doesn't do you much good if you lose $20k in downtime when you have to take systems offline to fix them. That concern is a big part of the mix.
-- Slashdot: When Public Access TV Says "No"
In a competitive market, that is without cartels, monopolies, and artificial controls enforced with law, price can be a good judge for quality. Let's say it only costs you $1000 to complete this work, and you are comfortable with pocketing $4000. Should the price of $5000 be enough?
At first impression you may think that a person who charges $5,000 for a project is a bargain, especially if he produces good work worth $10000. On the other hand, a person who knows the quality of his work relative to the market place will understand the value of that work relative to his peers. So you may be able to make a comfortable profit if you charge $5000 but if there is no one else who can do the same quality of work for $10,000 why not charge $10,000? At least if you don't recognize that $10,000 is what it is worth, others will. It works the other way too. If there were more people doing the same quality of work for $10,000, eventually the price would go down through competitive price cutting.
Of course you can't use price solely as a guide to quality. You have to weed out the lemons by looking at his (the company's) track record. But all things being equal, price will indicate quality. Perhaps you underestimated how much your work was worth in the market place.
I know it happens around here a lot. Did the company that won the bid already have the "paperwork" taken care of with the contracts department based on previous jobs? Many times it is worth $10K not to have to go through all the hoops of working with a "new" consulting company. Much like you had their website mostly "templated" out (thus your bargain rate), they could have already had the winning company "templated" out with a previous contract in place. I have done many RFP's with new companies -- and have been surprised at what it takes paperwork wise to get someone new setup. (billing, waivers, proof of insurence, conduct policies, network id's, mail accounts, etc...etc..)
(+1 Funny) only if I laugh out loud.
I think a business is willing to spend a lot of money for a "warranty".
I mean, a manager need a warranty that a project
will be completed in time and will do the work;
he could spend a lot of money to get this warranty.
So he is not paying for the quality, or for the
men hours spent on the project: he is really
paying for the warranty (in the broadest sense).
I'm not surprised that a lot of money can
be spent on software.
That's the way I usually ask (a lot of) money for
GPL software to my customers. We basically
work as an assurance company.
Davide Barbieri
--
http://www.prosa.it - the free software company
Well most posted replies look like they're taking the psychology route. But let me offer a different point of view.
If the business is to assume that the bidding developers makes about $70,000 in salary, then you've effectively "said" to them you'll be committing yourself to this project for 26 days, whereas the other developer is "saying" 78 days. Perhaps they think this project is a two or three month project and they want someone who will be around?
I'm not just talking about coding... you have to consider delays (there will always be delays if you have to wait on them for anything, even just approval), training (sometimes dimwitted) staff on using your system, testing, approval (sometimes from a committee that will want changes), and lots of bugfixing (don't tell me you have no bugs, I don't believe you).
The more I think about it, $15k sounds more reasonable to _me_.
They care about how much it will do for them. If an app is going to make a company a million dollars a year, why not pay someone really good $10,000 even if you think you could do it in 16 hours?
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.
autopr0n is like, down and stuff.
Also, if you charge next to nothing for your product will you be around next year to support it?
:)
The analogy being would you buy something that you weren't sure could ever be fixed should the need arise? It would be a substantial risk on a non-trivial project. Taking substantial risks could get you fired
You must also consider how proposals were evaluated for that contract. That particular evaluation method may have weighted cost to insignificance, instead focusing on technical merit. I don't know what company you're talking about, but to many, the difference of a few tens of thousands of dollars is trivial. Also, if you were a small company competing against larger, it's possible that the reason you bid lower is because you're "leaner and meaner" (that is, less administrative and fringe costs associated with your per hour rate). To many evaluating companies "lean and mean" is a risk because it might mean you're not established and may go under before you finish your project (or during the maintenance phase).
Occasionally, organizations invite bidders to the table just to keep the incumbent honest or maybe they just liked your competition better.
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
When shit fucks up, whoever commissioned it wants to be able to use the excuse, "But, I paid good money for this!"
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.)
"Old man yells at systemd"
because it costs less to live there. It's almost like you're paying them more in terms of psudo-'feel good' quality you get simply from paying a lot.
autopr0n is like, down and stuff.
Many in the IT world are actually MISers or others who do not really know what is happening. They judge projects by costs and assume that if you charge more, it must be doing more. This is there way of making up for a serious lack of knowledge.
OT: When you next apply for a job first find out what is the rate for your area for what you do.
When they ask how much you made, tell them a figure that is 10-20% above the average. They judge us by our rate becuase they are incapable of figureing out what we do.
I have fixed everything from video games to high-end broadcast equipment. Invariably, the fixes I do for free or minimal charge are the ones that come back to haunt me. If I charge someone my $100 minimum for a one hour repair job (that really took 10 minutes) they think they got a great deal. If I do it in 10 minutes as a favor, they feel shortchanged. There is an old story about an engineer that walked in and fixed a transmitter (after several others had tried and failed). He looked it over, turned a knob and had it up and running. After presenting the bill (for $500), the manager asked if he was charging him $500 to "turn a knob." The engineer replied, no, "$5 for turning the knob, $495 for knowing what knob to turn." When someone gets something for free, they generally feel it has little value. The same is true for the "low bid" on a project if it is way below the others.
To most business people, talking with a developer is like talking with a doctor. They don't understand the other person's black art, and they have no way to judge the person's competence, other than their standing in their professional community. And most business people treat the health of their business at least as seriously as they treat their own personal health.
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.
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.
-.-
If you ignore the other uses of a tool, does that make the tool less useful, or you less useful?
Not to sound too idiotic, but in my experience you always get what you pay for. If you don't pay enough, you get poor architecture, lack of extensibility, creeping deadlines (if you only have one developer, and he's sick...), and the knowledge is locked with a smaller group. Documentation is ALWAYS the thing that gets cut in an effort to save money, but when you have a group of 10 people working on the project, you cannot work without it, so you can't cut it.
On the other hand, open source projects like ezPublish[ez.no], Apache[apache.org], and MANY others have the benefit of long development times, good documentation, and many developers working on them. That is the way to get less expensive quality software, not to underbid!
Anyways, just my $.02
"...I'll need guns" --Chow Yun-Fat in 'Replacement Killers'
At some of the bigger places I've worked (the guilty parties will remain anonymous, as always), the IT department would always spend its budget for fear of, in the words of one director, "having it reduced next year if they spend less than allocated."
Made me reconsider the whole management thingy.
Time_it_takes_to_write_Bug-free_software = Time_programmer_thinks_it_will_take * 3.0D0
In other words, if you think it will cost $5K, charge $15K.
If your software is bug-free ahead of schedule, then offer to charge less for the system.
If your sponsor must stick to his budget, spend
the extra time to implement more functionality etc.
-frank
It's also known as the BUY HP phenomena:
You sell some very average hardware at incredibly inflated prices that has the same MTBF as any other vendor and solely because of your brand-name (and because you're charging huge amounts of $$$), people buy your stuff...
It's also called the "One Born Every Minute" rule.
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
http://www.bradheintz.com/
- updated
I work for a software company. We sell stuff you can (mostly) get for free or do yourself. Basically, I think people spend the money because with high price tags come high accountability. They get support and upgrades and all the other commercial perks they are used to. Not to say the free and OSS approaches do not provide this, too; but that is the perception. Or, at least, the perception is that they could be there now and disappear tomorrow if you don't pay for it. I think most of the same applies to build projects too, just with different parameters...
we speak the way we breathe --Fugazi
This seems pretty simple and is true for almost all non-concrete property. Concrete property is valued based upon scarcity -- if I want to buy that car or pc of land from you I can evaluate the value of that object based on its uniqueness and the value of similar objects.
For abstract property though -- intellectual property, consulting services, software, etc -- the value is very difficult to evaluate. I could try to evaluate the imapact that having such an item or service will have on my business (ROI, $ saved, TCO, etc) but if I don't already have the thing or if the thing is rather abstract then it is very hard for me to do that. Its much easier for me to associate the value to my business with the price I am paying for the property. This is especially true of consulting services where the basic rule is that information is valued at the price for which it is obtained. This is, of course, mostly true for organizations and less true for individuals. As individuals we have an easier time guess-timating how much happier that pc of software will make me. Even individuals, though, resort to price paid for things like financial advice -- where they have a really hard time evaluating the value outside of price.
Trollaxor is a homo, and so are you. I for one am quite happy that his gay blog was shut down by Taco and crew.
Now please shut the fuck up and pull your penis out of your mom's ass and stick it in her mouth.
I have never seen that. I see producers and managers bragging about how little they spend, and in general how badly they are able to abuse/rip-off/jerk around contractors.
They frequently use lines like "this could lead to more work in the future." Yeah right, at even lower rates, since they now know you're a sucker. At the bigger, more famous companies they use my personal favorite: "this will look great in your portfolio."
Of course, after taking enough desperate contractors and suffering through enough "bargains" most managers come around eventually. But then they usually rotate in a fresh idiot.
When a client buys a product from Company X, they buy more than just the product. They buy into Company X itself. They ask "Can we do business with these folks? Do we like them? Do we trust them? Are they our kind of people?" They go by gut instinct as much as anything else, and so you must learn this lesson in business: People buy people.
The company awarding the project must have gotten burnt by the cheap labor for web projects that is provided by Indians on Elance.com .... so some hot shot manager decided to "take another direction" this time ....
HallmarkOrnaments.Com
Never take the lowest bid/price.
You have a higher risk of getting screwed.
Example:
All you know is that there is a $100 whore, a $500 whore and a $1000 whore. Which one do you choose ?
Hmm. Only and idiot would pick the $100 whore.
Did you post this comment in the wrong story ?
I don't care how good you think you are, it cost money to create quality. I highly doubt anyone could create a quality bug-free product like you are describing in less than a month and be fully implemented, FULLY TESTED (everyone forgets about test!) and determined ~bug free and ready for release to consumer(s).
... let alone just for functionallity). Right there you are in for about $4000.00 in just labor for one person.
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.
Ascalante: Your bride is over 3,000 years old.
Kull: She told me she was 19!
Based on a similar experience:
maybe the men who had to choose the project have paid 20K for a similar project some month ago.
Choosing the 15K project, they can say "We got a better deal this time, just 15K!!". If they choose your offer, they would have explained why they paid so much for the previous project.
Actualy the reason that super low cost solutions are often culled out is because it make the bidder look desperate to get work which implies, especially in this economy(US at least), that they may not be around in 6 months.
Also, it implies a lack of control for the buyer. If you're paying someone 5 grand they can just up and walk away too easy for 15 you'd think they'd try harder to make you happy when things go bad. These numbers are both relatively small so the point might not get accross but consider a larger scale purchase of $10,000 vs. $100,000. You know the $100,000 is going to try and make you happy. (this may not actually be true but it is the impression business people get)
Finally, when buying a software product (not services) a higher price implies (often incorrectly in the software industry) that the developer has more invested in that product and has put more work into it and therefore it must be better.
Networking (people not cat5) is still the best way to undercut the all too popular overpriced services bids. If you know someone prior to them needing software and you have talked about how little most PSOs do and how much they overcharge the future client will begin to trust you rather than the usual FUD. As a result, when it comes time to for them to buy, your bid is just an example of you putting your money where your mouth is instead of you begging for business by undercutting someone with a ridiculously low price or you misestimating something that's actually going to go way over budget.
Unfortunately the key to business is always the people and most people are idiots, so you have to trick, cajole, pander to, and nudge them in the right direction even when you have only their best interest at heart or else they will shoot themselves in the foot and reload every freaking time.
A lot of contractors, especially government ones, have to spend their entire budget or face having it cut when the contract comes up for renewal. I've seen this stupid behaviour in the military and large companies. It can sometimes be a prestige issue since you raise your "importance" by controlling bigger projects and assets.
"God fights on the side with the best artillery." - Napoleon, Marshal of France - speaking truth to power
Actualy, Freud probably just wanted money to buy more blow. He just didn't want to admit it.
autopr0n is like, down and stuff.
I'm with you man, I don't understand why the company would want to pay 3 times as much for such a simple tool. If I were the guy taking bids, I would want to see examples of the developers work. If it looked like the $5000 guy did good stuff, I would go with him. But then, I'm the kind of guy that tries to save the company money, even if they don't want to.
IANAL... But I play one on
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.
I have looked into Lasik eye surgery, and I've seen lots of doctors who advertise a very low rate... I for one, am very hesitant to trust my eyesight to someone who doesn't feel that they can charge as much as another doctor, I'd gladly pay more to guarantee quality, and I suspect similar reasoning is used by corporations.
Go away, or I will replace you with a very small shell script.
A while ago, when Protel was called Protel, they upped the cost of their software (schematic/pcb design etc) in an attempt to look more respectable to bigger businesses.
Maybe it's just a matter of understanding managers ("The Dilbert Principle" by Scott Adams is a good introduction).
The other project only cost $5K too, but the bosses got $10 in lunches, lapdances and luxury box seats.
1) He has choosen you, the cheaper $5000:
2) He has choosen the other, for $15000:
Which is the basis of Starbucks' business model!
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.
Novel theory: Modern Man evolved from psychopath
A lot of companies (my own included) are suspicious of small consultants that charge far less than the competition on fixed-price contracts. One reason is, I think, a subconscious perception of quality -- "this is worth X to us, but you're charging X/4, therefore your results will be 1/4 the quality of what we want". But another is definitely "ownership" -- we want to feel like we own you, that our project will be more important to you than the other things on your plate, and that you'll go that extra mile to satisfy us, precisely because we are paying you so much. Although the costs of fixed-price consultant contracts have been pushed lower and lower by this economy, they still aren't commoditized yet in a lot of customers' minds; we still want the comfort of feeling like we've got a "temporary hire" who will make the effort to understand our business and the problem that we need them to solve. We want them to be every bit as motivated and aggressive as our employees, and we're willing to pay a premium to make sure that happens.
I am currently employed by a large national financial company in the IT department as a Unix Implementation Engineer.
The software selection process is much more political than it is technical. In the 6 months I've been here, I've seen over 1/2 of the software selections derailed by the politics. We would select what we thought was the best solution, propose it and begin the acquistion process. Then some VP or Director would step in with their opinions, the process would stop, and then a different decision was made.
In one case I proposed an Open Source based solution, which met ALL of the technical requirements, was immediately available, at a much lower cost, with a track history of working installations. I was overruled in favor of a solution which the VENDOR said (in writing) did not currently meet our requirements, cost more and had vaporware galore. When that project failed, they again refused to look at the solution I offered, chose another partially functioning solution that someone else had as a pet project and headed off into the sunset. Still no working application 5 months later.....
Call it politics, call it turf, call it pet projects or ego. Software is not selected on technical merits, even by technologists....
Software needs to be priced based on the business benifit, not the development cost. If you have a simple product that saves a company a ton of money, the price needs to reflect the cost benifit, not the development cost.
If you are not charging the market rate, it deminishes your credibility. How are you going to be around in 5 or 10 years if you are working for peanuts? Businesses do not normally have the expertise to maintain and adapt software to their needs. Usually they have to outsource that. If you are not around to maintain your software, they are likely to need re-invest in a whole new system.
I think it is outragous how much money you can earn selling software in $/development hour. I choose not to worry about that too much, and instead price my software based on the number of man hours that it saves them...
They are happy, and I am very happy.
The dollar of the bid amount is not necessarily what will win or lose you the account. It has to do with how the hours are devided for the work. At a difference of $10000 you obviously weren't giving the company the same service. For instance your database set up and schema was probably being produced by you the programmer where as the other company probably has a DBA to do it. That goes with every part of the project, you also probably planned to do the frontend design and feel yourself, where as the other company may have brought in a design consultant to make sure everything blended in with thier current products and the way they do business. Also with testing, they are probably a large company with multiple people to check the software for bugs. I personally, don't like people like you that come in trying to get a job by offering the lowest dollar not the best product. It makes my job harder when I have to come in after you and clean everything up and deal with an angry customer. When you turn a bid in always turn one in that will build the customer the best product not the cheapest. If you bid is high but they like the services your offering you'll get the deal no matter how low someon else is.
If your not cheating your not trying. If your not trying your not winning and if your not winning why play?
Cause it's TROLL TUESDAY!
I think it has more to do with spending the quaters or years budget money thank anything else...
>Do you think that businesses might be better off >if they took a risk and tried the lower end of >the costs spectrum?
Do you think developers might be better off if they took a risk and tried the higher end of the charge spectrum
This is a phenomenon documented in economics. Means pretty much what you think it means. Particularly in fields where value is difficult to measure objectively, the maxim "you get what you pay for" wins out over "caveat emptor."
If your bitterest enemies are people who hack the heads off civilians, then I would say you're doing something right.
"Nobody every got fired for buying IBM."
Now that same philosophy has simply changed slightly. Just replace IBM with Oracle, or Microsoft.
The truth is more important than the facts.
-Frank Lloyd Wright
I am not a contract worker but I have worked around contractors for about 5 years. Successful contractors always collect good wages when they are working.
You will find this in any industry as contract workers insure their own work. By quoting far less than someone else you are not guaranteeing that you do good work.
Good luck for the next job and record/expand/hone your skills constantly *as well as keeping worthy business contacts unless youre anti-social like me*. =)
Pixels keep you awake!
That policy is standard practice for many companies and most state/loacl/federal government departments. Efficiency is punished.
Free Mac Mini Yeah, it's
Having read most of the comments up to now, it seems that most of the independants have run into this and have adjusted their pricing accordingly. I personally have a hard time doing that, how I was raised I guess.
Wouldn't it be better for software developers in general, instead of charging an exaggerated price to be taken seriously, that we have some way of being certified and from that have an implied guarentee of quality?
The way I see it, it would have to be a voluntary type of certification but if passed then clients could be given a certain level of expected quality. Think about other professions these days, like Engineering for example. Just graduating from school doesn't make you a Professional Enginer, you have to do a few years of grunt work and write further exams to be considered qualified.
Wouldn't this type of thing help for software developers?
Those taking bids on software development enter the situation with an expected cost based on their prior investigations. When a contractor provides a bid that is either conspicuously too high or too low it is often disregarded. If you wish to submit unusually low bids for software development projects you will need to explicitly justify your lower costs in a line by line financial estimation statement. Companies today have learned the hard way that going to cheap route often leads to future costs to fix the cheap software.
I believe that is the term you are looking for..
There have been a lot of responses to this from people saying that the reason this guy's bid was rejected was probably because he was amateurish or wasn't good enough, or couldn't offer support, or whatever.
At my company, we have an approach to business that is unfortunately rare in the IT industry. We are honest with our clients. We think it is better business to get a client and keep them for ten years than to make a fast buck on a single contract.
This approach has cost us business in the past (but also is good long term - we have an extremely high client retention rate). But one thing is for sure, when we have lost a client because of this approach it has always been because the client doesn't know what they are doing.
Example. About six months ago we bid for a job against several other companies, incuding an IBM shop. We spent a long time listening to the client and finding out exactly what they needed, and then wrote a proposal which fulfilled their requirements along with an honest costing of the work involved. The IBM shop gave them an off-the-shelf proposal that was actually completely inappropriate for their requirements, and was costed at about five times what we quoted, and was the highest bid.
IBM won. When I quized the CIO (a clueless PHB) about why they chose the IBM shop, it had nothing to do with the contents of their proposal at all. The CIO didn't understand it. He went for their bid just because it was IBM.
Second example. A client approached us and wanted two different web sites created for promotions. Again, we did a proposal, and said that their web hosting requirements would be adequately covered by one of the standard packages from a company like Verio. The competiting proposal contained costing for buying and installation of in-house web servers, as well as an upgrade of the company's network connection to support the site. This meant that their bid was twice as high as ours, had a very high on-going cost, would cause them loads of hassel, had implications for their network security etc. etc. However, they couldn't believe that a $40 a month hosting package could possibly do what they required, when the competing company was saying that they needed to spend tens of thousands dollars on hosting. Again, the main issue was that they didn't have the internal experience or knowledge to assess the proposals.
We almost lost it because of the hosting issue. I persuaded the company that the best way ahead was for them to give us half the job, and the competing company the other half.
With the hosted web site, they have never had any problems. It's always up, and it does the job. Their internal web server has caused them loads of headaches and expense which I'm sure you can imagine.
Because we won their confidence, this company now gives us all their IT development work, and we practically write their IT strategy for them.
Sometimes, when a CIO accepts the highest bid, it is because he doesn't know what he is doing and feels safest with the highest bid.
And a problem with electrical generators or something. And a chalk mark. Anyhow, here's a link about one of my heroes:
Steinmetz
-- ac at work
This is a common situation across industries.
Companyes generally have an idea what the cost will be any quotes that differ widely are thrown out. This is a common thing, why is this person so much higher or lower then the competition.
Lets say you are looking for a "loaded computer", you expect with all the toys for it to cost about $1k. You skim some adds, you see a few for around $1k, you see one for $4k, you see one for $300.
I don't think you'd hesitate long to think that the $300 is a cheap one cutting many corners, even if the specs are the same, you would be wary of purchasing it.
Please, you're a hacker who probably won't be in business much longer. If you had any CS or SE background, you would know that maintenance is where most of the work in a software project goes. Hackers like you come and go.
It's a bit of a game, yes, but generally it goes like this: look at the value of your services, and look at the class of your customer. You can't ignore that different customers require different levels of service.
There are three balancing points you need to look at when setting a price for goods or services:
a) what's it worth to them (1 customer)
b) how much are you worth relative to your peers in ways that MATTER to your customer
c) what's the benchmarked rate for this class of service
Sales skills involve convicing your customer of your estimates for (A) and (B), and also keeping (C) in mind as you haggle. You'll need a "benchmarked" rate such as those at RealRates to keep your feet on the ground.
Notice how the stock market uses a stock ticker listing the last bid/offer prices for issues? That's because people need a benchmark to know what others are charging, what tactics to use, what the trend is, etc.
It's not so simple that "companies buy outrageously priced services and products". What's outrageous to one person is acceptable to another, because DIFFERENT customers have DIFFERENT needs, many of which are intangible. You can't purely quantify price on technical quality alone, though that's a major factor.
A perfect example: J2EE servers tend to be fairly costly, compared to jBoss (free). This is the subject of many a flamewar: why do people keep spending the $$ on IBM WebSphere or BEA WebLogic? There are a lot of people that are certain of the imminent world triumph of jBoss, but I'm not so sure (even though it's a solid product). There are a LOT of intangibles that go on when purchasing a mission-critical product. To keep this brief, I'll focus on one: TRUST.
Do you (as a Manager Director or VP of a company, responsible for the company's performance) trust the jBoss team? Do deliver quality, to continue making improvements, etc? It's an open source team without identifiable faces... so you try to find a face... and the leader, Marc Fleury is often associated with it. So when you say "do you trust jBoss", it's really a question of, "do you trust Marc Fleury?".
Alternatively, do you trust BEA? The owners of Tuxedo which has a reputation for reliability & scalability, and with a suppport staff that is always in the message boards helping people out, with major accounts among your peers, with guaranteed 24x7 support if need be, etc.
Similarily for Linux, it originally was do you trust Linus Torvalds and Alan Cox -- but is increasingly "do you trust IBM and RedHat and Oracle?"
Many people think "I don't trust those suits" when judging mySQL vs. Oracle vs. PostgreSQL, or [insert pissing contest here], but that's because you're not a suit. Suits trust other suits, sometimes for better, sometimes for worse. They'll pay around the rate their peers are.
-Stu
> cost is seen as directly proportional to the quality of a product...
The truth of this statement depends on how you define 'quality', but in the vast majority of real-life situations, it holds true.
Rolls Royce > BMW > Ford...
Rolex > Tag Huer > Timex...
etc.
As an IT consultant I ran into the same thing.. If you underbid you are instantly thrown out. Now, if you underbid by a smaller amount and include with the bid a nice 1 sheeter explaining your advanced cost saving and increased performance that results in savings for the customer.... then you win. First thing you really need to learn... YOU MUST MARKET YOURSELF. Yes, you have to do the underhanded, shoddy,crappy world of marketing... build up to amazing perportions things that dont matter, and border-line lie about features. Example: "we save you money by diversifying the liability of the Intellectual Property rights by drawing from the massive pool of experts available around the world and include their tried and true expert knowlege to your project!" Translation: we use GPL code.
this is what you need. Market yourself and your bid.. SOMEONE is reading them and if you look professional (you sent your bid by overnight or had deliverey service right? and you had it in a $5.00-$6.00 linen folder with foil printing? the papers inside were printed in full color on 25 ound stock linen paper with watermark? your bid package had better cost you about $20.00 and look like it came from a place like ENRON or Texas Instruments.. remember you need to look damn good.)
It's all marketing... and that is the cool part, Us freelance guys that know it... we get the jobs without even worrying about the other 20 guys bidding.
Do not look at laser with remaining good eye.
One thought is that the purchaser--the company who wanted the website--didn't feel you'd covered the material well enough. The reason I'm suggesting this (with no insult implied to you), is what you wrote here on /. -- "The contract was not a complex project: a system comprised of database-generated web pages, with file submission and minor document management features." One thing I've found more and more in custom development is that companies are very nervous the more complex their projects get. As a result, they tend to turn to vendors who can assuage their fears about how things might go wrong. Is it possible you took the wrong tack? Maybe when they saw the $5K price, and especially if you said this was "no problem", they thought: uh-oh, he's going to miss something, he won't cover it all. Meanwhile, the other guys were talking about how they were addressing security and scalability and failover and whatever (even if they really weren't). For better or for worse, people sometimes like to be sold to; it increases the value of the thing in their eyes.
The other thing is how, in general, your rates will be judged based on prevailing market rates. If the prevailing market rate for the website's functionality is 100 hours at $150 per hour, then your bid would seem surprisingly (and suspiciously) low. One alternative is, if you are competing at that level, maybe throw in a bid for $12K with a number of useful features that they've been talking about but in a future release. Show them ow for the same (or slightly less) money, they will get much more. Otherwise, if their friends at other companies are spending around $15K for this work as well, they probably won't trust you to do it for $5K. And why should they? Generally, there's no free lunch.
p!yaya
"I honestly would vote libertarian if their candidates weren't usually total cooks."--slashdot poster
Buyers believe they know what a job should cost to have done properly. If your bid is too far from that belief (lower *or* higher), they'll be suspicious. They're going to spend their money on something in their comfort zone.
The other costs they're comparing is the cost of failure. How much does it cost them (opportunity cost, wasted time, extra money) if they have to rebid the contract in 6 weeks because the job wasn't done (or wasn't done correctly). That's a "competitor" you may not have considered.
Of course, the project not only could be done for less money, but will simply push problems onto other departments and people. But that probably won't be noticed. He'll be a hero, and eventually get the keys to the executive washroom. I love corporate America.
There is no gravity...the earth just sucks.
I spent some time as a software development manager. Whenever anyone who worked for me gave me an estimate of 2 weeks, I assumed they hadn't estimated correctly (all jobs look like 2 week jobs). I would grill them much more deeply than any other estimate.
I learned this when a developer gave a 2 week estimate. 2 weeks later he told me he had 3 more weeks of work. I pulled him from the project since he was making negative progress. He was too dense to get the message.
When VPNs are outlawed, only outlaws have VPNs.
It seems to me that companies are more willing to pay lots of money to developers than little because they want the developers (and the developer's company) to be in business for the long haul. If they are paying peanuts, there's a good chance the developers won't be in business for long. Then the company that bought the developer's product will need to pay lots of money to have their employees or other contractors figure out the product and maintain it.
"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."
With all due respect, and I don't mean this in a bad way, maybe they just were not comfortable with you. Maybe it had nothing to do with money.
Doesn't mean you are not qualified or a great person or anything. Maybe you didn't give them the "warm and fuzzies". Who knows why people think the way they think.
...but it costs $50 000.
That's why sometimes you'll see teachers with a whole bunch of basic supplies, because if they don't spend all of their budget, it just gets thrown back into the district pool.
There are 4 boxes to use in the defense of liberty: soap, ballot, jury, ammo. Use in that order. Starting now.
A few friends of mine and I recently started up a web-design/web-services company. We thought that if we were cheaper, we would get projects. This is not the case, many companies use the mentality that you are talking about, the CEO decides that a certain ammount can be spent, and tries to spend that ammount.
-sstc
It's often thought that if you charge too little, then you won't be arround to support it. And that's very important to a business.
You are using the term "cognitive dissonance" incorrectly.
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.
autopr0n is like, down and stuff.
Your intiial quote is only the beginning on any decent sized project.
Are you asking enough for the project that you'll be able to pay your salary and your overheads and still be in business in 12 months time? The project will need amintenance, and if you're not on the scene through undercharging, then you've done both yourself and your customer a disservice.
-- You can't give it, you can't even buy it, and you just don't get it!
Same situation at my company, and it frustrates me to no end. I've suggested using OS tools since I got here, and instead they come in here and plop a 3K copy of JBuilder on my desk! I still use ant and gvim.
I've asked many times, "Why are we paying obscene ammounts of money for shitty software (ahem... BEA WebLogic) when we could get something equilivalent and better for peanuts. They always say...
1. Someone to blame when things go wrong, you can't sue OS developers, they don't have any money. (Do they ever sue these vendors? Nope.)
2. Support, you can always call their support number, what are you going to do with OS software? (Yea, i know how crazy this sounds, and I've tried to explain, but they think those monkeys on the teir 1 support are worth paying 15K a year for)
Same goes for hardware in my company, they just bought 2 50K sun machines which perform about as well as 15K worth of linux boxes.
I've tried to get through to them, but the PHBs do not listen to their technical staff when making these kind of decisions. This, I believe, is the main reason for this problem.
Troy
For many mgr's the reason for going with the higher bid is that they feel that they would be justified in attempting to extract more flesh when things don't go exactly as planned.
This issue is going to occur any time you are dealing with intellectual property type issues.
In the construction business, most aspects of a job are:
1. Not new -- jobs like this have been done before.
2. Require tangible materials -- 60 tons of concrete have the same basic price all the time. And it will be a high part of the total bill.
3. Regulated and Standardized -- Architects, Structural Engineers, and even contractors work within a framework of legal, union, or standardizing body rules.
So these three factors serve to level the playing field when it comes to bids. If someone has a substantially lower bid, than they are either skimping on the material, or the labor, both of which can be extremely problematic for mission critical projects and may even land the owner in legal trouble (i.e. you built a highway bridge using a guy who was half the price, and you are surprised it gaveway killing innocent civilians, to the slammer with you).
Software development for the most part is not bound by these three principles. Every project (including simple database applications) have specificities and subtleties that can have long ranging immplications for budgets and timelines. Material costs are negligible regardless of who gets the bid, and software development is only regulated and standardized in a few industries.
This leaves potential customers with a bewildering array of bid timelines and budgets. If they have experience in other bidding areas they may follow the rule of thumb that low bids should be watched very carefully. Now we all know that this is mostly untrue in software development but how can you prove it? ROI with software is a tricky subject at best, as is performance appraisal. In the end, as with most business decisions it all comes down to sales.
perhaps they arent so clueless as you think. Software developement IS expensive, if done properly. Why else do you think XP, for example, costs £250, even though its going to sell millions of copies?
So if you`re too cheap, you`re almost certainly doing something wrong.
Here is my experience, business when they buy software solutions factor in security. When it comes to a business ask yourself this:
Who do I want to work with, a million dollar company or a $30,000 annual net company. They are attempting to pay for security and prestige. They have to justify the costs of the project to the upper-managment. Then they have to at least prove that the company that made it will be around in 5 years, a company that is worth more (as far as perception is concerned) is more likely to be around longer.
From a darker side of business it is also easier to skim when there is more money. A REALLY COMMON skim that project and department managers do is to hiring the staff for a project on-site and expense computers and monitors for the project out for the consultants on site. Then when the project is done, viola! Free computers and new monitors for the department. Hell you can expense the new equiptment as a labor cost to the consultants and the take the computers home! I've seen that one done dozens of time.
i.e.
4 Consultant at $300,000 (Real Cost)
Project Budgeted 4 consultants at $304,000
You buy $4,000 worth on computers stuff for the consultants to use (legal) and they use it(of course legal) at the end you paid $304,000 on paper for the consultants (which you were budgeted for) then manager gets $4000 in free stuff? (Shady) or the department got those new monitors they wanted (not so shady).
Also many times when a dept. comes in under budget the dept. can keep the cash, answer this: if you come in under buget at 5% which many business wouldn't consider doing an "assest reclamation" on the project. Now which would you prefer to get free, 5% of 8000 or 5% of 15,000?
Fin
-=[ Who Is John Galt? ]=-
i used to work for this company that does mediation software for telecoms. at the time they were involved with y2k work for one of the major telecoms. they had presented a cost to said telecom for work to be preformed. i don't remember the amounts anymore. but the original was something like 10,0000 dollars.
siad telecom responded back thak can't be right its too low. so my company 'reworked' the bid and added a line like 'testing' or something bogus +50,000 dollars.
the telecom then accepted the new bid.
nothing in reality changed except the telecom had to pay more money
i never really understood the logic there.
I work for an ISP that services a large portion of the united states and some other countries with ADSL service. We have software to keep our customer's trouble tickets in a database to document their problems. They paid over $20,000 for this software, which is completely obscene. They had some other software previous to it which was much lower scale in the graphics department, but it definitely made up for it in speed. That software worked great, but for some reason they still decided to pay 20 grand for the new stuff, when they already owned perfectly good software which they purchased at a much lower cost. I looked at the file size on some of the images used by this program, and for some 250x70 jpeg images they were racking up 80K a pop. The money they wasted on this could have been used to pay for some new computer or at least some optical mice because nobody cleans the rollerballs and they just don't work right. I can't believe they would pay someone that much for such a poorly designed software program, but as many people have stated in here already, if you don't max out your budget, you don't get as much for next year. Silly, ain't it?
I was working for gas turbine design and manufactur company. My boss always told me to design with rediculously high factor of safety. Obviously they never got any contracts as the bid price was too high. The more interesting thing I learned later was that they actually got a contract in the past (my boss designed it) because our bid was very much low to that of competition. But guess what, our company blew it out and went to losses as they later realized that lot of design considerations were missed, proper project costs werent included in evaluation, things like tiny expenses were grossly ignored. These were the things that added to most of the cost.
These sorts of complaints only show how amaturish the company (or the person) in bid are. Get over it, get involved in coulple of more bids, get feeling, learn some accounting, you will win next time.
The problem is, your clients have absolutely no idea what the product they are buying SHOULD cost. You can look at it and tell, with a little thought: it should take me X hours of development, I can use these pieces of previous work to save time, my hourly rate is Y, so the total is $4,200-- lets add a 20% contingency and call it about $5,000. And you're right-- I have no doubt you could do the job at that price and be happy with the $5,000 you received in exchange. But I can only say that because I am fairly familiar with what the type of service you are providing-- Your potential client does not have that advantage. So he has to let the market tell him what the project is worth.
Some firms routinely reject bids that deviate too far either way from the average given a sufficient number of responsive bids. It's easy to reject a high bid, because no one wants to hire someone who is trying to make all his money on one project, but why would you ever reject a low bid if you believe the person can do the work?
You would reject it because companies who consistently do work for less (or more) than it is worth cannot stay in business. Given that they are eventually going to go out of business, you don't want to risk them going under in the middle of your project and leaving you with nothing.
You and I both know that you can safely outbid your competition because you have much less overhead, and you really aren't doing the work for less than it is worth-- but your potential client doesn't know that. He doesn't know how much of that extra money is going for benefits, office space, secretaries, yadda yadda.
The only way out, as crazy as it seems, is to jack up your rates for bigger clients and smile all the way to the bank... Then you will know that you have a safety net, and if you really did underestimate the amount of work involved you can afford to hire some subs to help get the job done. If you're not comfortable with the idea of bidding two to three times your "normal" rate for bigger clients, then you are going to have to be content to pursue less sophisticated clients. After they have seen what you can do, you can cut them a really nice deal on future work-- but it is vital that you "right price" your first few jobs for them. Honestly, when I was contracting I avoided clients who only sought out the lowest bidder-- they usually turned out to not understand how a project is typically run and almost always wanted expand the scope without paying for additional work.
Larger clients expect a certain cost of doing business based on what they think the market is telling them. If they don't see the numbers line up the way they expect them to, they assume something is horribly wrong. A contract that is priced too low has all the appeal to them of a person in a singles bar who seems "too desperate" to get a date.
You might consider researching the winning bidder and seeing what their presentation and "look and feel" is like (not to mention their hourly programming rates, if that information is available). After all, they did enough of a sell job to secure this contract at three times what it is worth-- maybe they will be going out of business soon. Also, keep in touch with this client-- they are already comfortable enough with you to tell you "inside information" like how much the winning bid was. A lot of people would kill for that kind of business intelligence. Keep calling to check on these guys, and be sure to let them check out some of your other work-- especially work completed after they rejected your bid. Let them know what you can do and about how much it costs so that they will make a smarter choice next time...
I hope this helps take some of the sting out of it.
I wonder if this affects jobs as well.
I found that if I charge more money for a job than I think it's worth (and then maybe negotiate down to what I wanted to get anyway), I'm more successful. I mean: more successful than just lower my price right from the start.
It seems to me that companies look more closer at a project/employee if the cost is higher. So it's never a good thing to ask for low wages. Psychology. They'll think that you think you are worth it and will have a closer look. If you don't do this, nobody will believe that you are better than what you asked for.
Seems to apply to project costs as well.
Any experiences with this?
42. Easy. What is 32 + 8 + 2?
I don't really see what the problem is. This is good news for everyone here, isn't it? The upshot of all this is: YOU CAN CHARGE MORE. You can make a living. You can afford to hire some other folks, maybe even put together a vibrant little company where you can enjoy what you and make a living doing it. Isn't that ALL good news?
Late in my thirties, I hate to resort to Forrest Gump's "momma always said," but in my case my mother is a damn fine business woman who charges a $100 an hour just to talk to her about interior design for your home or business. Her adage has always been: If you underestimate your worth, you can bet others will only make it worse.
I'm an university professor who does a lot of consulting on the side, a great deal of it for free in the public sector, but when I get involved in private scetor contracts, I charge the going day rate. First, I don't want to undermine independent contractors out there who depend on that kind of income to make a living. Second, I damn sure want people to respect my worth -- you never know when I might decide to leave the university and need to make a living myself at customary rates.
My sense is that you should consider the bidding process a bit of "market research" as it were. You've learned a bit more about what the going rates are for those kinds of projects. Bid more and bid often; keep pace with the market. Enjoy the fact that the market for your abilities is "up" right now.
It could be a lot, lot, lot worse.
Lots of other fields have the same thinking. Take cars. Infinity makes the Q45, reviews just rave about it, the cost was $10k less than most all competitors. Yet the sales were sub-par.... They drop the incentives, raising the average cost by $10k (no small sum) and whats happening? Sales are on the rise (they are also advertising a bit more, but not by much). People who want quality don't want value, they want quality, and are willing to pay for it. Even if it is insane.... :)
"The saddest words of mice and men, are not those which were, but should have been."
I found out some guy I know wants to get into the IT consulting gig. He's charging $35 an hour.
First thing I said to my wife?
"$35 an hour? He must not be any good. That's what the Staples guy charges. If I was going it alone, it'd be at least $200 per hour."
A bit hyperbolic maybe. But I think undercharging also betrays a lack of self-confidence, among other things.
A lack of self-confidence implies you aren't sure you can really do it. Nobody's going to pay for some wank who isn't sure he can do what you are paying him to do.
obviously no deficiencies vs. no obvious deficiencies
Business Expenses = Tax Deductions
A project manager at Telstra (Australia's largest telco, and notorious for pissing software development money against the wall) once told me
"I may not be able to show you the size of my dick, but I can show off my project budget"
In many organisations your only measure of status is the budget you control. Hire more consultants! Buy more hardware! Spend! Spend!! It makes you IMPORTANT!!
Oracle can customize a package for you just like the one they made for California.
In my contracting experience, the reason seems to be more often than not that the management with the checkbooks don't really understand software. They often have a number that is their target budget, often not shared with the contractor. Many in management (many bad managers) take a budget as a min, rather than a max, and conclude that if a quote is considerably below budget, that it could be done better, with more features, and most important, faster if more money is just thrown at the problem. i.e. If I quote $X for a job, some people assume that $2X means I can do the job twice as quickly, or with more features in the same amount of time.
So management often assumes that if a contractor quotes just below or just above budget, they are doing the best job possible for the money being spent. If management really understood software, they would realize that money isn't the limiting factor and that time *is*.
One interesting bit I'd like to pass along from a client (whether this right or wrong, it's the attitude of many customers) is that software contractors are in the business of doing spec'ed work for money, not making business decisions. If management want an expensive, non-optimal solution, it's their decision, right or wrong, since they're the ones writing the checks. All we can do is offer the best solution we know how and try to explain in Luddite terms why it's better, even though it's cheaper.
From your presentation of the evidence, I'd guess that you misunderstood the scope of the project. If you thought you could finish 50% of it in a day, you were almost certainly overlooking some elements that others *did* foresee, and which they considered at least doubled the scope. Hence the bid that was three times what your was. (Yeah, that's the math.)
In almost every case, 'your bid was too low' translates to 'you didn't understand what we were asking for'. This is a common problem for people whose life revolves around technical issues. The decisive factor in every winning bid I have ever made has been whether or not the client and I understood the scope of the project properly.
I know that in Government work, we usually go with the a pretty much RANDOM person when we choose contracts. They don't like the highest person, becuase they are usually WAY out of our price range, unless it's near the end of a fiscal year then we tend to spend more money on each project..
They also REFUSE to use open-source because they don't trust it. For example they would rather pay $1500 for Stronghold then to let us spend some extra time just securing Apache. Or they would rather spend $8000 a year on Sybase contracts then to pay MySQL for support when they need it..
Whatever they want to do. But it just goes to show that Government really does WASTE a tone of money!
"Shut up about my driving. You're still alive."
I shortchanged it in that I didn't add the word theory.
Thanks for taking an entire page to point that out.
-- Scientist: You aren't going to leave me here, are you? Boagh! Thump...
How do you justify your existence here; why do we NEED you? And, why should we pay YOU even more?, and why should you have even a bigger staff?
I have worked with my share of "professional managers" from the big business schools and that is ALL it is about.
It's pretty much always been that way. In the late seventies/early eighties a number of the new software producers were wondering just what the "right" price for their products should be. I remember one of them saying that they initially priced their business productivity program at fifty dollars, but experienced only lackluster sales at that price. When they jacked-up the price to two hundred bucks sales took off -- go figure.
you hit the nail on the head with that one. shoddy commercial software that was promised to butter your toast and make your coffee is often purchased as it is perceived to be cheaper than allocating people and resources to get what you need done internally.
in some cases that's true; but more often the commercial software is bought followed by several people getting stuck with the sole job of dealing with it and the fact that it doesn't do what was needed but now we have no choice because we're locked into paying them for it forever.
Same reason they spend tons on hardware, support contracts, and reassuring salesfolk: they need to impress clients, and corporate clients don't want to hear PostgreSQL, they want to hear Oracle, or to a lesser extent SQL Server (shudder). They might be convinced Linux is OK, what with IBM and all, but "A patchy server"? Who makes that again? Next bidder...
It's been my experience over the last two-three years that price does not matter in bidding for a project. What matters is your ability to convince the client that you're competent, easy to work with, trustworthy, and able to give him the best overall service along with a quality application. You have to SELL your product, and yourself, and frankly, most programmers SUCK at sales. The process is analogous to us techy types paying more for an nVidia card with equal or slightly less performance, simply because nVidia has better drivers and better support for more platforms. I have never won a bid where i am the lowest priced bidder. It's just not important - what's the point - finish the project, or spend the least amount of money? In most cases, finishing the project is all that matters.
$45 per U Colocation Special
It seems to me that if you expect your quote to be very different than your competitors', you would do well to explain that a) you know this price difference exists and, most importantly, b) why it exists. Maybe you lower your costs by using open source software and pass that savings along to your client. But for all your client knows, you're using 8th graders for $5.25/hour and passing the savings along to your client--unless you tell him why your just-as-good solution is inexpensive.
Another suggestion: If you suspect your competitor is offering a more full-featured, or bloated, product, and that's why they're asking more money, give a list of additional features you could add and the development time and cost those would add to your bid. Your clients can add the numbers to get the higher price they want, and you might get lucky and impress them with your honesty.
Yes, it's possible that the low bid comes from a very talented developer. But it's equally possible that the low bid comes from some flake who can't deliver.
You know what interviewing is like -- Can you reliably spot the duds with a brief chat and a couple of references?
Excellence in software development is exclusively dependent on natural talent. If two engineers have identical education and identical experience, it's easily possible that one of them could be 10 times more productive than the other. No profession is held more hostage to natural talent.
The only feasible solution to this risky conundrum is to buy your way out. If you're spending $500000 on a project, then that money will allow you to effectively call the shots if you find the project is staffed with poor performers.
Obviously, money and power are very blunt instruments for getting a wayward software project back on track -- but unfortunately, money and power are the only tools you have.
Call it "insurance" money. Sometimes you gotta pay it to get the power you need.
Are you a one man shop? A larger shop will have more overhead but reduces the companies risk. I.E there will be a programmer, another programmer to check his work and a manager to blow the whistle if the project gets off track or hire someone else if the programmer gets fed up and leaves.
With Business software figuring out what the client really means/wants/needs is the hardest piece. Typically it changes 3 or 4 times in the middle of any project. Technically the project is trivial but you have to be prepared to do it 2 or 3 times different ways or at least make major changes mid-stream. It always is easy, simple up front but if you don't put bloat in your bid or have a solid no changes provision your going to be eating the difference
In the sales industry they refer to this as being column fodder. You are merely there to bid so they can put your bid in a spreadsheet and show why they shouldn't choose you. A lot of times if you don't have contacts on the inside of the target organization then you will be doomed from the start, merely used to show that they made an "informed decision" by investigating alternatives. Sales are deteremined by not just price, but perceived value and they will go with the company they know. Get inside contacts that have influence over the decision to make the sale.
It's not at all uncommon for contractors to provide clients with unrealistic estimates for schedule and cost, either because they're inexperienced at estimating software development project schedules, or, worse, because they know they can provide an unrealistically low bid to win the contract and make up the difference (and some!) with time and material charges when the project inevitably takes longer to deliver than they estimated. Either way, the client is going to avoid options they percieve as risky.
Unfortunately, the poster has a few things working against him in competing for this contract. There are many honest but inexperienced software professionals working today. Also, there are a lot of real creeps out there selling professional services by bidding low and then bleeding the clients dry once they've commited to a project.
The client's gut reaction to the pricing is surely based on its prior experience with software development contractors that have successfully delivered for them (or on what their own team could have done before they laid them all off). It's quite possible that the poster is much more capable than those contractors. Still, convincing the client that his bid is not naively optimistic or an intentional low-ball will be very tough.
Now, on to the next story...
This might be a little O.T., but, I think it's related to some of the other threads on /. about all the big software packages that companies buy, like Siebel, or SAP, or whatever the flavor of the month is. And, it's the same mentality that spends 15K when 5K will do.
/. already knows, this is a load of crap.
Yes, there's this huge delusion out their, foisted on the business world by I.T. companies, that you have to spend $$$ to get 'real' technology. Everyone on
I now believe there is momentum forming in general business about this, too. You will soon see front page articles about it in business week, WSJ, etc. Business guys just aren't that stupid. They just didn't understand technology, and they bought all the lines the IT industry could throw at them for fear of looking stupid.
Now, however, I think most sane, strong, business leaders are saying the emporer has no clothes. You will see it more and more.
Guys like Larry Ellison and Tom Siebel are going to have many bad years ahead. Of course, they've already made their millions (or in Larry's case, billions). But, the gravy train is over.
Read "The Mythical Man-Month" by Frederick P. Brooks, Jr. All will become clear.
While it is true that one person on a project can be cheaper, if it is not a one-man job, things have to scale up dramatically. Everyone involved has to spend time communicating, which one person does not have to deal with working alone. Also there is the perception that the more people work on a project, the more attention will be paid to scheduling, productivity, planning time, etcetera, meaning better results on the scheduling and budget ends.
Why are you surprised that jumping in and lowballing a quote doesn't guarantee winning the contract? Of course, maybe somebody else had some juice with the company, and you were politically shut out...
and I've rarely chosen the lowest price bid; money is never the sole criterion for awarding a project.
Here's an example : we were evaluating an e-commerce solution. I worked with the internal developers to get a feel for what the technical impact of the solution would be, what the interfaces back to the main system would involve, the sort of performance and scaling issues we would expect etc. All these issues were made clear to the companies bidding for the work.
I asked the vendors to address these issues in their proposals, and outline their ideas for how to deal with them, together with rough time estimates.
Anyone who came back with nothing more than a price (and yes, that happened with a couple of vendors) got put aside : if you're bidding for a job without understanding it, we're both going to end up in trouble. Any vendor who didn't demonstrate at least a basic understanding of the requirements in their proposal and did not submit meaningful estimates was asked to go back and think about it again.
In the end, we chose a solution that fell in the upper quartile of the price range; we spent a lot of time talking to the vendor, and everyone knew what the other was expecting.
What does this boil down to ? Yes, there are some PHB types who behave irrationally in the vendor selection process. There are also those who know from experience that a partnership has to be win-win. You have to make enough money on the job to be able to do it well, and help us out when the unexpected happens without having to renegotiate. We need to get a quality deliverable from you, and give you enough information up front to make a reasonable guess at how much time it's gonna take you. If you don't demonstrate you fully understand the requirement, and show how come you can do it for the price you quote, I'm going to assume you haven't thought it through, and are going to run into trouble delivering the job.
It's all very well in practice, but it will never work in theory.
But look at accountability in another light.
If a company is charging top dollar for their product, _regardless_ of whether or not it's the best product on the market, they are percieved as having the financial backing to settle in litigation should their product fail to meet the requirements of the contract. Little companies just don't have enough cash to go after in the case where their product causes your company to shut down for a few days due to a bug.
I think part of this is the difference between the way geeks view software vs. clients. When a geek gets software with source, he has the finished product, and if it works OK and is reasonably well written, he is satisfied. The non-geek is going to need somebody around who can take care of problems and enhancements, ideally the author.
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.
Post may contain irony: discontinue use if experiencing mood swings, nausea or elevated blood pressure.
Well, let's take a look at the economics of this:
Okay, so you go and buy a Lexus. It costs ~$45,000. You could've bought a Toyota with all of the options for ~$35,000, but you didn't. Why? Two possible reasons are obvious;
1) Cachet: Owning a Lexus vs. a Toyota gives the owner cachet. It says "I can afford this." This essentially boils down to brand recognition.
2) There are a lot of perks with owning a Lexus instead of a Toyota. Better valet handling. Better dealership experience. Better service.
Despite the fact that the two cars are almost completely identical.
The same thing applies with software and big companies. One of the reasons that Linux has taken so long to get fully accepted by the corporate community was that it is free. It also has almost no support.
There are other things associated with this phenomenon that are purely political. Every department has a budget. Next quarter's budget is based on what you used this quarter. If you have $150,000 left at the end of the quarter, you didn't need it this quarter, what do you need it for next quarter? If you don't use it, you lose it. To get it back, you have to put together a use case statement to justify the increase in budget for next quarter. Big hassle. It's easier to spend it all this quarter.
Another thing: Department Managers are also looking out for their future. Most managers are referenced by how much money they manage, and the size of the team they command. For example: Joe worked for X Company where he managed a IT department with a $5,000,000 quarterly budget. This is especially true when the manager is a climber, looking to work for the next big company with more responsibility. Money = Responsibility. It's a lot harder to make the case that the reason you had a smaller team and a smaller budget is because you can do the same job w/less money, not becausse you can't be trusted w/ a large team and a large amount of money.
The Dopester
"Yes, I'm a Karma Whore, but I'm doing it to pay my way through school."
> cost is seen as directly proportional to the quality of a product...
The truth of this statement depends on how you define 'quality', but in the vast majority of real-life situations, it holds true.
Not really.. Sure a BMW that costs twice as much
is better than a Ford, but the BMW does not cost
twice as much to manufacture.
BMW conciously set their prices higher to make their product more "exclusive".
That's what people are paying for: not the better quality, but to be a member of the "BMW owners club".
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. :-)
Light cup, beer drink, thin so chain, neck turtle fat, man I won't say it again
You may not be taking into account the 'whole package' your competitor was offering. They may have allocated ~$5k worth of programming, but probably added $5k for 24/7 customer support availability and $5k to install the app on a server farm with redunant systems and uptime guarantees. They probably also had some sort of legal guarantee of having the project completed by X date (make no mistake, these things cost money!). Or, it may be that your competitor is simply a larger company, with more resources (honestly, more people to answer the phone in case the client calls), and therefore has a larger overhead to support than you. From the perspective of a small business, these things don't make much sense; why pay so much more money for guarantees on X, Y, and Z when it's just cheaper to take the risk? The thing is, for larger companies, it isn't cheaper to take the risk. Riding on any one given product or service a larger company buys there could be hundreds or thousands of billable hours or thousands of dollars of product waiting to go out the door. If a software product or custom app doesn't function right, it could easily cost a company thousands upon thousands of dollars in lost sales, lost productivity, or lost efficiency. Therefore, spending an extra $10,000 on an app that comes with some guarantees can be (and is) viewed as cheap insurance. It means a lot to larger companies to have someone they can call 24/7 if the app borks in the middle of the night. This is a large part of the reason why a lot of companies went with M$ and Sun for corporate IT servers, and why Linux is harder for them to adopt (I know RH and the like offer 24/7 tech support, but there's still a perception among some officers that it's a largely 'unsupported' platform). Think about it, as an IT director for a $80M company, how long do you think you'd get to keep your job if the email server stopped routing mail, and you had to tell the board of directors that you'd submitted a question to some newsgroups, and you hope to hear back soon. Ok, that's an exaggerated picture, but not far from what IT directors consider when choosing software. They simply don't want, in the case that something does go wrong, to have to tell their bosses that they don't have anywhere to turn to in order to rectify the situation. Therefore, they tend to favor larger, (hence, more expensive) well established software companies who have a plan for some sort of permanence, and factor that into their costs.
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If the difference is that great, They probably were afraid that you underestimated your time and would have to come back and ask for more money. This occurs a lot in Government bidding, where the bidder will come back with a price, and a year later say, "Because of X and Y, and the Economy, I'm going to have to charge you more for this project or I will go out of business."
Going back to the well and asking for more not only makes you (the vendor) look bad, it makes the person who awarded the bid look bad, because they then have to crawl back to their boss and admit that they made a mistake.
On the other hand, coming in under budget looks great. If you estimate that a project will cose $15,000 and you only bill them $13,500, then you look good, the person who awarded you the bid looks good, and you will be hired back because you saved them money.
My personal rule-of-thumb is to estimate the amount of time it will take to do a job and multiply by 2.5 This will give you enough leeway to make changes, go to design meetings, and document (!) without feeling the pinch.
What the fuck is this with the 'bloke' and the conspicuously British usage of the phrase 'fuck off'? Are you some sort of a Briton? I didn't think your country had internet yet you hasbeens of yesteryear. Why don't you go massacre some innocent trusting peoples or something you murderers?
As a software/web/database developer working for a small company, I've done tons of random projects ranging from under 1k up to where I personally billed 6 figures. One interesting tidbit I've noticed is that in some places, due to 'company policy', for any project over a certain dollar amount (for instance, with a county gov't agency, it was 5,000), they were required to go to bid. Our bids typically are higher then some, but lower then others, but of course, all this was a mere formality. We were getting the contract because we'd done work for them in the past, done service and support for free over a period of years, and they felt comfortable with our work.
By the same token, we'd also had to work with other development teams that were completely inept. However, the upper management of the client was practically 'in bed' with the other consulting company, so they billed out close to 400,000 even though I did a majority of the work, and the other developers were learning as they went along (or asking me to explain how to do things!).
Having seen both sides of the spectrum on this, a person has to always keep in mind that business politics can take precedence at the end of the day, regardless of dollar figures.
-- If you can't laugh at yourself, someone else will do it for you.
dont mess the corporate up now for us geeks
"Give orange me give eat orange me eat orange give me eat orange give me you." -Nim Chimpsky
... Stop complaining and just start asking for more money. If you really feel confident about the quality of your code, and your peers are asking three times what you are for the same project, then you're underpricing yourself in the market. It's like driving on the highway - driving too slow is just as dangerous (and often more so) than driving too fast. Make more $$$ in the same or less time - I wish I had your problems !
Wine, music and cinema are the three great creations of humanity. -T'Ian Han
Quite some time ago now a company a friend worked for needed a small system writing. It was a mid-sized company, still 10's of $millions turnover.
:)
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.
Rolls Royce > BMW > Ford...
Rolex > Tag Huer > Timex...
etc.
But if your business requirement is simply to be able to tell time, a Rolex is no better than a Timex (or if it is, the difference is too small to justify the cost -- diminishing returns). You're just paying for a fancy package.
Maybe the $15,000 bid had a fancier package than the $5,000 bid...
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.
I agree but don't fully understand why people often default on the expensive==good mentality. One idea is that it is somehow genetically encoded into most people. How differently do people view technology from food or mates? Is the same logic used in choosing software as is used in choosing animals at a market? In other words, if it looks good and is presented well, then there must be less risk involved in choosing it, and less risk can be associated with an increased chance of mating and passing on one's genes. The aspects of human behavior driven by mating are some of the most stubborn and tend to drive people towards otherwise-irrational decisions.
Healthcare article at Kuro5hin
I worked for state gov't and now work on contract for state gov't and the motto isn't lowest bid wins. They use something called 'lowest and best.' That'll save their asses everytime.
You lost business to a big company because you were cheap and not based in India.
Change one of the two and you'll be fine.
Because you don't understand, you're posting anonymously on Slashdot supporting the "loser" instead of explaining how he should win.
Maybe instead of insisting on how right you guys are, you should listen to some of the people here explaining how to win the projects.
You're missing the point of I.C. Nobody is interested in paying you to sit around in unclean clothes jerking off. They like to work with people that come off professionally.
You can't sit on slashdot and complain about how unfair it is and how stupid all the people that control the money are, or you can understand how to succeed. Hopefully the poster is learning, maybe one day you will too.
Alex
You walk into a store, and you need the best pair of work boots available. This is an important pair of boots because you will have to wear them for two straight years and nothing else.
Also, let's assume you know nothing about the quality of different brands, etc.
You see 4 boots each priced as follows: $25, $35, $50, $100. Which pair do you choose?
Most would choose the $100 pair. It is most likely to have the highest quality. You would only choose a different pair if you knew what to look for in a quality pair of boots. I would guess companies don't know what to look for thereby choosing the safest option.
...but until they taste them both, they don't know.
the strange truth of the matter is that quite often even then they are incapable of knowing. it could be a bottle of wine, or a watch, or any one of a number of consumer goods. in fact, expectation of quality, as so many other posters have noted, usually plays as much of a role in its appraisal as inherent quality.
...vividly encapsulates that post-Watergate/pre-punk/coked-up moment when you could trust no one, least of all yourself.
I don't know if this is incidental to Georgia or to the construction industry, though.
Need a Linux consultant in New Orleans?
There is more to it than just cost of software. Here are just a few.
Supportability: Which one requires more people time to maintain? How much training is needed? People cost adds up quickly.
Vendor Support: A large company will spend more on software if they feel they will get better support. If you can't reach someone at 2:00am and your system is down, being cheap is being stupid.
Life span: They will also look at the long term feasibility of the solution. If a cheaper solution can't be easily upgraded, most companies will shy away from it.
Vendor reputation: A cheaper, smaller vendor can face problems simply because they are smaller. A big business doesn't like the idea of giving a small company money if they won't be in business for the long hall.
Existing contracts: If you deal with a new company, the lawyers will become involved. This is added cost. If you are already dealing with a company, it can be much easier to change an existing contract.
Integration: Which solution fits better into an existing infrastructure?
Return business: Large companies sometimes agree to "return the favor" in exchange for a large contract. For example, a software company bidding for a telecom contract, may agree to switch to that telecom in agreement for winning the contract. I don't know how ethical it is, but it happens. When IBM sold it's Advantis network to AT&T, AT&T agreed to outsource some of it's operations to IBM's Global Services division.
Techie preference: This often is important to the bosses, but a smart business will ask the people using the solution which one they prefer. IMHO, nothing kills a project quicker than having the users say "we hate this."
1: In the corporate world, money == status == power == penis size == etc. To get the big budget that brings status et al, you have to have big, expensive projects.n k) syndrome.
1a: Many organizations, esp. government, budget on the basis of current expenditure with no carryover; i.e., if you don't spend all of your budget this year, you lose what's left and it'll be cut next year.
2: Fortune 1K MIS execs are almost invariably gutless wonders who gladly spend money as necessary to avoid even the slightest perceived risk (note the emphasis) - the nobody-was-ever-fired-for-buying-(fill-in-the-bla
3: Politics and ego. It's amazing to witness the lengths to which some people will go to ram their solution down a company's throat, because it's their solution and, by god, they know what's best! (Which, of course, is almost never the case.)
All of the above trump efficiency, even when a company is on the brink of chapter 11. In my humble, cynical opinion, one of the most effective ways to climb the corporate ladder is to spend ever-growing amounts of money while making sure the board knows you really care about controlling costs.
4: The all-too-common price == quality fallacy. I paid $260 for this miracle weight-loss formula, so it has to work, right?
5: Unstated business-driven factors. In the above-quoted situation, there may have been a hard deadline that made it prudent to drop the extra $10K on a firm they've worked with before, to gain confidence of getting the project in on time. (It'd be rather silly to issue a RFP without mentioning such a thing, but you know what I mean.)
DDB (currently wrestling with a new time-reporting system that makes its lame predecessor look like a work of art.)
Life is like surrealism: if you have to have it explained to you, you can't afford it.
I think currently, customers understand pricing better. They know that cheap doesn't always mean low quality instead cheap is an opportunity for them.
My point is that we need to know who we are and who our customers are. Then we pass the information to our customers to distinguish us from other compititors. If they beleive that we are about the same as the more expensive ones, they will choose us.
I think at least this concept work for SME customers. Goverment and large Enterprises may be much more complicated.
What if you had the opportunity to taste the coffee before buying a cup? Or to speak to customers of the coffeeshop who have tried either or both?
I currently work for a company that spent an enormous amount of money on a software package that promised us certain features. The manager of my group insisted that we evaluate it before signing the contract. When we did, we determined that it was not going to suit our needs, but the executive management team had already closed the deal -- they signed before we even had the chance to speak to anyone!
It is not that they are picking software packages [solely] based on the concept that more expensive equals higher quality. Rather, the problem is that senior managers are picking the products. Period. They are ignoring their technical people or even bypassing them altogether, putting their confidence in salesmen whose understanding of the products extends not much further than the glossy spec sheets.
The result was predictable. It turns out that we were in fact their very first Solaris-based customer, a fact that they neglected to mention before the ink hit paper. After several months of attempting to integrate it into out site, we abandoned it. I suspect that we also paid the bill in full.
What makes matters worse is that we are a small start-up living off of venture capital and still far from being profitable. What makes a company who has access to technical resources on staff make such stupidly expensive decisions?
Sadly, that is a rhetorical question...
"He who spends the most money is the most important."
We must be alert to the danger that public policy could become captive to a scientific-technological elite. - Eisenhower
If a company pays a development team $50,000 to develop something for them, the large amount of money makes someone very responsible if things fail or have problems. Someone can come down on the developer hard when there's a bunch of money at stake. However if a company just implements some free solution, or a really low dollar solution, it just doesnt have the same effect to kick down the meeting room door and say "DAMMIT, WE PAID $5.29 FOR THIS SOFTWARE, WHY ISNT IT WORKING RIGHT AND ON SCHEDULE?!"
I'm Rick James with mod points biatch!
Make sure you ad 200% to whatever your price is to compete with everyone else.
1. A real programer wants to make at least 80k a year.
If a program takes 6 months from start to finnish that means that a real programer needs $40k for the work. Add in Social Security Taxes, Health Insurence, and a little extra because you never know when you are going to get your next contract figure at least $50,000. That is for one programer. There is also more to writeing a program than just coding. You have to document it for the end user, the support staff, and for any other programers that might come behind you that might need to fix it. Sure you can get paid less but why? If it is just a hobby then fine. But if you are going to make a living at this then you need to make money.
Don't forget documentation. Are you a good writer? Do you know how to write a mannual if not then you will also have to pay a tech writer.
If you notice that most GPL programs have poor documentation. When a GPL program gets popular then you can get an O'Reilly book other wise tough.
The simple answer is if you tell a company that it will cost them $10,000 for you to write a program that will take 6 months they know that you are not going to be around long or you do not know what you are doing.
See my blog http://ilovecookes.blogspot.com/ for light hearted technical information.
(The above is sort of a joke. Sort of. Actually, this book frightened and saddened me, and I passionately hate it. I still recommend it, though.)
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
The last company I worked for produced MRP software. If it was being sold to a smaller company it would run about 1K a user, but when the package was sold to big companies (Motorla, Harris, Informix) it was sold for 5 - 10k a user - for the exact same package. I asked about this a few times and was always told that big guys won't even look at you if the product is too inexpensive as they will think that it's not robust enough for their needs.
LRJ
They become unsure of how well the bidder understands the scope of work
They fear looking bad because they over-estimated the cost. The project in question may include aspects beyond what that particular bid includes, which may have been starved to cover the costs of this element.
In the example of spending an extra $10k-- their expectations (the level of interaction they will play in the ongoing development) might be high enough to warrant the additional expense.
Also, if there are multiple bids, common practice is to throw out low and high bids and work from the remaining. Ultimately, it is foolish to expect price alone to be the determining factor.
People don't understand the software. Thus, they pay more in hopes that they'll get a better product. And this isn't just limited to neophytes. Most people do it all the time. For example, say you go to buy a cellphone. Most people don't read reviews of the different cell-phone models before they buy. So what do they do? Do they buy the cheapest model there? Of course not. They'll usually pony up an extra $30-$40 bucks in hopes the get a "good" one.
A deep unwavering belief is a sure sign you're missing something...
Bah! Mating has nothing to do with it! It's all of those RPGs we've been playing for the last 30 years! Where the more expensive something is, the better it is. You KNOW that if you step into a shop, and that rusted out helmet costs 25,000gp, but the shining gold and platinum helmet next to it costs 125gp, the rusted Helmet is a mystic artifact that is WAAAAY better than the shiny one! So of course, everyone now knows that the more expensive something is the better it is!
Kintanon
Vide Game Slave
Check out JoshJitsu.info for Brazilian Ji
The bidding strategy should not be to charge what you may think is a reasonable price, but to offer a bid price below their willingness-to-pay and perhaps only slightly lower than the next-highest potential bid winner then sell the heck out of your bid. Spend some time and effort to make yourself seem bigger and more reputable than you otherwise may come across if that's what businesses value.
After all, the outcome will be that you make more money for the same work. You're happy. The company pays below their willingness-to-pay. They're happy. Everyone's happy.
And if you lose a couple of bids while you're refining your strategy but snag the third (based on the prices you cited), you've earned just as much money as winning one bid at the low price and done much less work.
In consulting, your business strategy is as important as your product.
-- My choice of computing platform is a symbol of my individuality and belief in personal freedom.
How do you find out about RFPs available to bid on for tech projects like the one described here?
ELance seems to get an extreme ammount of bidding down on projects, are there better places to bid?
Are there local organizations that deal with announcing projects?
Thanks!
$200 per hour consultants -- guys on standards committees driving Excursions whose weblogs are actually _READ_ -- are perceived as writing better code than us $20 per hour pissants.
.4 better in the quarter mile, and costs thousands less. But the Audi is perceived by most car buffs, myself included, as the better car. Why? There's less plastic on the inside. The leather is nicer. The engine is quieter while idling and louder at full boost. The doors shut with a delightful muted crunch, rather than the slam effect of the Subaru. And the controls are much more intuitive...
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.
Hey freaks: now you're ju
Business 101: price your work relative to it's value, not to it's cost.
Do determine value, of course, you need to understand the business use and the environment that generated the RFP. What will the web site be used for? How much money will it save the client? What if you recommended additional features above and beyond the minimum - would that save them more money? What if you proposed to take on the testing role, and proposed a usability test so that the UI was guaranteed (in their eyes) to be simple and effective, thereby reducing training costs? What if you had a unique approach to the UI that sparked their imagination, and they thought of 2 more uses for the same product?
Take a look at the ad & design businesses: they do a lot of custom web development, and they're *never* the lowest bidder, but they're always busy. That's because the principals of those firms understand their clients, and can charge top dollars for that understanding.
Old industry adage...
Spec out a decent project:
You figure it will take 5 people 6 months at an average of $75,000/year each. (3 Exp. Developers, 1 archetect/team lead and 1 tranee/intern/junior developer).
((75k/2) * 5) = $187,500 salary
187,500 + ~10% markup for profit = $206,250.
And that's conservative. This is just based on what the people I know (and I know a few) demand to work full-time. If you throw contractors into the mix the average yearly salary can jump well over 100,000/developer.
If anybody bids lower than that for a contract with me on a 6 month contract then I know they are either full of it or they are using developers that will, sooner or later, quit for a better paying job.
My $0.02 will always be worth more than your â0.02, so
Project done by one person: $5000
Project with larger group/more overhead/more support/whatever that reduces risk of failure by 50%: $10,000
Cost of failure (due to lost opportunity, re-bidding the project, etc): $30,000
Being the middle manager who will keep his job by making the right choice: Priceless
BMW conciously set their prices higher to make their product more "exclusive".
That's what people are paying for: not the better quality, but to be a member of the "BMW owners club".
The college I went to did just this - they raised their tuition, not because they needed too, but because their competitors were pricier, and they did not want to be perceived as a lesser quality institution.
BTW, they found something to do with the extra money.
-josh
I work for InShift Technologies. We produce a web development platform that is incredibly simple to use and serves up dynamic content. We've got TONS and TONS of really top-notch features, and anyone with a good understanding of HTML can pick it up in a couple of hours. Well, it seems we may be charging too little; people just can't believe that you can get something so robust for so little. We've built some pretty killer websites (123inkjets.com / 00inkjets.com for example) with our platform, and saved our clients a considerable amount of cash. In one example, we would have saved Associated Foods many many thousands of dollars, but we were told flat out that our bid was waaaaaay too low; which is unfortunate, because we still had a very high profit margin!
so 5k is around 5 days work at our rates you have to design the site get Signoff develop the site - then re-doing it when the customer says oh but i want it to work like that(usualy in bizare and stupid ways)
you have to cover the cost of moving from your development enbironment to the eval box and then on the the live.
You do have separte dev/eval/live dont you.
Oh and I forget testing/acessability
Paul Everitt (Zope/Digital Creations) spoke in Colorado about 2 years ago at a Linux conference. Zope Corporations was preparing to bid on a large contract for a national news organization, and they ran their proposal past one of the board members who was a VC and familiar with the market and with Zope Corp's abilities. He told them it was all fine but they needed to double their bid price in order to be taken seriously. Paul told him they would be making a nice profit at the bid price they had settled on, and the VC told him that they would never get the contract if they didn't double their bid price, because the client wouldn't take them seriously. They doubled the bid price and still came in under all almost all the other bidders and got the contract.
this is getting old and so are you
blog
From what you said and the time you actually spent on the project, I cannot help thinking that you might oversimplified the client's business requirements.
The clinet probably not just looked at the cost, but would rather they valued more the work put behind. For them, the work with higher quality justifies the money they spent.
When I first started working for my current company, I often looked lightly the work done by my collegues. I was telling myself that if I was assigned to do the work, how much less time that it would take. But over the time, I realize the real business is not as simple as I orginally thought. The requirements are more complicated that the first sight you saw. The dependencies of the project on other parties are more threaded and thus a lot of time has to be put to smooth that out.
But certainly I have seen some crap being done with a lot of groundless money. Most of the time though, the more work you put on a project thus more money demanded, the better qualilty the project gets delieverd.
As a consultant I have tried to build my reputation on quality and professionalism. When a company looks to a consultant to do software development they always have concerns. Will the project be done on time and on budget? Will there be a lot of bugs? Will I receive packaged deliverables for everything I ordered? Will I be able to hand these deliverables to my internal developers six months from now to work on? The goal of a consultant, or any professional, is to sell their time for as much money as possible. In order to be able to sell your time for 3x that of the next guy, you have to offer more to the customer in terms of the whole experience. If you are an honest consultant who wants to make a lot of money off your clients in the long term, always ask yourself "What is best for my client? What will satisfy their needs and allow them to make a bazillion dollars from my work? How can I do this project is such a way that the investment they have made in my time will pay off in folds?" If you can develop a reputation for making your clients a lot of money (or saving them a lot of money) you will be able to charge higher rates. And then of course you can go to the Apple Store and buy yourself a $16,000 Dual processor G4 with dual 23-inch cinema displays.
Stuart Eichert
Business is all about managing risk. Applications ("business process") tend to be or be part of core functions in a business. The more widely an application is used the higher the risk if something goes wrong with it.
I think that many managers look at the 'extra' money they pay as a form of insurance.. if something goes horribly wrong with the product they can whip out the old "We paid a _lot_ of money for this product and we want it fixed _now_" line (I've been on those conference calls).
So the question becomes costs versus risk:
One guy working out of his garage with a $1,000 product. This guy could throw up his hands tomorrow and abondon the whole thing.. or get hit by a bus.
A company with 300 employees (i.e. lots of people to 'escalate' to), a reputation and a responsibilty to its shareholders to not only stay in business but to make a profit (thereby ensuring that it will/should be around for a while) selling a product with the same features for $10,000.
Which looks more attractive to a business person?? Generally the $10,000 product because you can "buy down" the risk with cash upfront.
Charles
Support Project Gutenberg! Distributed Proofreaders
- Phase 1: Expensive custom development
- Phase 2: Marketing of custom development (still expensive but less so)
- Phase 3: High Use/Low price/No customization
- Phase 4: High Competition/Very Low Price as new players enter the market.
I think Web/form-based UI business software, be it for HR/CRM/Acctg/whaterver is in Phase 3 or 4 (we all know how easy it is to slap together an RDBMS with some Perl, J2EE, asp, etc.), but business people, who always see their business or application as unique, believe they have a phase 1 or 2 project.Your price was too low, which meant to the customer that either you weren't paying enough attention to their problem or that you weren't going to give them a novel or complete solution. It's like if you are walking on the street and somebody offers you a Rolex for a hundred dollars. Sure it might be real, odds are its a fake.
Five thousand dollars for any complete solution in any case is still probably too low a bid because almost certainly you aren't accounting for maintenance and phone calls and problems you don't expect. Take whatever your bid is, tripple it and then you should be fine.
Beware the wood elf!!!
1. Spend $100,000 on software
2. ?????
3. Profit!
The point is they probably don't want to see you come back and tell them you need more cash, because some unexpected problem arise and blablabla...
So, they are paying for a solution without any blabla. So, price your blablaless projects accordingly.
Achille Talon
Hop!
I was with a company where they paid big money to a consultant who came in and told us we had to adopt practices that had been abandoned less than a year ago. We could have told them the same stuff for just the cost of our regular salary, but we weren't charging them $100,000 for a month's work.
If you're too cheap, you're going to look to them like a cowboy. Pure and simple.
And if you look to them like a cowboy, they won't hire you. They'll go for someone who's charging more like what they think the job's worth.
You do get what you pay for.
"Information wants to be paid"
--I see the same phenomena with rich folks in general and buying stuff. Like for instance, I have some pretty wealthy friends who are all the time buying crap from like sharper image or jade mountain, etc. I've pointed out to them with a little googling you can find the SAME EXACT stuff like 1/2 price. They still just do what is convenient and buy from the expensive places. I've also seen this thing when I used to do remodeling/contracting. I would give a bid that made me a profit, but wasn't gouging. The rich homeowner would take a high bid from a flashier larger contractor. I think that they think stuff always has to cost more to be any good. Besides that I can't explain it. It might be tied into snobbery a little, who knows...it does seem sort of lame though. There's an old,old expression about this, it's "he's/she's got more money than sense", so it must be a universal human trait. Of course, to be quite fair about it, I'm not rich, maybe that's how folks get rich, they only pay top dollar, only hang out and do business with top dollar places and people.
The corollary to "you get what you pay for" is that if you pay enough (or too much) money, any problems that crop up are the vendor's, not the buyer's. Buy something for a buck at K-Mart, when it breaks you throw it out. Buy something for $1,000 at Macy's, you're gonna go back and get satisfaction when it goes bad.
One day, I was speaking candidly with my boss about the possibilities of using Red Hat for various server tasks. He never took linux seriously, but had been hearing more and more rumors in recent times, that its "getting big".
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.
Skiers and Riders -- http://www.snowjournal.com
It is frequently true that the company that they want to win the bid is choosen before the bidding process begins. This can be based on many reasons, some quite good, others less laudable. Often it's because this is someone that they've worked with before, and who already knows what they want on the project. Frequently the only reason that there is a bidding process is that administrative proceedures require it, and sole-source justification is made unreasonably difficult. (Multiple layers of management can cause this effect.)
... I have noticed that when buying off the shelf products managers tend to prefer to pay more. I think that to some extent they get a feeling of status from deciding to buy a big ticket item, and something inexpensive just can't give them that. Apache recently had a hard time standing up to IIS for just that reason at a place that I won't specify. It won because the staff just went ahead and installed it before IIS was ever ordered, but until after it was up and running, it wasn't believed in by management.
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
I think we've pushed this "anyone can grow up to be president" thing too far.
A few possible factors at work in general:
A) When it's not your money it's easy to spend.
B) Momentum is a powerful force, even if a vendor hs done you wrong it *seems* easier to keep working with them then find a better vendor!! That goes for app servers, consultants, everything.
C) People are afraid to buy outside name brands. That sort of goes with (B) in that after a while even the shoddiest vendor becomes a "name brand".
"There is more worth loving than we have strength to love." - Brian Jay Stanley
cowardly,
-craiger
There are many stories here of how to quote a project based on experience. This gives valuable insight to any potential bidders out there. But, as yet, there has been no submission really discussing why a project manager will discard low bids so easily.
We need to look at from their perspective...
Firstly there is a corporate (company) project which needs to be completed such as a (simple?) web/database project. This will satisfy some strategic business objective (SBO) where the critical business issue (CBI) is to give more and better access to web services within in a certain time period.
The project managers issues, in addition to the company issues, are to look good to his boss, his peers and to make his resume look better for future use. This may be a little cynical but keep it in mind. The strongest part of any sale is motivating the buyer.
1. He needs to succeed within budget and with little to no risk.
2. He wants to spend money (resume: Lead $100,000 web project etc. etc.)
Now, assuming he is honest and wants to get the best value for money for his company, he will buy the solution which looks like it is more likely to get his company web site up and running in the shortest time with little risk to the company.
That's about it.
I'm awfully unimpressed when someone up here says says "I administer a 2 million dollar clustered E10K rig" or something like that. My first thought is that, if you knew what the hell you were doing, why couldn't you have done things more cheaply? Vague promises of "reliability" or "quality" don't really register with me -- people paying 3x for a hard drive (can't you just get three cheaper hard drives and use RAID?) or for a high-end system from Sun or IBM (what, you're not willing to do a little work yourself to save a ton of money), or for Oracle (most Oracle folks seem to just buy Oracle because it's "good" or because they've heard things about it, not because they've used all the alternatives and can make an informed purchasing decision).
The guy that impresses me is the guy that says "I replaced our old $20K Sun setup with a $5K pair of generic, load-balanced servers, either of which can be swapped out at any time."
And the same goes for software. You're using a $2k, a $20k, a $100k software package? What is it that you can't accomplish with a less expensive package? You're using PVCVS instead of CVS? Why?
May we never see th
You need to stop charging how much the project costs to create and start charging how much the project is worth to the company.
Increase ALL your fees by 400% to 500% at least. If your client seems to have a big budget then increase your prices by up to 1000%. This will make your client think very highly of you!
If your $30000 project only takes 15 hours to complete, NEVER tell this to the client! A good project should take a long time, so spend the extra time playing Quake and add it to the bill.
The world of business is a strange but exciting place. Good luck!
If you build a piece of software that is going to be used by many of a company's workers they will need support.
While programming out of your basement you might be able to develop something better than all the competetion. Maybe your insight into the problem is better than anyone else; and your coding techniques are superior. In short your software is the best in the world in it's class. But no matter what you price it you won't sell a single copy.
I've seen that scenario before with a business aquaintance. He added a zero to the price he was charging. From about $3,000 to $30,000 per site.
At this much higher price point he was able to rent an office, and hire a staff to support his product and that's what his customers needed. After the price increase his sales went from less than $10,000 in the first two years to over $300,000 int the third, and growing.
It should also be noted that in many companies IT Depts. (like mine) you need to keep spending a required amount each year to get that amount the next year. Perhaps the company in question had 10,000 left over in this years budget and needed to have it spent before they loose it for next year.
Don't ask me to explain the management rational behind this, all i know is that it's a commonplace issue in my company (and not just in IT) and in companies many friends work in.
Which do you think sounds better in an annual review (if the software project succeeded) or resume (if it failed):
"Evaluated, selected, and managed contractor for a $5,000 software project..."
"Evaluated, selected, and managed contractor for a $15,000 software project..."
"Evaluated, selected, and managed contractor for a $75,000 software project..."
In a big company, thinking big is one of the keys to advancement...
"How to Do Nothing," kids activities, back in print!
It looks like you chicken and egging.
Would the manager feel guilty and therefore worse for trying to get people to like him?
Or maybe an employee also took a social psych class and realised what the manager was doing, had a word with there colligues and there all laughing behind his back(ignorance is bliss).
Jesus, I think my heads fucked up again!
I've seen the exact same thing. I can sell twice as many of my product at $600 as I can at $300, because of the "you get what you pay for" perception, AND because the higher price point also puts me into a market that is more willing to spend money when it's needed.
The further advantage of a higher price and higher market bracket, is that it gets you OUT of the "too cheap to pay for what they need" and "chronic deadbeat" market. So you make more money AND have much less hassle when you go to collect your fee!
Plus the higher market bracket gets you out of the nickel-and-dime dickering and dithering that's so common when people are trying to get a job done on the cheap.
When someone does get charged more than the work I really did, I'll usually add on some benefit to them -- such as my completely computer-illiterate client who calls me to install software from one-click CDs. I'm not going to drive 100 miles r/t without charging a service call, but when I had that little to do, he really didn't get much value for my minimum fee. So after I install his program or whatever trivial thing he called me for, I do all the maintenance tasks that no one's done since I was there the last time. Then we both feel like he got his money's worth.
~REZ~ #43301. Who'd fake being me anyway?
Perhaps your price really is too low. What if you make mistakes? Can you afford to correct them for the same $5000.
And what about the 20 hours discussing all kinds of stuff that you don't find important but the customer does?
And what if the customer got the requirements wrong somehow and they want you to change the software while you're building it? If you charge $15000, the client can guess that there are some margins for you and that you will not complain as quickly as when you charged a rock-bottom $5000.
So a smart customer can figure that they can ask more when they paid more.
Just raise your price next time. It seems to me that raising the price and getting the job works on two levels:
1: You get the job.
2: You make more than you were going to with your original price.
If you need $1000 to make a product and quote $2000, and don't get the job, you have made $0.
But if you quote $5000, and get the job, you have made $4000.
I'll take the $4000 over the $0 any day.
my sig was dubm so i took it out.
My finance professor gave us a great quote (I have no idea who said it first):
"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.
Ummm, Jon, aren't you supposed to be dead...? - Otter(3800)
Clearly mating has nothing to do with it.
You just stick to those video games, and keep avoiding 'girls' and everything will be okay.
This is exactly it. End of story. Everyone can go home now.
I used to work for a credit union and we paid an insane amount of money for the specialized program that ran our business. What we got for that money was 24/7 x 365 tech support (and yes, I did call them once at 11:30 pm on Christmas day without fail. For anything related to their product. Even when my supervisor screwed up and did a "rm -R *" at the root directory and whiped the system clean.
In retrospect, we got a great deal.
When your business relies on one specialized piece of software, you pay what they are asking.
Boobies never hurt anyone. - Sherry Glaser.
Clearly 'he' isn't making them clear to his manager or sideways or the government etc....
.....followed by
'Were getting shit because were not evaluating the bids properly', GOOD management.
'Fuckit i ain't got time, ummmm that one' BAD management.
'Were getting shit because were not evaluating the bids properly', Ahh that's better again.
The usuall problem is that whoever you shout 'Were getting shit because were not evaluating the bids properly' at tens to be a bad jobsworth manager anyhows so you don't get that far.
Try
'Were getting shit because were not evaluating the bids properly and xyz isn't taking notice'
he he I bet XYZ takes notice then (contractors are the best people to do this!)
The general comments about being in the expected budget range are right on the money. As one who spent over a decade in software and network consulting, we worked hard to be sure that we were priced a high as we could be and still stay under the decision-maker's signing authority.
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!
THPPPT! Jokes on you, I'm married. So Nyah!
Kintanon
The following text is being inserted in order to kill time so that slashdot won't discriminate against me for typing too fast.
The previous text was insreted in order to kill time so that slash, eh nevermind that wasn't as funny as I thought it would be.
Check out JoshJitsu.info for Brazilian Ji
I've been running into this since I started working for IBM in 1973, let me see if I can make it clear, we have many ways of approaching a problem, we have, the easy straightforward way, we have the bass-ackwards way, and we have the bloated, convoluted, redundant way. Now the Gummermint usually chooses the latter as it makes it easier to get more money next year if you overspend this year! Very large companies have a different motive entirely, you see in BIG companies every manager is responsible for looking as important as possible so as to protect and perhaps even expand their little empire, and if you can convince the under vice presedent of brass plated widget manufacturing that your little project is really a big project then you have both increased your status and his status at the same time! So in the context of BIG companies the concept of simple and easy just don't make sense.
I killed da wabbit -Elmer Fudd
Just make your bid higher. If companies are judging on price alone with the attitude that higher = better, then it is win win for you.
ever notice how there are very few middle range priced used cars. Either the price is way high (almost new) or its real low (POS). - There is an economic term for this, I just can't remember the name.
This is also known as the Emporor's New Clothes Syndrome after the children's tale of that name.Cognitive dissonance sounds better, but it all comes down to believing that you get what you pay for!!!!
Apparently you did not include testing, it simply does not fit into $5k, it seems like you simply do not know that ALL software has to be tested. Also, I do not thing that you have an idea about user input validation and maintenance operations as a components of SW product.
I suppose that people who were looking for help were morons too: they while saving on upfront costs they were setting themselves to lose greatly on support and user dissatisfaction.
The only economic way to handle small project is either by establishing long term relationships with with developer to handle multiple projects.
Because my last company had the same problem--selling a completed product. We sold software for radiation oncology, and it was clear that the hospitals believed that a more expensive product was better. Additionally, many of our customers complained that the simulation code was too fast! We had to insert spin-wait code so that they would stop complaining (after verifying and re-verifying the simulation code).
I have no problem sticking a $10,000 price tag on my software. Hey I'd have to sell 10 copies per developer just to pay the developers. That and it's better to have a few customers that pay a bunch of money than a million who only pay a small amount. It's easier to target your sales people on a small target, just say "okay here are the 200 companies we want to sell this too. Try to make 10% of them buy it and we're gold." And if you did your work right you get like 30% of them buying it your first sales round.
:)
That beats selling a million games in a very competive market when you have to divide up those tens of millions of dollars accross many employes and huge facilities. Selling to and supporting that many customers is just mind boggling.
So take the easy route. Slap $10k-100k price tag on your software, claim it is "enterprise" software and sell a few dozen copies of it a year. It helps if you try to have like 5 employees or less
“Common sense is not so common.” — Voltaire
The bottom line is that you can only *guess* why the client rejected your bid.
:-)
Perhaps spend money to somehow get their honest answer after the bidding is done. If an outright payment to them does not seem appropriate, then invite them to high-quality lunch somewhere to try to shmooze the answer out of them.
We can sit around and guess until the cows come home. However, perhaps you should find a way directly to the source of the rejection if it *keeps* following the pattern you describe.
By the way, having a gorgeous babe on your team will greatly improve your chances of winning a bid. Hire one if you need to during any people-to-people presentations. Maybe offer to fix the babe's PC in exchange for wiggling T&A during a meeting. Or hire a hooker to show up. They don't have to do anything besides be pretty.
(Just don't pick the lowest-bidder hooker
Table-ized A.I.
"Why are people willing to pay $10 for a burger at some fancy restaurant when you can get one from a roach coach for $1.25?"
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
Always keep an eye on your junior employees when you turn down one of their ideas or they'll backstab you later.
Actually, it sounds like that CIO was a prick with no real vision for the future. Sounds like he was real fun to work with.
"Tax preparation software eliminates errors your[SIC] may make...." From IRS home page.
I agree but don't fully understand why people often default on the expensive==good mentality. One idea is that it is somehow genetically encoded into most people.
The problem is that it's rarely applied consistently sometimes conpletly illogically.
advertising and college tuitions are other places where this sort of pricing happens. I'm not entirely sure of the motivation there, but I really do wonder what goes through people's minds when they look at a group of contract proposals.
-- it's ridiculous how many people misspell ridiculous... (damn, damn, damn...)
I sincerely doubt that anyone would bother with the kick-backs and potential embarassment on such a small contract.
Taking them out for lunch? Maybe. But slipping a couple of bills would be insulting and not worth getting fired/exposed over.
Look at from a different perspective. Apple users are quite content to pay what some would call extremely high prices for what could be seen as a somewhat anemic system. (I, personally love Macs, but I'll leave that out of this for now.) If you put the Macintosh and a WinTel clone up against each other, it's always a game of catch up on both sides. WinTel boxes can do almost everything a Mac can, and vice-versa. So... why do Mac users pay so much for boxes that won't have support from Apple in a shorter period of time than a cheaper WinTel box? There are a few complicated answers:
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...
-"...bad old ideas look confusingly fresh when they are packaged as technology" - Jaron Lanier (Digital Maoism on Edge.o
I don't remember the exact quote, but I've always liked it!
It goes something like:...We're sitting on 50,000,000 gallons of fuel, and a machine that has 250,000 moving parts, and it was built by the lowest bidder!
If you started applying that to the rest of our world, it really makes you feel safe driving across that bridge on your way to and from work, eh?
To some extent, it is logical why higher contract bids are preferred. This is generally taken as an indication that the contractor is going to be able to offer a certain level of service that a low-bidder may not be able to offer. I liked the example of the $1 coffee -vs- the $3 coffee.
Unfortunately, software development organizations also undertake similiar endeavors. Rather than leverage existing technologies, a development organization is generally content over-developing (and thus over-spending) to meet its goals. For some reason, the more LOC's written the greater the "quality" of the product.
Eric Sarjeant
eric[@]sarjeant.com
Thus one can right off the cost. Eliminating taxes is corporate priority one! Open source stuff doesn't reduce the tax bill....Do you think Congress will pass a tax break for using open source free software....?
Kickbacks are another beautiful thing in the corprate world...Worked for Microsoft for years...still does.
"I pad your wallet you grease mine...nudge, nudge say no more..."
isn't he the one with the robot dog?
First off, all the "big impact" or "big cost" decisions are left upto management. Management gets thier technical breifings fom the technitions (which in most cases can hardly be called that). I really belvie it is a lack of technical skill in corproate America which lends itself to this mindless purchasing of fat, slow poorly desinged software, where you can get secuirty updates through a web broswer (dosen't have to make them think about it).
Besides a plethora of reasons (e.g., they weren't being up-front with you, they worked with the other vendor before, you lacked "referenceable" experience) you leave out detail that might help suggest the cause.
From your description you whipped up a quick-and-dirty prototype - if you were to ask anyone who has been involved in full implementations, they'll tell you that the devil is in the details. In other words, wiser and more experienced heads may have noticed that you were on track to getting yourself in a heap of trouble. I've managed developers for years and have first hand experience with the fact that only a fraction of any development effort is the actual development. You have to consider the quality assurance (testing), along with the associated bug-fixing, the written specifications (i.e., design documents), the end-user documentation, the install mechanism, project maintenance staffing, technical support, etc. Software is costly for a reason.
Inexperience in estimation has flattened more startups and consultants than I can count.
As a consultant working for a software/ hardware consulting firm I handle this kind of question a lot. The problem is it usually has nothing to do with price.
As a firm we regularly advise against hiring individuals or small firms for software projects. Why? They tend to disappear. With a larger firm along with a higher price you usually get: more support and stability. We had a case not to long ago where we advised a client to take a higher bid on a web project than the lowest bidder- and they chose otherwise. They chose a lone developer in North Carolina to develop the system, he got a job offer that was "really good" but promised to keep working. Three months later nothing new had happened and he tells us he is sorry but he is busy with "work"! (To which the client responded "Well what the hell do you consider our project and payments!). Two weeks later we get a single burned CD with some source code and a note saying he had to move, so sorry, thanks for the opportunity. We did get some money back but now we do not know where he is even located! Now we are scrambling to find a group that can finish the project on time and with out too much of a higher cost- more than likely we will have to start over.
Are all individual developers/ programmers like this? No, not at all but the process of finding this out is often difficult and painful. So... most companies go with larger firms that have more stability and offerings. With that comes overhead for the bidder and thus a higher cost. So, often the higher cost bid is chosen not because the other bid is too low but because there is no stability. Also with bigger companies there are multiple developers, better planning (usually, but trust me not always) and more experience. One of the other benefits of the larger deployment/ programming companies is that they usually have lots of references that can be reviewed and checked out in detail. Often with smaller firms or individuals many of the projects they have completed were with another company and they really don't count. When you work for someone else there is a support structure (accounting/ finance, more developers, better equipment & testing) that you do not have on your own.
This is not to say that we have not had good experiences with individual developers (or bad ones with larger programming groups) but on the whole our client feels better when they have a company with assets to make grievances with and not some guy with an computer, car and PlayStation as his primary assets that we sue for.
Just my 2 cents.
Huh?
15-20% are born with the silver spoon in their mouth. The other 80%+ get rich by being complete nickel-dicks all their lives. A little luck, a hell of a lot of hard work, and never under-charging usually go into it, too.
When I lived in Kansas City, the guy who owned the RanchMart shopping center complex was worth about 20 Million. When it snowed, the fucker was out there shoveling the walks himself because he was too cheap to pay anyone else.
"You get what you pay for" is usually tempered with "You earn what you save". Unfortunately, the 'annual budget' phenomenon turned the second part upside-down. I worked for a school district for awhile, and we had to work to overspend our budget so that we'd get more next year. It's horribly stupid, but true.
You've got to research the companies you sell to. Find out their budget. Decide how much of it you think you can get from them. If 10% less than that is profitable, quote 5% less. The only time your real cost should be a factor is when it's more than what you can probably get.
All pass beyond reach of medicine. None pass beyond the reach of love.
You may be familiar with the old adage "Nobody got fired for buying IBM."
Well it's not because IBM was necessarily better -- but because IBM *usually* took care of their customers, and if the sh*t hit the fan, the person who decided to purchase IBM could point the finger, and his bosses would understand.
If you buy cheaper/freeware/unknown software, you're taking a risk. That is the most important thing -- if you buy from a commercial vendor with good references, who is well known, it's the safest if things go bad. It may not be the *best* choice, but risk averse people will go for the *safe* choice.
Believe me, I know -- I sell commercial software for a living.
Oh -- and one thing that's also important to remember -- the PRICE of the software isn't usually justified to "how much more does this cost than something free" but rather "how much money will this software save me, for example how much would it cost me to build and maintain this stuff myself." In the same way a company will spend $5 million on consulting to address a $15 million corporate inefficiency -- it sounds like a win-win to the two people discussing it on a golf course, because it saves one guy $10 million and makes another guy $5 million. It may not ever *get* to that, but everyone looks good to their boss.
Several of your items sound reasonable, but are actually foolish.
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 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. 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!
Haven't read "Mythical:Man-month" have you?1 ,4096, 0201835959,00.html?type=PRE
0 7/ qid%3D1030473929/sr%3D11-1/ref%3Dsr%5F11%5F1/104-6 018526-7131943#product-details
http://www.aw.com/catalog/academic/product/
Having more people doesn't insure success.
A LOT of projects in the past and present have had plenty of people and they've gone over budget & over time. You might want to read a book called "Computer Snafus"
http://www.amazon.com/exec/obidos/ASIN/09663993
The answer is plain and simple.
Look at the tax angle. The more you
spend, the more you can deduct.
Why would a business pay a penny more in
taxes than necessary?
"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?"
So How does one explain the success of Walmart then?
Ever heard of an EULA? How about Microsoft. How many people sue M$ for buggy software you stupid twit?
Of the manager.
In my last job the first thing I did was roll out BB, mainly as a proof of concept and to have some monitoring up.
The new manager who came in didn't like it. "You don't know what it is doing" (Well, I did know what it was doing, I had the source and I had used it in dozen of contracts and other jobs before). So he wanted to go with BMC, for a whopping $250K despite the fact that an NT implementation two years ago had failed miserably.
I got the BB guys to write me a quote, the first one I got was for $10K with the footnote that they felt bad about the amount because they only had to go to our Montreal office in order to install it, I wrote back telling him that he should at least 10 fold the price, otherwise it would be ignored, they refused, I passed the quote up to the higher ups and it was promptly rejected.
When I asked why the answer was: That stuff is too cheap it can never do what BMC can do.
To the best of my knowledge after they canned the Manager the project was dead as well, the guy who came after me had no clue about BB and the system is now dormantly still sending out warnings (if it is still working).
Sad but true, those guys could have made a killing on their product and probably get paid enough to retire.
2 programmers will probably always do a better job of things then 5 programmers on a job that size.
thank God the internet isn't a human right.
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.
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Of course I have to ask Lost Canadian Abroad: are you sure it wasn't CAN$15,000 vs. US$5,000? If so then the spread ain't so wide :)
RTFM; please, I beg you.
If a business did not spend too much money on EVERYTHING, they might actually have some money left over to, say, pay their employees more. This would be a very BAD situation.
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.
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.
Many software dev jobs are moving to India, because HP and other big businesses are sick of paying Silicon Valley wages when they can hire Indians to do the same work for $1/day. Who cares if quality suffers, as customers don't seem to care. Multi-National, Conglomerate Get-Rich-Quick Formula: "Just setup in Kerplekiztan or some 3rd world country, work the locals cheap, and you'll make bank."
The biggest trick the devil pulled was letting lawyers become politicians so they can write the laws.
Its becaue management of any company is a bunch of Penis Jockeys that think Bigger, and more is better....Usually till they take it in the Ass, then they realize something medium fits much better...but smaller doesn't quite give them all the best pleasure for their dollar...
Power Corrupts,Absolute Power Corrupts Absolutely, leaving one person(group)in charge is absolutely corrupt.
Hopefully, whining will get me my precious lost karma point back. Hey wait a minute, what do you mean this is offtopic too? Wait a minute, I--
As copyright owner of this comment, I authorize everyone to defeat any technological measure which limits access to it.
If you bid higher, it shows you'll do better work. You guys ever had a client who doesn't understand this, and wants four months of dev for $1,000? What a joke.
we are all one consciousness experiencing itself subjectively - bill hicks
This isn't reserved to only software projects. Construction is also driven by the bidding process. They work for months putting together bids, and spending lots of money doing so. Soil samples, calling places to rent equipment, etc. Lots of time spent setting up bids.
But, construction is such a cut throat industry that quite often some guy creates a construction company and he starts to go through hard times and can't make ends meet. The bidding process is the determining factor on whether you can make payroll for this month. In these situation you will see companies offering really low bigs just to have work. This happens all to frequently. People bid for jobs that are below cost just to have work because it might be another 6 months before they can bid on another project. Better to have the money flowing in than filing for chapter 11.
Sometimes smaller companies like this will be subcontracted by a larger firm to do a part of a job. The contractor who is actually bidding will reject or drop smaller firms bids if they think it's too low for fear that the subcontractor might be having trouble with make ends meet. So sometimes it's not the client that rejects the bid directly.
Companys in desparation like this can be very harmful to employers because it means that half way through your project if this company hasn't secured some other work or cash to cover his loss. He folds up shop with half the work done! Now who's going to fix this? It's really bad if you subcontracted someone who folds, and have to explain to the client that your sub went bankrupted. You the contractor are liable, and will be sued if you can't fix it.
Clients know this fully, and to cover themselves they do look down on companies who have low bids because it's a good sign that that contractor could be underbidding his cost. Your margin is your own business, and the client never sees that. Thank god right! Normally, your lucky in construction if you get a 2% margin, but then again they're costs are in the millions from most jobs.
Moral of the story. Be happy we can screw each other like this that's what makes business, business.
It's the same reason the pointy haired fellows spend thousands on sorry software as hire green college grads over 15 year veterans: it's the Dilbert principle, of course!
There's no such thing as a "20 hour project".
Even if you think there is only 20 hours of coding to be done on the project, there is:
- Proposal preparation
- Requirements analysis
- System Specification
- Statement of Work
- Detailed Design
- the coding
- End-User Documentation
- Training
- Warranty and Maintenance
- ongoing project management overhead
Even if you think it's a simple project, the customer may not be sure of what he wants, or may not have communicated the requirements properly. You really do need to go through all this to ensure that the final system delivered actually meets the customer's needs. By the time all of the above is done PROFESSIONALLY, the 20 hours has ballooned to over 100 hours.Don't be afraid to bid real rates, either. If you're worth US$80-100/hour, bid it! (The company I work for bids MUCH higher. But that's chip design, not web design.) If you're independent and have low overhead, then you have a lot of negotiating room if the customer otherwise likes your approach.
I'm raising my rates and asking wage immediately!
One intriguing thing, which I dealt with when I worked at a US Government post years ago, was low-bidders who knowingly bid too low.
Essentially, they put in a bid which will get them the job. They start the job and, about 1/3rd of the way through, come to us and say "You have to pay us more or we'll go bankrupt." At this point, you have two choices: Tell them to get stuffed or pay them more.
If you tell them to get stuffed and they do go bankrupt, you are pretty bad off because now you have to start the bid process all over again for either 2/3rds of the work which was uncompleted (and you have to have someone come in and figure out EXACTLY what has to be completed, which will also take time) or for the whole project again plus the cost of removing the 1/3rd that they did accomplish.
If you decide to pay them more, they can pretty much charge whatever they want and you have to go through the hassle of getting this approved. Depending on the business which is doing the work (Minority Owned, etc.) this can be easy or difficult.
If a client has a particular software requirement, and you are the low bidder ( and the winner was 300% over your bid!), then you didn't properly understand their reqirements, or the winning bidder did not, or the client did not. These are your 3 options. No client will admit that they misunderstood their own project ( even though they very well might) and no client has a bias that they are less complex than the next guy.
Therefore, clients have a built in bias against the lowest bid. Usually, one chooses the lowest reasonable bid - and certain things, like a lot of verbiage, can convince a client that your bid, though low, is reasonable. Especially when it is a software project, a client needs to feel a high degree of confidence that the work is bid, and performed, by someone who really and thoroughly UNDERSTANDS. So overbidding beats underbidding. No client would possibly admit that offf the shelf software could solve a problem. And code re-use? If sounds too much like used cars!
The basic problem is a lack of understanding by the client of the software industry and of the coder of management decisionmaking.
It is definitely true that adding people late in the project cycle is extremely problematic. Which lead Brooks to his famous observation that Adding more people to a late project makes it even later.
However more of the book is about the issues that come from keeping multiple bodies coordinated than is about adding people to a late project. And the discovery that larger teams give seriously diminishing returns is one that a lot of subsequent observation has supported.
companies are willing to spend more, because they like getting a "Total Package" from one vendor (Like Microsoft) instead of having to deal with a dozen vendors whose products might not "Integrate" as well as the single vendor.
Ah but the simple matter of fact is that the pointy haired bosses that run those companies still love Microsoft, not matter how many times Microsoft has bitchslapped them with license fees and upgrade costs. They think that Linux and MySQL is for Hippies.
I am partly responsible for purchases of some pieces of software by a couple large companies. When we choose an app it's not high prices that we look for. We look for the best app that will do what we need it to do. The process of finding a cheap app that will do what we want can sometimes take quite some time. If it's just taking too long we will sometimes give in and just buy a more expensive app. I guess part of the problem is that companies that charge less dont have the budget to get their name out there as much. Also, often the cheaper apps simply dont do that one key thing that we need.
I have however also worked in software development and found that my employer spoke of this problem. When he talked about it he had a very good solution. Know your customer. If you are dealing with someone who is looking for the right app for the right price then charge a fair price. If the company you're selling to thinks that price = quality then slide the price up. In our case we worked on rather custom apps, so the prices could be based on who they were developed for. In the case of selling a premade app you could have ethics problems with selling the same app for more, or problems just convincing them that they should pay more. I guess the easiest way around that would be to have an Enterprise version of your app that maybe has features like dde support and just charge LOTS more for it.
That's just my interpretation of the problem
Uh huh. Get a cup of coffee from 7-11 and one from Starbucks. I can't imagine how anyone couldn't tell the difference, and I regularly drink both.
This may be excessively cynical but ...
- lots of managers are systematically rewarded for having large budgets
- having useful work done inexpensively might cause them to under-spend
Dunno about him, but I would be chasing up early payment on those invoices every time, and explicitly disclaiming warranty on security issues.
I've had a client blame me because one of their Windows clients ran an executable attachment which then sniffed, filtered and transmitted a lot of their plaintext (or near equivalent) traffic, notably including telnet and SMB passwords. Subsequently, their entire LAN become a DDoS zombie.
Oddly enough - from the logs - the telnet passwords were sniffed, but never used against the Unix boxes, only against the Windows machines, presumably in the (in this case justified) hope that they would use the same password twice.
Got time? Spend some of it coding or testing
Exactly --- low bids smell of KDE-type developer egocents blowing-off all Lusrs of their GUI. Who trusts those bast*rds? They want to be fondled, appreciated .... they want to be LOVED. The two-bit europr*ks. Likewize with the LOW BID. If they don't grab for your money, they gotta grab for yer ballz.
The problem here is that you acted like a programmer, but you need to be a SALESMAN.
You probably lost this business because your competitor employed a professional, well-trained salesperson who knew how to navigate the political structure of your client, develop relationships with the right power brokers and seal the deal at three times your price.
You Slashdotters all piss and moan about sales and marketing guys being empty suits, but you forget who actually brings home the bacon in most companies.
Salesguys exist for one reason: to crush and eat naive competitors such as Lost Canadian Abroad. Personally, I find big bloody chunks of guys like this in my stool every morning.
Wanna find out why you lost? Go read a copy of Power Base Selling: Secrets of an Ivy League Street Fighter by Jim Holden. The book makes it painfully clear: people lose deal by being outsold. Period.
Next time leave the selling to a pro.
BTW... your competitor's salesguy pocketed between 3 and 10% of that 15K. Right now he's probably using that money to bang some perky young hooker.
Good times.
Why do liberals insist on spending $8,000 per year per student at government schools when private schools do a much better job at half the price? The answer, of course, is that $8,000 is not enough, and we obviously need to spend more.
I watch Brit Hume on Fox News
I'm a baby nerd in training, and a professional Children's party entertainer (face painting). I also am an artist both culinary and otherwise, and I sell my products over the internet, and at small local health food stores. I have noticed for quite some time now that people would rather pay more for an item or service if given the choice between one that is inexpensive and one that only upper middle class people could afford. I have not been chosen for parties because I only charge $35 per hour, for unlimited painting, whereas a clown who knows 2 magic tricks and makes a balloon for each child charges $60 or more per hour. I agree that the american public has been trained to believe that low prices are alwase a sign of low quality work *shakes head* but, I myself, will never understand that thought process. If you want to see my hurriedly made website (completely aweful looking) and check out some of the things that I make and sell, feel free to drop by www.ArtFoodFun.com . If you happen to have any advice on how to make my site any better, feel free to email me.. Or at least relatively inexpensive.
Signed, Christina
IT'S ALL OTHER PEOPLES MONEY
The costs are never payed for by the company they are always payed for by the consumer, hense they couldn't give a rats arse about the cost of the project. If funding came out of executive share options (for example) then economic realities would start to set in, but they don't and they won't.Btw... please don't flame me saying stuff like,,, "but that would mean they would end up less competitive cause company B would take the cheap option" we're talking about *big evil American couporations* here, and they are all the same. The marjority made up only of Management, Marketing and Legal.
Pianist : Some jerk whos taught themselves how to type in rhythm
Oh, sorry...just thinking out loud ....
<cough><cough><graft><cough>
If you don't believe me, ask that guy over there.
Apparently companies want to pay more money than developers are willing to charge. I will ingeniously solve both problems at once with my new company. The process is very simple: the developer sends us the amount he wishes to charge. We multiply the number by 4 and send it to the company. When the company sends the check, we send the developer 25%. This way everyone is happy.
than all these fools who don't understand the question, and don't have an answer, and would just as likely be fooled by slick salesmen higher sticker prices on other products (how many of wish you could pay $20,000 extra to replace your cheap American or Japanese car with an overpriced "European" car made in Mexico?) is this:
Raise your price to match. Not for "perception", or to avoid the lowball cut, or just because you can, and itemize some extra things like support or documentation that you wouldn't otherwise include, and then allow them to deduct what they don't want. If they take the bid as is, you get the extra money (in the form of extra work), but they'll probably either A) ask the competitor if their bid includes those things, or B) agree to remove the unwanted items and think they're making a savings on their own.
It's the same reason an outside consultant can be brought in by my customers (or senior PHBs). The outside expert, who's time runs more is assumed to automagically know more about my environment. Most of these guys seem to discover work which they need to do over the next few weeks, months, years for the ones with brass huevos. And yes they will find a point or two, of course if I had a week audit and review any one of my sites so would I.
I am glad you brought up the coffee example. When I go and buy an expensive cup of coffee at Starbucks, the coffee is not the only thing I buy, I buy the entire experience of Starbucks. For instance, I buy the background music, the halogena lighting, the comfy chairs that I can sit in for hours, the convenient outlets that I can plug my laptop in, the assurance that the cup of coffee was prepared the same way as the other starbucks I know of, the assurance that the employees are getting paid a decent wage and benefits, etc.
And like you said, this is also true in terms of software. The client is not simply buying a piece of software, they're buying a package of something much weirder.
I think the only valid way to probe expertise is obtaining references from previous clients and following them up. If you are spending ca 80000 US$ in a given project then surely you can spend 10 minutes per bidder to make a couple of phone calls.
IANAL but write like a drunk one.
The only way the typical /.er can pick up a chick is with a forklift. -- AC
Spending obscene amounts of money is also part of a manager's job. It gives them a feeling of self-worth. Just like a geek buying the latest quad processor Linux box. You don't need it but it is nice to spend money on things, epecially other people's.
It is not always like this. Government departments are notorious for taking the lowest bidder even when it doesn't make good sense. The big consultancies know how to play this game and put in very low bids but with very tight requirements. They know that they can make all the money back and then some on all the requirements changes the civil servants will make.
Some low bids are silly and show a lack of understanding of the complexity of the project. In the UK there is a famous project called the London Ambulance Service. The mission critical emergency service contract was given to a bidder an order of magnitude lower than the principle bids. The supplier did not grasp the complexity and mission critical nature of running an ambulance system. The result were a number of deaths as the system collapsed under the load. This failure has been very well documented in project management litterature and nobody wants to go there again.
Often big companies will win 'zero cost' bids in an order to freeze out the little guys. In 1995 my Internet startup put in a bid to build a small web site for a publisher (Letts). We quoted $8,000 dollars only to have a big multinational quote $0!. The multinational wanted to build a Web team, but we looked at their proposal and they had no understanding of the Web, it was rubbish. The client said 'you can't argue with $0' can you? Well you can if it is rubbish but whatever.
So in conclusion it is easy to look at your failure and draw the conclusion that only high price bids will win. But often there is a lot more invovled in the decision process than that. Also never underestimate the stupidity of the person making the purchasing decision.
If all that fails, try bribery. According to the accepted measures the US is quite low down on the bribery scale but in some countries it is the only way to win contracts. The cost reflects the amount of 'consultancy' you paid to the manager in the client firm.
David