Why are Businesses Willing to Spend More for Software?

Lost Canadian Abroad asks: "As a software developer I have always found it strange that large companies are willing to spend obscene amounts of money for software development. Until recently I have shrugged it off as 'the cost of doing business', but something happened not long ago that has caused me to start questioning that practice. The more I talk about it with other people, who are business people themselves, the more irritated I get about the whole thing. Why is it that if you're not charging a company tens of thousands of dollars for a development project that you're not taken seriously?" I've always wondered about this, myself. This practice seems to contradict common sense. Is it that higher prices imply a certain degree of quality and/or assurance to managers? Do you think that businesses might be better off if they took a risk and tried the lower end of the costs spectrum?

"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."

Comments

Sssshhhut up!

[Space Coyote]

You'll ruin it for everybody. Just sit back, and bill the extra hours while you play quake, no one will tell, really.

Seen it in the gov't

[iiii]

I had a related experience while working in the gov't. A manager had a great idea and put together a small team, 5 people, to try it out. I was on that team. We built a prototype web system based on his idea, perl generated web pages hooked to a db. People loved it.

Then, for the second iteration we went to java and built a much more sophisticated, interactve app. The brass loved that even more.

They decided it was really worth doing and therefore they must spend money on it. They initiated the monstrous government procurement process. It took some eight months or more, but finally a coalition team with Oracle and IBM and others won the $35 million contract.

After much hoo-ha, meetings, requirements gathering, countless billable hours, and the generation of untold linear yards of documentation, they finally decided to build something quite similar to our first prototype. And, after several years of work, with a team of dozens of contractors, that's what they have.

It's like the management said, "We love this, therefore we must spend millions of dollars to have it be exactly the same." But surely some assistant director's budget doubled, thus increasing their dominion, and people got to put on their resume that they oversaw a $35M contract. I'm sure everyone got awards and promotions for successfully disposing of all those unwanted taxpayer dollars.

Sigh. No I'm not bitter, I swear. :-)

Re:Seen it in the gov't

[pubjames]

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.

I can believe this. An organisation I once worked for wanted an IT-based staff directory to replace the paper one which was becoming increasingly costly to keep up to date. This was in about 1996. I put togther one exactly meeting their requirements using perl and html in a couple of days. The CIO (who was a very senoir grey-haired-suit who liked to talk down to the junior IT staff) looked at it and said, "How many days did you waste doing that? I suppose it can be used as a protoype to show the bidding companies when we put it out to contract..." Eventually they decided to get an IBM shop to implement it with Lotus Notes. After much expense, many months and countless meetings, they had their system.

Meanwhile, I had sneakily put the version I created on the intranet, and many staff were using it. Of course the CIO didn't know anything about it because he didn't pay much attention to the intranet - thinking it was just a toy put together by the junior IT staff that was going to be replaced by Notes in the future.

He decided to unveil the Notes system at a huge meeting with all staff present. The IT Manager thought it would be his moment of glory. He did a slick presentation, including saying how much he had spent on the development and how leading-edge it was. He then demoed it and asked for questions. When the mic was going round the hall, staff were asking things like "why have you spent so much money on this to copy what we've already got?", and "that looks much more difficult to use than the current system, what's the point?" etc.

He successfully deflected the first few questions with management-speak, but the staff detected they were being bullshitted and got increasingly angry with his answers. He dug himself deeper and deeper into a hole until he had bring the meeting to a premature end and leave in a hurry.

It was one of the most joyous moments of my professional career. It was a complete disaster for the CIO. His contract wasn't renewed a few months later. I was promoted.

They eventually got rid of Notes, and they're using the system I developed to this day.

Re:Business Logic? An Oxymoron?

[Kintanon]

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