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

Perhaps You Didn't See a Bigger Picture

[DrEducator]

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.

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.