Setting up your project for success
Having been in the software services business for over a decade, we have seen many kinds of projects and a wide spectrum of customers. At Affirma, we pride ourselves in our extremely high customer satisfaction rate (98.8% in 2014). And to ensure that we only take projects where we are confident we can please the client, we have had to respectfully turn down projects that are being set up for disaster. Setting up the contract as a fixed bid or a time and materials contract can make a big difference.
Custom software development services is not a commodity, but sometimes it is treated that way. Inevitably, every month we get 2 or 3 clients that call us that have been burnt by a different software company or a developer they found. Often, it was the “lowest bidder.” Unfortunately, this is an industry where some studies show that up to half of the projects end in failure. By the time they are calling us, the poor client has sunk in tens of thousands of dollars with nothing to show for it and are back to square one. They are usually less price sensitive at this point and more concerned about the project outcome.
There is a good reason that clients want a fixed bid proposal for their project. It seems like the responsible way to find a vendor to execute a project. You tell 3 or 4 vendors what you’re looking for, then you choose the vendor that can deliver what you need for the lowest price. This does work, but only if the needs are meticulously defined or if the project is a standard task (commoditized task) that is done across the industry.
Unfortunately, most projects are not standard. This is because businesses are all different – much like the people that run them. On rare occasions, we will receive a document with a screenshot of every UI page and a detail description of each control. We are fairly confident that we can give a competitive estimate in this scenario. However, we are usually asked to give a proposal from a 2-5 page document of requirements that leave way too much room for interpretation. Sometimes, we do give an estimate for these types of projects, however we have to consider every ambiguity and adjust the price for the worst case scenario. We are not a company that walks away and leaves a client hanging, so we consider what it is going to take to make sure that our clients will be pleased with our work and add on enough room in the budget to ensure we can accommodate the client’s wishes when addressing ambiguity or future changes. This is typically not the philosophy of the lowest bidder. They are looking at the ambiguity from a perspective of the minimum required work to satisfy the requirement even though it may not be the intent or the wish of the client.
Furthermore, once a client is in a fixed bid arrangement with a vendor (whether us or any other vendor), there is a significant amount of effort that goes into discussing the defined scope of the original contract. Often times, the client does not know exactly what they want at the beginning of the project. They have an approximate idea. As the project starts to take shape and screenshots/prototypes are reviewed, there is almost always new ideas or changes in directions. In a fixed bid contract, it now becomes very important if the change is a replacement of scope of the original fixed bid, or if it is a change request with additional cost associated. In a Time and Material contract, there is no wasted time/effort on determining whether or not a modification is in scope or out of scope. If the client wants something changed, then it is just done. This may seem like a small issue, but it is not. Significant time and effort is spent on determining the classification of scope changes. It is a constant negotiation throughout the project.A concern that some clients have about Time and Materials is that they might get pulled into an open-ended contract with no checks or limitations on budget. Or, the vendor may be lazy or incompetent. These are real concerns and it takes time to build up trust to make a T&M relationship work well. One of our best practices is to review progress early and often with the client. It builds trust and the client can quickly see the value they are receiving for their money. Also, we work with the client to prioritize and deprioritize features to hit a budget that the customer wants to stay within. In custom development, there are always options and trade-offs.
However, some clients still feel more comfortable with a fixed bid budget, especially on their first engagement. We understand this and accommodate by going through a design phase with the customer. In this phase, the output is the detailed specifications including every screenshot of the product. It is much less expensive to make changes in the design phase rather than after the coding has started. Once the design phase is complete, then the client has a tangible deliverable that can be used to get a reliable fixed bid from any vendor (including us). The purpose of these deliverables are to reduce ambiguity and express on paper the exact intent of the product that the client wants developed. This will lower the risk of a failed fixed-bid project by reducing ambiguity.
If you have a project, but aren’t sure how to get started, reach out to us. We’re happy to talk through it with you and discuss possible ways to structure the project to lower the risk for you and the vendor for a successful outcome.
