Cape Town, 10 Dec 2015
Brian Harding, MD of EOH MC, says rate per hour quotes and billing are meaningless as a measure of software development standards, yet enterprises are increasingly partnering with service providers on the basis of rate cards alone.
"This has been a problem for years, and now with the proliferation of international outsourcing companies, enterprises are increasingly using rate per hour as the only basis for sourcing IT services. We often get calls from prospective clients, asking for our rate cards. Unfortunately, they see this as the only measure they can use when comparing services from various service providers. They tell us their procurement departments will only work with service providers who operate within a particular price bracket, therefore they use rate per hour as the only criteria for choosing a developer."
Rate per hour procurement inevitably results in a dissatisfied client and harms the image of the IT industry as a whole, says Harding. "Rate per hour tells you nothing about the level of skills working on the project, or the quality, performance and sustainability of the software. Typically, projects initiated on the strength of a rate per hour quote run on far longer than expected and can cost significantly more than what was originally anticipated."
He likens it to appointing a house builder only on the strength of his quote being the lowest per hour: "When all you know is the rate per hour, you don't know how long he will take to build the house, or whether he will do a professional job. It's a case of being penny wise, pound foolish. A professional builder would come in and assess the plans, look at the land, talk you through the processes, clarify your vision for the house, and supply references. Then he'd give a quote for the entire project."
Harding explains that it is virtually impossible to give a quote on a bespoke software development project on the strength of a rate per hour without understanding the client's strategies and existing infrastructure. "There is always a lot more going on under the hood than just software development. This is why we don't quote on a project until we have completed the elaboration process, where we fully understand what will be required to deliver the project."
There are also risks inherent in allocating business to a service provider who gives a project cost estimate without having carried out a full elaboration process, adds Harding. "In those cases, you'll typically find the vendor builds in a contingency based on the assessment of anticipated risk and the client might end up paying up to 50% more than necessary."
Harding concedes that determining the cost of a bespoke development project can appear to be fraught with complexity. "The best approach is to work with a reputable service provider who has a strong track record, who carries out a full risk assessment and analysis of the existing infrastructure and proposed solution environment before embarking on the project, and who partners with you effectively to ensure that the project delivers true business value," he says." It boils down to mutual trust and a partnership. Ideally, both parties must understand this and have the maturity and trust to work with each other to resolve the issues that will inevitably arise."
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