Underbidding to win the deal - so why should you as the enterprise IT manager responsible for choosing an application development partner care that your vendor is underbidding to win the deal? After all, if your project is fixed bid, there is no risk, right? Wrong
First, let's admit that a sizable share of IT projects fail and that any number of factors can cause a project to be considered a failure.
When a single vendor low bids to win a deal, you might choose that vendor over the next cheapest vendor because they were cheaper, not because they were better. You might even renegotiate with the 2nd cheapest vendor that is better, letting them know you like them but that someone else is cheaper. How can you justify spending 15% more even though the quality is expected to be more, right? This is the IT equivalent to dumping.
Here's what happens behind the scenes: Vendor A low bids the deal to win it. Perhaps they lack the maturity as a company to accurately estimate the effort required to deliver hte project. Perhaps they lack the technical skills to foresee the complications. Perhaps they know well that they are losing money on this deal and hoping to make it up by putting entry level developers on the project.
In either of these cases, they will most likely fall behind schedule and /or deliver a poor quality solution which will cost YOU frustration and extra money as you have to spend more to maintain a solution which was poorly built. We see it ALL THE TIME!
So, you saved on the initial project cost but ended up delivering late which may have cost you market share or revenue or just plain frustration. The final application quality is lacking which will cost you extra in maintenance.. Do you get it?
Unfortunately most IT managers making these decisions will NOT heed the warnings and advice and will make this mistake on their own a few times before they become wiser. Human nature I suppose.
Back to: 10 Ways to Fail at Outsourcing
First, let's admit that a sizable share of IT projects fail and that any number of factors can cause a project to be considered a failure.
When a single vendor low bids to win a deal, you might choose that vendor over the next cheapest vendor because they were cheaper, not because they were better. You might even renegotiate with the 2nd cheapest vendor that is better, letting them know you like them but that someone else is cheaper. How can you justify spending 15% more even though the quality is expected to be more, right? This is the IT equivalent to dumping.
Here's what happens behind the scenes: Vendor A low bids the deal to win it. Perhaps they lack the maturity as a company to accurately estimate the effort required to deliver hte project. Perhaps they lack the technical skills to foresee the complications. Perhaps they know well that they are losing money on this deal and hoping to make it up by putting entry level developers on the project.
In either of these cases, they will most likely fall behind schedule and /or deliver a poor quality solution which will cost YOU frustration and extra money as you have to spend more to maintain a solution which was poorly built. We see it ALL THE TIME!
So, you saved on the initial project cost but ended up delivering late which may have cost you market share or revenue or just plain frustration. The final application quality is lacking which will cost you extra in maintenance.. Do you get it?
Unfortunately most IT managers making these decisions will NOT heed the warnings and advice and will make this mistake on their own a few times before they become wiser. Human nature I suppose.
Back to: 10 Ways to Fail at Outsourcing
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Ariana. Great post but i have to make one point of clarification. Our company (www.agavelab.com) consistently comes in far below other bids (sometimes as much as half) but its not because of the reasons you mention above. I think that your "10 ways to fail" is right on but we deliver on all of those metrics. How we're able to do it is we focus ALL of our resource on delivery. I see a lot of small nearsourcing shops with ridiculously fancy buildings, expensive furniture, assistants, conference tables, etc. etc. I think that it's a mexican thing - impressions are very important. Our place is very spartan. We're working on doors from home depot, we had the walls painted by a graffiti artist friend, and we're sitting on those plastic chairs you find at a cantina. Most of our money goes to salary and technical infrastructure. I've followed your posts for a while and am interested in your thoughts on this. Thanks and keep up the great work!
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