Tempting but unrealistic offers
There is not a week that we don’t lose a deal or two and that’s ok. There is always a company out there who is willing to do a project for lower fees. Our fees are not very high. We charge market fees and plan the project scope in a way to maximize the value for our customers and minimize the associated risks. We also consider a profit for ourselves, because otherwise we won’t be around in the future to help our customers. We are very proud that in the history of our company we have delivered 100% of our projects. But the promise of getting a project done at lower than the market’s going rate and less time while delivering high quality results, is very tempting for clients. The promise of winning a new project at all costs is very tempting for the vendors.
Years ago when we had just started, we were one of those companies who gave such promises. We aggressively quoted below the market fee to take business away from more established companies. We worked long hours to deliver those promises. Then we learned a very hard lesson.
When projects are signed at lower costs, due to the lack of time and resources both sides get hurt. The quality of work delivered to the client is directly affected. The vendor loses profit and they need to recuperate the loss on their next project. This vicious cycle continues. In case of enterprise clients, the vendor is injured even more. Enterprise companies have much more money and resources. If an outsourcing attempt fails, it hardly ever makes a dent to their bottom line. They also have much larger demands and that relationship could seriously damage a small software development firm who has to meet those demand on less than sufficient resources.
It is unlikely that this will ever change. For as long as markets exist, there are always suppliers who are tempted to win new customers at all costs and customers who are tempted by lower than market prices. If you buy a product that you aren’t happy with, you can always return it. In the service industry however, the poor results emerge months later, and the resources are lost for good. The only gains are the lessons learned: to avoid the temptation to buy and sell below the market’s going rate. To avoid a situation where both sides lose.