I’m getting this question a few times a week.
So it’s time to answer it here and for all of you who think about launching a new tech product.
Process-based pricing might be confusing…
A few years ago, when I started working on my first rental apartment repair, I talked to many dev teams.
All of them overloaded me with multiple-page price sheets.
The designer charged a fixed fee per project. Plasterer – per square meter. Tiler charged per tile put. Plumber – per item installed. Furniture installers – per hour spent. Foreman was taking 10% on top of all services provided.
After spending a few days staring at these numbers, I still had little idea about the final price or deadline for my one-bedroom studio…
Hour is not equal an Hour
Then, there are juniors with lower rates and seniors with higher prices.
Some top performers can do 10x times more than average providers.
Also, teams with relevant experience will complete the project much faster than those who do it for the first time and need to invest time into the learning curve and build it all from scratch…
Thus, the hourly rate becomes even more irrelevant when it comes to the quality of that hour.
As per this great article by Joel Spolsky:
If you threw a bunch of extra programmers onto the Windows Media Player team, would they ever hit that high note? Never in a thousand years. Because the more people you added to that team, the more likely they would be to have one real grump who thought it was unprofessional and immature to write “Most things actually work” on your website.
Obviously, asking around for hourly rates and process-based prices is far from the optimal route.
So, what do you do instead?
You need to take one step back and remind yourself why you started looking for a technical partner in the first place…
You probably wanted to build a piece of software that you can use within your company or sell to others. Right?
Being a business owner, you always keep an eye on the ROI.
For that, you need to know what will be the investment and how much time it might take.
Well, now, we’re getting somewhere…
But what if I’m looking for long-term tech support?
Now you might ask:
“Vitaliy, that sounds fine for one-time projects or quick MVPs. But what if I’m looking for long-term support for my existing software?”
Okay, let’s break this scenario down…
Here, you probably have a monthly budget that you’re not willing to cross. Right?
It might be the total monthly payroll for all of your in-house devs. Or it might be a fixed monthly fee for a dedicated team provided by a 3rd-party agency via an out-staffing model.
In any case, you have a limited monthly budget for the dev team/department.
In return, you want to squeeze as much as possible out of this budget and get many new features deployed to the production server. All within that same month, ideally…
Thus, you need to have some ballpark estimate for every new feature you ask to develop.
Without estimates, you won’t have a deadline:
Deadline = Start Date + ( Estimated Hours / Productive Dev Hours )
So, it all comes to this term:
The success of the project and the overall quality depends on these three components:
To get a high-quality result, you always have to balance between those three components.
We call this model Project Triangle:
For example, a project can be completed faster by increasing the budget or cutting the scope of the work.
Similarly, the increasing scope may require equivalent increases in budget and schedule.
On the other side, cutting the budget without adjusting the schedule or scope will lead to lower quality.
So, how might this triangle help us with the right questions for our dev team?
Four Questions (Summary)
Instead of asking about hourly rates, I recommend you this Four Questions framework.
The first three questions come directly from Project Triangle:
- Ask them to help you define the high-level scope of your project, task or mini-project
- Ask how much it might cost you. The ballpark figure will be enough at the beginning
- Ask about possible deadline with their suggested team stack
The fourth question is not so obvious and thus often overlooked.
No project can be perfectly implemented with a given budget, timeline, and scope limitations at a good enough quality.
So it’s vital to let your tech partner shine and come up with some creative compromises to balance Project Triangle out:
4. What will be some COMPROMISES you’ll recommend to do to meet our desired timeline, budget, and scope?
These Four Questions help us a lot in our daily work, so I hope it’ll also help you find a proper dev partner. Be it a one-time MVP launch or long-term tech support…
Want even more? Check my other article where I list six steps to hiring a good tech partner.
What are the questions you ask development teams on the first call?