Outsourcer vs. daily-rate contractor

[DimPrawn]

Client lock in. That's the key.

Do the work, making it very hard for them to go elsewhere when they need support, enhancements, changes, fixes outside of warranty.

Then charge the absolute earth. I'm talking £1000+ per day min.

[TheFaQQer]

I worked with a large "consultancy" a while back. They had won a fixed price deal with a government agency, and had really vague functional specifications.

So the project policy was to deliver the bare minimum, regardless of how user-unfriendly it was, and charge a fortune to "fix" issues. For example, building screens where the navigation from one field to the next via the Tab key followed a random order rather than the obvious one on screen - time to fix: 10 minutes, charge to the client: 2 days. Changing the prompts on fields - time to fix: 5 minutes, charge to the client: 3 days.

Shocking really, but that's how they make their money - on the change requests. As suggested earlier, if you can tie them in to only using you to fix the problems, then you're onto a winner.

[chicane]

Shocking really, but that's how they make their money - on the change requests. As suggested earlier, if you can tie them in to only using you to fix the problems, then you're onto a winner.

A lot of it depends on whether the OP is trying to build a business or make a quick buck.

Whilst the big players regularly get away with tricks like those outlined here, any small software development business trying the same will soon realise that word gets around pretty quickly.

The result being a company with one lucrative client that is eventually going to turn around and say "Enough is enough", at which time the gravy train comes to an abrupt halt.

[XLMonkey]

Thanks again.

Well, operating at the either extreme listed one's pretty much doomed to failure - but somewhere in the middle could work well. Minor changes included in the price, major changes not - or change requests in the first month free, second month reasonable, third month very pricey. That along with a well-defined initial spec (but not a highly detailed one) in order to know what a "change" is is what I'd aim for.

I do know there's no magic number, but I wondered if anyone had real-life examples of similar scenarios?

Yes, a couple:
- major utility company working with a medium sized outsourcer, moving from time and materials to fixed priced contracts for development projects. The risk premium varied between 20% and 35% to transfer from a T&M to fixed price. 20% was the bottom end of what the supplier was prepared to accept in exchange for carrying the risk, 35% was generally the top end of what the customer was prepared to pay.
- most public sector IT projects carry between 40% and 100% of project costs in the form of risk (i.e. the actual cost will be 40%-100% more than the initial business case suggests). I've been involved in quite a few negotiations to try to fix the risk premium in public sector deals - there's a certain amount of horse-trading, but in my experience it was rarely less than 15% and never more than 30%.

... that second example may also, in part, explain why so many public sector IT projects go over budget....;-)