Bidding for projects
Posted by Ian Holsman
On The relevance blog today, Stuart mentions how his company underbids his competitors by 30-50% for projects. and how rails lets him do this.
Personally I’m not so sure I would be doing this. (disclaimer: I haven’t placed a bid for anything for a long time).
why not?
price = quality for a lot of people, and by being so far out of whack of your competition it signals to the potential buyer that you are going to do a shoddy job. your sales guy now has to convince them of your quality, and of the quality of rails itself. Until you have educated your potential buyer that rails CAN actually deliver quality at such a low price point, I would be going for a price more inline with everyone else.
cost != value. just because it costs you half to build something doesn’t mean you should be charging half for it.
you are driving the market price down and starting a price war. For this contract you might get the deal, but in the long term you will force the java guys to go hungry, and they will in turn be forced to lower their prices to compete, and probably switch to rails/django as well. so.. all you have done is given your self a year of ‘ok’ profits, and then you will be subject to intense competition at the lower price point. The only winner there is your buyer. not you or the java guy.
If I were the marketing person in your company (or the person who ends up figuring out the price) I would be bidding at 5% under the java version (give him a bit of help, and estimate how much the java version would cost), and not even mentioning what language you will deliver it in. If asked, mention rails or django then, with a focus on the quality aspects of it and how it enables you to write bug-free code (NOT the efficency ones).
and then donate the extra 25% margin you just got to some charity or to fund open source development.
or keep it in your own pocket :-)