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Mistake #3 The Mythical Hourly Rate: The low hourly rate creates a challenge for a lot of US-based consulting companies. It's workable for my company, but I could easily see how mid-size consulting companies with no offshore resources may not be able to work at that rate. Quite surprisingly, a resource in India could cost less than $10 an hour and max $20 an hour for a really good developer. My company does not use the off-shore model, but I have used my personal network to make introductions to developers for as low as $20 an hour to a client in the US. However, that's really the wrong discussion to have here.
The real question to ask is who came up with the magical number 100 for the size of a good team? Why, in the first place, has the client decided it needs 100 developers? What's the plan for on-boarding all of them? Do all of them need to be working full-time on the project from start to finish? We live in a world where Wall Street defines decisions that might be great for the result of that quarter, save the CEO his job for another couple of years just by promising cost savings; however, these “results” may render the company incapable of facing innovative competitors and it may be thrown completely out of business in the long run. Remember Circuit City or Blockbuster? Those were once big names, but short-sightedness put them out of business. They were not too big to fail.
Mistake #4 Myopia: I think it’s fair to say one of every thousand executives actually knows what he’s doing. If you look at successful executives like Bill Gates, Steve Jobs, or Mark Zuckerberg, all of them started really small. This enabled them to make smart decisions for both the short-term and long-term; however, they very surely had a more long-term vision. So much so, that the outside world couldn’t understand them. IBM thought Bill was crazy to think he could make money selling software. Apple was bailed out by Microsoft in the early 2000s and no one would ever think that one day the iPhone division of Apple would be bigger than the entire company of Microsoft. None of this happened in one day though.
Most executives end up being myopic to satisfy the monthly and quarterly numbers rather than thinking big and taking risks. If we go back to the example above where the client wanted 100 developers, my personal estimate to complete all the work (not only development, but also design, testing, deployment and support of the application) was just 12 resources. Of course, the resources were of much higher quality and I personally believe the rate would have been close to $100 an hour per consultant. Just do the math here. This would have saved the company millions of dollars and the project would be done six months faster. How can I be so sure of this? Because I have done this successfully over and over again. I was one of the less than 100 awarded experts in the country on the technology on which this platform was being built; however, it's true my company surely didn’t have a billion dollar revenue backing it. So, for that executive, short-term thinking was more in terms of ”CYA” than making sure the work actually got done.
Mistake #5: Time and Materials vs. Actual Deliverable: Estimation is hard in software projects; however, do we all understand which company to pick to provide a realistic estimate? Should the client look for one that only offers time and materials option for 100 developers for 18 months, but doesn't guarantee any deliverable? This only means 100 people will be dedicated to work full time for another 18 months. Does that mean they could end up 18 months later without actually completing any deliverable on the project? Absolutely. My company offers fixed bid projects as an option for our clients as well. This means we won't charge more money than what 12 developers should have been paid in one year. It also means that the deliverable is guaranteed. The client has security that in case of delay they won't have to spend more money. So why continue working with the BCCs who are willing to provide an endless amount of resources, but not results?
The Bottom Line: To conclude my original example, the executive decided to go with the supposedly safe alternative of the BCC and he ended up losing his job. This was simply because with the changing times, handing off the project to a BCC didn't mean that his job was safe regardless of the amount of revenue backing his huge team of hundreds of developers. In the older times, this strategy surely would have worked; however, with startups succeeding over and over again in terms of innovation, market cap, actual revenues and profits, it's no longer the safe option either. Quite surprisingly, this executive was rendered jobless for months and since then has learned his lesson. Following his termination, my team trained him in software development and I was personally able to find him a job. He's one of my best friends now. After finding employment again, he has used us for some critical projects that were so successful he ended up retiring.
I wish all tech exec stories had this happy of an ending. After discussing the multitude of issues plaguing the industry today, I’d like to see more executives learn from the mistakes of executives past. The ultimate goal is to see the industry thrive and the integrity of development protected. This is possible if those at the top focus less on the “CYA” mentality and more on delivering cost effective and successful results for their companies.