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Consulting Budget – Estimate Overruns – Fixed Price Game

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I was reading this article

ERP Cost: Getting Real

A lot of what is said applies to freelance web software development.  Key points are:

1. There is a direct correlation between the cost of consulting services and the ability of the client to take more project responsibility. This goes beyond just cost; it is also about increasing the probability of success.

2. Many clients naively believe fixed price agreements (as opposed to hourly billing) are “risk free”. The false premise is “if we can just get the consultants to own all the project risk, it becomes their problem not ours”. Unfortunately for the client, dumb people do not run consulting firms. Therefore, the devil is in the fine print. If it is not, chances are the consultants are desperate for business and there are probably reasons why. Let the buyer beware.

3. No project has ever failed because of over budgeting during the project justification phase. In fact, clients should be conservative with the ROI.  On the other hand, plenty of goods projects have “failed”  as a result of unrealistic cost estimates right out of the gate (not because of execution).

Written by John Lai

July 17th, 2010 at 10:11 pm

Start Mission - Project management and invoicing

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