ColdFusion Muse

Estimating Part 3: Explaining the Costs to Customers

As we have discussed in our earlier posts on the Business of Web Development inexperienced customers (ones who have never done an IT project) are often surprised at the cost associated with a project. This is partially the result of the reputation that the web has for being cheap. Customers look at services like godaddy.com for example, and they see that they can register and host a site for the cost of skipping a couple of frappuccinos a month. While this is true, it is really not the same as professional design and development services and high performing, scalable, redundant, mission critical hosting services.

In fact, if I could digress to hosting for a moment, customers often fail to see the cost benefit of a more complete "managed" hosting setup. They spend thousands on development and then try to save a few hundred dollars a year on hosting. Having settled on hosting "on the cheap" they often have to pay someone a high hourly rate to do things like troubleshoot an underperforming server or handle DNS settings or figure out their mail services for them, or (worst of all) alter their code to conform to a changing server environment - like when a host recently disabled createobject() on a server causing an application to fail for someone who is now our customer. Any savings they might have gained is eaten up in support costs and they are actually losing money on the deal. In the words of Jesus they "strain out a gnat and swallow a camel" (email me if you don't know exactly what that means - I'll enlighten you).

Of course when it comes to development costs there are other things that mystify customers. As we have discussed before, customers often only account for the visual "up-front" items of a web application. They see forms, lists, charts and displays when the reality is that the bulk of the work on many complicated projects goes into coding, revisions, Q/A and Project Management. Here are a few fallacies that range from the hair-brained to flights of fancy:

Estimating Part 2: Quality, Quantity and Visual Blinders

In our first post on this topic, Red Lobster Eyes With a Happy Meal Wallet, we began the discussion of the difficulty involved in estimating projects for startup companies. We took the time to chat about the nature of the bright people with big ideas who choose to try something new on the Internet. Our main point was that Big Idea people often underestimate the time and money it takes to complete a project. Today we will talk about one of the principle pitfalls that arise in reaction to lack of resources.

Red Lobster Eyes With a Happy Meal Wallet

If you have read my post, Great Expectations, you know that I spend a good percentage of my time helping entrepreneurs outline requirements for brilliant new ideas as well as helping them figure out the cost. I am the "chief estimator" at my growing company. Creating an accurate Estimate is an extremely important part of running a company like CF Webtools - a large project can affect our profitability (or lack thereof) for the entire year. My goal in estimating is to charge enough to pay for the development - salaries, expenses and infrastructure - and of course to make a profit. A second, equally important goal, is to give the project its best chance for success for the customer.

In the next 2 posts we will take a look at the dynamics of this task and in particular the importance of managing the relationship between the customer and the developer or development company. But let's start with the role of the development company - or in my case, my role in particular.

Great Expectations: What Make's Money on the WEb

About two or three times per month I am presented with an idea from a visionary business person who wants to start something new. Some of these ideas are unique and some are not. Many of them involve a web based application or service that the individual wants to sell. Whether it's an actual product, information, or a service of some kind, this person has convinced themselves that the idea has the potential to become a thriving and profitable business. They come to me for general advice and possibly, to see if CF Webtools would like to develop the product for them.

In some cases they are underfunded and they ask if we would take an equity stake in the venture in lieu of some or all of our development fee. I have declined to do so up to this point - mostly because we need projects that are profitable and funded to meet our own business goals, and any capital we want to risk we tend to use to expand CF Webtools. In any case, all of these ideas have something in common. An individual or group of individuals believe they can leverage the web to make a pile of money.

Now let me say at the outset that I am sometimes amazed at the ideas that end up succeeding. CF Webtools has built a few crack-pot applications that we felt had no chance of success, only to see them take off and exceed expectations right out of the gate. On the other hand we have seen some applications that we thought were startlingly innovative die with a whimper. Still, there are some hard earned lessons that we try to share with our customers to give them the best shot at success.

So this series is designed to help consulting companies or independent contractors better assist their clients in making good choices. It is also an excellent read if you are one of those visionaries and would like to know exactly what you should focus on to get your idea off of the ground. Unless you are a follower of motivational speakers Anthony Anthony (If You Can Do It Any Idiot Can) or Walter Mollusk (Seize the Self-Help Book of the Day), you will know intuitively that there is no one formula for success. But there are some obstacles you would do well to avoid.

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