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The Risks of Custom Software Quotes

by Josh Beatty, Jun 19, 2020

When considering a software development project, it is important to understand the risks involved with embarking on that journey. One inherent risk that people often overlook is the risk associated with obtaining a quote too early in the planning process. Understandably, people are eager to find out the ticket price to build their software, however this comes with a host of other complications. In this article we will explore two common issues.

1. Lack of information

When obtaining a quote for software development, the more information given to the developer, the more accurate the quote can be due to known work needed for successful project delivery. When people request a quote too early, this puts developers in an awkward position with a large number of unknowns in what is actually required for this project. This in turn can leave way for an unpleasant development experience.
A great example for lack of information causing frustration in software projects is the QLD health payroll upgrade. The project started in 2006, and looked like a simple project, with a budget allocation of $6 million AUD. Fast forward 5 years and the project was $25 million AUD over budget and still lacking core system functionality, all due to lack of proper planning and information gathering.

a. Cone of uncertainty

The cone of uncertainty is shown below. This is a visual representation of risk and exemplifies the importance of knowing as many requirements of a development project before obtaining a quote. Moving from left to right you can see the movement away from a place of high certainty and lower risk into a place of less certainty and higher risk. It accounts for the lack of certainty in the future. This is why it is important to know as much as possible before development, and why we must complete a scoping process.

b. Scope

The scope is our process of beginning work on your project. Once the scope is known, so too is the likely time and cost to complete the desired functions. In this phase we explore the problem and uncover a solution that your software is providing its users. We move through 4 sequences (discovery, inspiration, ideation and realisation). The process typically is anywhere from 2-4 weeks depending on requirements.

Under/Over Quoting

Another risk associated with asking for a quote without embarking on a scoping process is that the developer will be at a higher level of risk due to uncertainty of work required before entering scope. This in turn causes both under/over quoting on time and money required for a successful project delivery and will almost always end in disappointment. Projects started without going through a scoping phase can cause disappointment through either the software being of a subpar standard, or from the developer holding your software ransom whilst you pay the extra funds needed to complete the project. On this point, always triple check who owns the IP. If you're paying for development services, our stance is that the IP should reside with you as the customer.
We mitigate these risks through our Way of Working, which is our in-house version of the Agile methodology. It allows for continuous improvement and flexibility in a project's lifetime. 
Through the Way of Working there are three options for embarking on a project.

1. Fixed time, variable scope
This is our preferred option, as it offers the highest level of certainty in pricing whilst enabling flexibility for new or unforeseen scope ideas.

2. Fixed Scope, variable time
This option ensures all scope requirements are delivered and allows for flexibility in the amount of time for delivery.

3. Fixed time, fixed scope
This is the least recommended and riskiest option as it has the potential to blow budgets out of proportion due to dev requirements and it limits the opportunity for scope feature adaptation thus limiting the project.

In summary, due to the nature of software development any project has some element of risk associated with it. Our aim is to minimise that risk through a strategic and scientific development methodology, in our case, the Way of Working. If you would like more information about our way of working you can download the full document here.