Do We Confuse Work With Value?

Here’s a little thought experiment. Acme Widgets need a new stock control system. They invite software development companies to bid. Big Grey IT Corporation put forward a bid for the system that will take 20 weeks with a team of 50 developers, each developer getting paid £2,000 a week. Their total bid for the system is £2 million.

Acme’s CEO is about to sign off on the work when he gets a call from Whizzo Agile Inc, who have read the tender specification and claim they can deliver the exact same system in the exact same time with a team of just 4 crack developers.

Assuming both teams would deliver the exact same outcome at the exact same time (and, yes, in reality a team of 50 would very probably deliver late or not at all, statistically), how much should Whizzo Agile charge?

It’s a purely hypothetical question, but I’ve seen similar scenarios play out in real life. A government department invites bids for an IT system. The big players put in ludicrously huge bids (e.g., £400 million for a website), and justify them by massive over-staffing of the project. Smaller players – the ones who can actually afford to tender and who have the government contacts – tend to get shut out, no matter how good their bids look.

And I’ve long wondered if the problem here is how we tend to confuse work with value. Does that calculation at the back of the customer’s mind go something like: “Okay, so Option A is £2M for 5,000 developer days, and Option B is £0.5M for 400 developer days”? With Option A, the customer calculates they’ll get more work for their money.

But the value delivered is identical (in theory – in reality a smaller team would probably do a better job).  They get the same software in the same time frame, and they get it at a quarter of the price. It’s just that the developers on the small team get paid a lot more to deliver it. I’ve watched so many managers turn down Option B over the last 30 years.

A company considering a bid of £2M to build a software system is announcing that the value of that system to their business is significantly more than £2M. Let’s say, for the sake of argument, it’s double. Option A brings them a return of £2M. Option B brings a return of £3.5M. In those terms, is it a good business decision to go with Option A?

In other areas of business, choosing to go with Option A would get you sacked. Why, in software development, is it so often the other way around?

 

Author: codemanship

Founder of Codemanship Ltd and code craft coach and trainer

One thought on “Do We Confuse Work With Value?”

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s