Is Price the Main Factor in Software Development?

in Business by Damian on January 8th, 2017

When cheap is good

If I want to own a product, I try to find the lowest price possible. I don’t want to pay resellers or cover some additional fees for the brand, if there is no difference in value. I use comparison sites and choose a shop that seems to be reasonable in terms of sales conditions and I am happy if it’s located in my neighbourhood. Then I don’t have to pay for delivery, so it’s more cost-effective. I can see and hold the product in my hand before I buy it and I pay a good price. Easy-peasy.

How about services? If I want to find a good hairdresser - how do I know that this person will meet my expectations? Will I choose the cheapest one to save some money or will I pick someone with good reputation who will surprise me and gain my trust? Overall, I am looking for someone who will make me happy with the new haircut. You get the point.

Hairdressers vs developers

In software development many people choose their provider in a similar way. They want to find services that are cheap and good at the same time. When someone is looking for tech people, he asks his friends if they know someone reliable because he trusts their opinion (even if it’s subjective). If they don’t have anyone to recommend, he will go to catalogues like clutch.co or agency spotter to read the reviews and pick 2, 3 or even 4 teams that seem reasonable. Then he will ask them for an estimate and in 60-70% of cases, he will choose the cheapest option.

What’s wrong with this approach?

I’ve been there, I’ve done that. People used to send me short BRIEFs for an app (web/mobile) and expected detailed estimations (because it’s easy and everything should be clear based on a couple of pages). They also mentioned that they have asked other teams for an estimate. I felt like I am a part of a “beauty contest” and need to offer a competitive price. The problem is that I feel that 80% of the clients never ask the important questions:

  • Where does the estimate come from?
  • How do you make sure you will deliver the software at the right pace?
  • What is my role in the process and which tools will we be using?
  • What kind of approach do you suggest to successfully develop and launch my app/website?

And many others. They just ask about the price and timeline. They tell me 3 things: Estimate. Build. I pay if I’ll be happy. Will great developers be up for a game like that? I don’t think so.

Clients can always find cheaper software providers. The real question is: do they compare companies that represent the same level of quality and work ethic? If not, the comparison doesn’t make any sense.

What happens next?

Client picks one of the cheapest and (subjectively) best software houses. He starts development and then the chaos begins. Everything was easy and simple at the beginning (software company said “YES” to almost everything), but after a while the client realises that he doesn’t know what people are doing, the app is going in the wrong direction and he gets annoyed. After the promised deadline, when barely half of the app is ready or the quality of the completed software is far from what he expected, he gets mad. He puts lawyers into the game. The result: the client lost time and money and still doesn’t have an app that can be sold.

How to build a software with A-Players

Good software teams don’t compete with the price. They reject offers quite often. They pick who they work with, not the other way round. Why? Because they compete with the quality of their work and guarantee successful development. They want to have a great portfolio and business partners, not demanding clients who play the first fiddle because they manage the budget.

I know that clients can have some “trust issues”. It’s not easy to collaborate with people you meet for the first time in your life. You may or may not be an expert in the software development field. That’s why you want to compare a couple of teams, but is the “beauty contest” the best solution that will help you find the team that will match your expectations? As a client, you can easily verify software developers by asking important questions: How much do you charge per hour or per week? What can I get for this price? How do you show me that I am in control of the process and money and time needed to complete this project?

Additionally, each client’s priority is to check if the software house will care about their business. How? By verifying if providers ask relevant and detailed questions about the business model and marketing ideas. It’s good if the providers argue about the purpose and give some suggestions about the way the development process should go. The software house should minimize the scope to deliver a product that is more intuitive and easier to launch.

Don’t make the same mistake twice

I’ve met people who worked with a poor quality team (cheap outsourcing) and failed. To make their situation even worse, they’ve lost a lot of money, but still wanted to build the product. With even more limited budget they thought that switching from India to Ukraine or Poland and finding new cheap developers will save their app and their business model. It almost never works. Instead of trying to find cheap solutions, if you have a limited budget, ask yourself the following questions:

  • Can I invite some people to develop my app and give them equity (in-house development)?
  • Do I have enough money to build an app and maintain it for at least 6-12 month before my business model will start earning real money?
  • If not, then do I really need all the functionalities? Can I simplify my app and cut off 40% of the features to stay within my budget and create it in 2-3 months?
  • Can I apply for external funding (e.g. VC funds) to make sure I won’t stop in the middle of development?

What’s your priority?

From what I know about creative business people, their number one priority is not to build an app as cheap as possible. Their main goal is to build a sustainable business with the web or mobile app that really serves people who are willing to pay for it. With that in mind, they find really good developers (even if they are more expensive) to make sure they will deliver a valuable product that will earn money necessary for further development. It’s an investment, not an expense. They put the task of creating their software in the hands of craftsmen they trust.

Price matters, but deliverability matters more

So now you see the difference. You don’t go to the cheapest doctor or hairdresser. You choose from a price range that is within your budget, but still you want to achieve your goals - great look, haircut etc. How would you feel if you would pay the lowest possible price, but didn’t get what you want? No one will give you your money and time back.

Make your budget a limitation, not a priority and discuss it with the team you want to work with. Ask them what you are paying for and how it can suit your budget limits.

Remember, make half, not half-assed products. If it’s too expensive, maybe you just don’t need a Mercedes, but rather Citroen C2? It can still take you from point A to B. Think about the MVP - how small it can be and still solve your problem. Keep the most important factors in mind - the deliverability and successful sales of your product.

What is your experience with having a limited budget for software development? How did you handle this? Share your story.


← back to the blog

You May Also Like

What Is a Code Audit and Why Do You Need It

by Piotr in on January 22nd, 2017

The source code of your application might be right or wrong. You won’t find out until you run a code audit with external developers. If you want to make sure your digital product was created with high-quality code, check our offer!

Is Price the Main Factor in Software Development?

by Damian in on January 8th, 2017

Estimating the software development is not an easy job. Clients expect a good price for a good service. Does it happen often? Let’s find out.

5 Mistakes Most B2B Startups Do in SALES and How to Fix them

by Damian in on October 19th, 2015

B2B sales is hard, but with the right mentoring you can become a hero and increase your business results. Read 5 tips that will push you beyond boundaries and make a better salesman.

Interested in Creating a Successful Project?

Contact us and together we'll bring your ideas to life!