Comparing CRM project day rates…

August 5, 2005 Richard Boardman

An entry in Joel Spolsky’s ‘Joel on Software’ blog caught my eye the other day. In ‘Hitting the High Notes’ he sets out some of the research he has undertaken, which seeks to establish the magnitude of differences in development productivity. His conclusions, which were well in line with other studies I’ve seen, suggested that there is between a 5:1 and 10:1 difference in relative productivity between programmers. In other words, what one programmer might achieve in an hour, another might not achieve in a day.

This set me thinking. Perhaps you’ve settled on XYZ CRM software for your project. The software is sold through Value Added Resellers (VAR’s), and because you want the best value for money, you ask a couple of VAR’s to quote. VAR A quotes a day rate of £750 per day, and VAR B quotes a day rate of £1,200. On the surface it looks cut and dried, VAR A seems to offer the best value for money.

But let’s say there’s a difference of 2:1 in productivity between the VAR B and the VAR A programmer, which is well within the norm from Joel Spolsky’s research, and the job would take the VAR B programmer 10 days. The cost for VAR B would be:

10 x £1,200 = £12,000

The programmer from VAR A, only being 50% as productive, takes 20 days to do the job. Therefore the cost from VAR A would be:

20 x £750 = £15,000

VAR B, despite the significantly higher day rate, is actually the cheaper option.

Which is all well and good, except that, even if you were to meet the developer assigned to your project, it probably wouldn’t be too easy, at least from a cursory glance, to determine their productive capability. The key to handling the variances in productivity, is to pay by the job rather than by the day. If say VAR A was prepared to do undertake the job for the sum of £7,500, the fact that would take them twice as long as VAR B is largely an irrelevance (bar perhaps the costs associated with a potentially longer lead team, and the concerns you might have around their financial longevity given the suicidal effective day rate) because they are now the cheaper option. You can only do this of course, if you spell out the requirements with sufficient detail and clarity that the vendors feel comfortable quoting on this basis. This being a to some extent a self serving blog, I will note in finishing off this post, that this is a service, we can, and are happy to provide.