Friday, May 14, 2010

Fixed cost does not work…


Our software development company esteems the agile approach. We work in Scrum and have come to regard it as a natural approach to managing requirements, releases, and changes in a project.

We believe that bids and fixed cost are bad idea. Here I’ll try to explain to you why.

First, you will never get an accurate price. Developing software, especially new systems built to individual needs, is a creative, inventive process. It is not possible to accurately say how long developing “Feature A” might take. It is possible to make a prediction, an estimate.

Secondly, every software developer knows they can't accurately predict how long a particular feature will take, so they guess.

In fact you get the following consequences of fixed cost: Because if the project is over budget but a contract is on a fixed price every sane company will do all they can to limit their losses. In other words, they’ll finish the product as quickly as possible. And besides it is always time stressing.

To further reduce costs, the company may replace senior developers with interns, working overtime.

Why is it bad to write a list of wants? Because in the end you end up putting many things there which are not needed, It’s worse, you won't put there many things that will be needed only because you haven't thought of them yet.

What do you think about fixed cost/fixed price model? What model do you use?

Your feedback will help.

Thanks

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