Day rates suck

Every single day, we find ourselves as an agency, telling people what our day rate is. In most cases, for people, this is a race to the bottom, the challenge of finding the cheapest development shop out there to get a certain piece of work done. People often believe that if someone is charging £500/day, whilst someone else is charging £600/day then the cheaper option is the best one and will save them a shed load of money. Well, funnily enough, it’s not that simple. For instance, let’s imagine for a minute that you don’t care what technology your idea is built in, you just send out some tenders. Two come back – a Java shop with a day rate of £400, and a Rails shop with a day rate of £750. The Java shop is an offshore setup, with unlimited developers to throw at your job, promising a quick turnaround. The other, the Rails shop, is local, and has a really nice portfolio (but still costs nearly twice the price). You’d love to employ them but you just can’t afford that rate so you plump for the cheaper option.

Six months later, you’re broke. You’ve just spent twenty grand on some Java work but it’s not finished, and you’ve got no way of moving forwards as you’ve got no more money. However, looking on the bright side, you know that you’ve not sunk nearly forty grand into the same project with the other company.

Except you’re wrong.

What you failed to realise is that everything you’ve assumed in the pricing of your job is incorrect. You’ve assumed quality is a constant, i.e. that the number of bugs is consistent between different agencies, and that performance is identical. You’ve also made a even more fundamentally bad assumption, and that is that a developer only achieves a certain amount in a certain amount of time.

They don’t.

Take the above example. Rails is a much more productive tool to use for web development than Java, and a Rails developer could reasonably expect to outperform a Java developer by as much as 100%. Add into this that Rails developers tend to unit test much more so than others it all starts to add up.

So, you go back to the Rails shop.

“Oh yes, we could have turned that project around in 22 days, which would cost you £16,500″

You slowly, and quietly, start to cry.

The moral of the story is this – day rates, for development work, are irrelevant. You, as a customer, don’t want to buy time from a development house. You want a development house to produce you a ‘thing’, whatever that ‘thing’ might be – and you want to know how much it costs. It doesn’t matter how much a day of developer might cost you. What matters is how much can be achieved and what level of quality might be achieved.

So, next time you’re out there looking for a development house for your next project, ignore day rate – it’s irrelevant. (And remember, we use Rails)

Posted by Neil Middleton on 09 Dec 2010