I'm fine with the former, you get what you pay for, the latter however, really makes me mad.
Most pro level consulting teams work open ended time and materials contracts. There's very good reasons for this, but this definitely gets abused to deliver a project that was never expected to come in on budget. It also exposes the client to the effects of bad management or other incompetence without a lot of redress.
Imagine if you were buying a hamburger and they told you that because they burned the first one you're going to have to pay double.
The hard bargaining can go both ways too. I've included what I considered ridiculous rates in a first draft of a proposal (to give me room to negotiate) only to have them often accepted without a blink. In fact, I'm quite sure not having a standard rate card has been responsible for hundreds of thousands of extra money over the years.
It sounds to me like the creator of the video probably does fixed price bidding, at least in part. In my experience that's never a good idea or worth doing - even if you can manage it OK (extremely unlikely) you end up alienating the customer by having to be so anal about scope creep.
If you have a contract where's the after the fact negotiation come from anyway? Are they really willing to say then sue me?
I whole heartily agree with your summation. Fixed price just sets it off on the wrong foot in the first place. What I generally do, is provide my best estimate of what the project will take. I also agree if the project runs past my estimate by 15% that I reduce my rate to my bottom dollar rate. This way I am not handing it out for free, but they understand that I am not trying to run up the clock as well. The other thing we agree on is that any feature creep pushes the estimate back by the size of the feature. I have found that this works well, gives the customer a comfort level, and though it is my rock bottom rate, I am not eating costs left and right for a project that goes bloody. It cost me opportunity costs but not hard out of pocket costs which are far harder to swallow.
I mean if the doctor overruns putting your new liver in, it is by a few hours at most. The economies of scale are way out of whack to make those kind of comparisons. What other professional, in generally do is a reproduces group of processes.
Our profession is unique in the fact that while there are similarities in what we do, each new project is wholly different (if you are doing custom apps). Now we do have stuff like Wordpress that make the simple stuff cookie cutter but for the most part people are not looking for that when they hire a custom software developer. They are looking for a new and novel product. The problem is that it is one of the only professions where product development is purchased from small and unsophisticated buyers.
We really are a unique profession in which our product is still crafted and not manufactured. The problem is as a society we have gotten used to everything being manufactured so the expectation is that building software is akin to manufacturing where the reality is it is more akin to an art and just like art, their are few really talented artist to go around.
Understanding, this goes a long way to helping customers see your value without alienating them by becoming defensive. I read the horror stories about bad clients all the time and sometimes wonder if it is a lack of educating the customer. I have had maybe 2 or 3 really bad customers in my 20 years. I just don't see how luck could produce those odds. I don't think I have a secret sauce and I am sure I have turned a good deal away that would have been bad customers, I just take time to understand their needs and to explain how software development works. Usually, if someone does not feel like they are getting screwed they are pretty agreeable.
If someone comes to me and says I have 50k to build X and X looks like 40K to me, I will tell them I am not comfortable taking the gig, based on the fact if it overruns they don't have the reserve to see it through and that I do not want to leave a customer without a product at the end of 50k. They then either tell me what they can burn to, which is usually far more than needed or we both agree that they are putting their capital at risk. In which case, I try to work with them to trim features to get it to a 25k product. Double the estimate overruns are rare if one is even remotely decent at estimation.
Speaking as someone who went to get a new filling in June, went through getting a root canal on another tooth, and finally will end up going under a GA to get some more serious work done in a month or two, I can assure you that doctors (well, dentists) do <i>not</i> charge on a fixed-symptom basis.
Even if you need to return to a doctor only to get a new copy of a script you have already had, most doctors will charge you the consult time.
Given that you appear to suggest there is no art to medicine, it sounds like you have no exposure to the medical world. Our profession isn't as unique as you make it out to be.
Most of us are fortunate to not have medical anomalies that require anything other than routing medical attention in which case prices are pretty cut and dry. My point was when a doctor recommends a path of treatment they usually have a comfort level with that treatment and it's effectiveness.
In your case the filling, the root canal and the serious work where three separate projects. In the development world, you would get the requirements for the filling and the root canal would feature creep in as the filling was being done. That was my point, was that doctors (for the most part) have pretty fixed problem sets like root canal where developers have different problem sets for each new project.
Interestingly, under the Medicare reimbursement system, that's pretty much exactly how they are paid (if the patient is a Medicare patient).
Ain't so. Doctors get paid for their time, Medicare just has the government pay for it instead of the patient.
Also, dentists in particular are poorly covered by medicare here. I remember as a student going to a dentist that was affiliated with my uni and having the receptionist laugh when I pulled out my medicare card...
In the US, Medicare is only for old people, and it's uncommon for them to attend university. Also, "uni" isn't a usual American colloquialism. So it appears that michael_dorfman is talking about US Medicare, and you're probably talking about Australian Medicare.
The reality is, I am fine with my middle rate, I expect negotiation so my mind is in the middle, if they don't negotiate, then the rest is gravy but when I go into a project, my rate reflects room to negotiate. I don't fear giving out my rock bottom rate as a tool that they can use against me based on the fact that they are receiving pressure for my time from other clientele. Having the ability to walk away from the table is the most powerful tool in ones arsenal when it comes to sitting at the negotiation table.
I believe in fairness, and I believe in making my clients comfortable with the value I provide for their dollar. I love negotiating, because it allows me to show my clients the value they are getting for their money and it allows me to make them feel like they have walked away with a deal. Both are psychologically important factors to creating happy customers.
In my experience... The client orders a hamburger. You give them a hamburger. The client really wanted a hotdog and expects you to eat the cost of the hamburger.
Not a big deal in the real world, except in this example hamburgers cost tens of thousands of dollars.
Seriously. Even though I know it's all mocked up, every time the video cut to the restaurant my pulse started to rise.
By ordering off the menu, you agree to the price on it. Similarly, when you sign an agreement to pay someone for work done, one would hope you'll pay that person when the work is done. Sadly, reality teaches us that this is not always the case.
(+) this == "You saw the price and consumed the product, now it's time to pay." "But I don't have any money." "Oh fuck. I'm fucked, not you, even though you're the asshole."
Anyway, as far as I can tell resturants are all about experience, and maybe forcing the customer to prove they can pay would degrade the experience to the point where the resturant makes more money by just accepting the occasional dine & dash.
Also in a real resturant if a customer was sitting there baldly refusing to pay, you could probably just call the police (I dont know, I've worked in resturants and have never even heard of this happening).
Regarding the housing comparison, the nature of the credit, the goods exchanged and the fact that maturities are so much shorter in restaurants (1:8)[1], allows (requires) restaurants to engage in riskier business practices. Mortgage lending risks are obviously much more complicated, but you are correct to point out that risk is an inherent part of issuing credit.
[1] Assumes 3 hours credit issued to the average customer, with average inventory borrowed for 30 days.
Get past the point where negotiations usually happen and the deal appears done and your counterpart is committed, then bargain. We're used to it happening as consumers. There we call it bait & switch.
I find that the term "commoditized" refers to goods or services that one, are all identical and b) are really, really cheap, like most commodities in the late 90s.
By the way, is AOL still doing that? I used to get a couple every year, but I haven't received one in several years now.
25% retainer, equal installments of 25% at respective milestones. End of story.