Comment by bb88 | Hacker News Reader

Comment by bb88 | Hacker News Reader

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> The second year you earn 100K, and if you don't save me money you have now made 20% commission and only saved me 800K (1m - 100K - 100k).

I disagree. Savings is a competitive advantage usually dropping your costs, time to market, and increasing profits, or efficiency, even if you don't reflect that on the books. Managers could ask employees to do more things as opposed to reducing the labor costs (layoffs), e.g.

Also since it's software, those savings typically compound. E.g: so I save tedium in accounting for $1M in the first year. It's so successful that you expand my efforts to other parts of your company. The next year you still have $1M + whatever I have added. Or $2M+ over the course of 2 years.

If you decide to go with a external package and pay a recurring licensing cost -- which is pretty common in the software industry, then you'd be paying maybe 10% of whatever you save per year. One software package we were looking at was $6M/annum. That's roughly 30 engineers being paid $200k for a year to come up with an alternative. We're using 5 engineers to do the same thing for less.

While it's hard to gauge true costs, paying my team $1M to save you $6M in recurring costs seems like a bargain, and something that's hard to argue against. In fact $2M might not be a bad number either depending upon how management sees it.

> If you decide to go with a external package and pay a recurring licensing cost -- which is pretty common in the software industry, then you'd be paying maybe 10% of whatever you save per year. One software package we were looking at was $6M/annum. That's roughly 30 engineers being paid $200k for a year to come up with an alternative. We're using 5 engineers to do the same thing for less.

Ok fair enough, now lets say I am an Accountant and I work out that I can increase profits even further by hiring 5 people offshore for 30K a year. I am paying now $150K to save $6m. You cannot deny me the accountant, the same opportunity to earn from cost reductions if you profit from it, that would not be in the theme of rewarding people for giving an advantage to a company.

If you look at both situation, mine is more efficient based on cost.

But most all you're playing an unfair advantage. You say the following: (* caveat lets say fair market value is 100k per developer)

> That's roughly 30 engineers being paid $200k

What happens if there are only 5 developers working for that company too, and working on the same profit-reward model as you are working on, they are getting paid 400K a year each because they are making the company $4m. So what's their true value, if they are being paid 400K and they can be replaced by your team for 200K it seems that they are being over paid 200K. Your way of justifying your 2x pay is that you decreased cost, their justification of being paid 4x is that they increased profits, but you're doing the same job, aren't they worth more than you are.

I the accountant see a business opportunity, and start a company the same as the 3rd party software company. I know that developers like you work on a profit-reward model of 20%. So your job did get outsource, but you were getting paid 200K to save the company a part of the 6m before that. I reduce the cost of the software by 50% to 3m, I offer you and your team 100K base salary and 20% of profits (2.5m for ease, 3m - 5x developers @ 100k), so would you take the job for 150k, a 25% reduction in pay for doing the same job based on the same model?

Here's the final point, how much do you pay a cleaner, they are a cost they don't produce profit.

> Ok fair enough, now lets say I am an Accountant and I work out that I can increase profits even further by hiring 5 people offshore for 30K a year.

Sure and then you'd find yourself without a job, thinking an accountant can understand what a software engineer does.

> Here's the final point, how much do you pay a cleaner, they are a cost they don't produce profit.

If they're cleaning up people's shit in the restrooms? Above market rate to make sure they're happy.

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