What Product Development Really Costs – A Realistic View

It's rare to be able to define everything in advance for a development project. That's why we bill according to actual effort. This form of billing stays honest even when things shift during the project, because it only charges for what was actually delivered – a fixed price would have to factor in the same uncertainty as a risk premium. But you also get a qualified estimate along with it: a minimum and a maximum value.

We guarantee this corridor – for the scope of work on which we based our quote. If the scope stays the same, the price stays within range. If you change something, it affects the price, and you'll know beforehand, not on the final invoice. What we don't do: exceed the range on our own initiative.

Why you'll get cheaper quotes

You will get cheaper quotes – within the EU and beyond. We say that openly. It's just that competitors here often work to the same pattern: you get a quote based on minimum requirements that looks cheap. The small print states that billing is based on actual effort and that if this is exceeded, the developer will "merely get in touch".

And they do. Only by that point you're often already five figures into the project with hardly any way to switch providers at a reasonable cost. Sticking with an ongoing project you've already invested heavily in isn't coincidence – research calls this the sunk-cost effect.

In our experience, a significant overrun of the initial quote isn't the exception for many providers – it's built in. This matches what research on large infrastructure projects shows: there, cost overruns are the rule rather than the exception.

How we counteract this

To make sure this doesn't happen to our customers, we communicate – verbally and in writing. We continuously compare the effort during the project against the quoted corridor. Changes always happen – that can't be eliminated. But if you see them coming early, you can assess them before they blow the budget. And if a change affects the price, we discuss it while you can still decide.

A lowball quote can win you an order; whether the customer comes back a second time depends on whether the promised range was honoured. In the long run, an engineering office only survives through customers who come back.

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Sources

1. Flyvbjerg, Holm, Buhl – What Causes Cost Overrun in Transport Infrastructure Projects? (Transport Reviews, 2004) – cost overruns across 258 projects, a global pattern.
2. Keil, Truex, Mixon – The Effects of Sunk Cost and Project Completion on IT Project Escalation (IEEE Transactions on Engineering Management) – why people stick with expensive projects.