Friday, July 14, 2017

The Technical Estimation Paradox

Face it, we've all been there...you're asked for an "estimate" that you KNOW you're going to be held to, but there are a hundred variables you have no way to control. The client is sitting at the other end of the table tapping their fingers and you think to yourself either: #1 "they don't understand, it's unreasonable, I don't have enough information", or #2 "Hmmmm, how much do I think based on my current information it might take?".

At the end of the day, neither of those matter beyond the psychological value they have for yourself...the real question that matters is "how much is it worth to them for you to deliver this?". Yes, if you're billing time and materials, there are practical problems: If you estimate too low, your client is going to be disappointed that you couldn't deliver in the agreed to cost/time...if you estimate too high, you client might be happy, but often they also think that you cut some corners (especially if you were the "middle of the road" estimate). On the flip side, if it's a "fixed bid", if you estimate too low, your margins are going to dwindle and you could possibly lose money and if you estimate too high you may end up in an ethical dilemma where you are making 99% margin (which is arguably good or bad, depending on your perspective). But at the end of the day, as a consumer of services, you should be happy if you get the contractually agreed to qualities you care about (without assumptions) for the agreed to amount (or less), and as a service provider, you should be happy to deliver at the agreed upon price (or less) with the agreed upon qualities (or more).

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