Service excellence delivered with fixed price projects

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Do you have car? If yes, then you must have experience with getting it services, unless you have people who do it for you. How do you select, where you should get it serviced? Normally 2 options; Service station owned by the car manufacturer or some private car shop where multiple car brands gets serviced. Company owned car service centre or otherwise, normally do not make a difference. Both organizations employee people who has not developed that car. May be the person working in “Company owned service center” was 1st employed at another private center. Anyways, based on our awareness, risk profile and few other factors we pick one, get our car serviced and believe that it will keep on running. This is a very simple scenario of “Service industry”.  In this domain, one has not built a product, but somehow they become an expert on “servicing” it. I will not talk about all the dimensions of Service industry here. But, it more or less applies to all dimensions. I go to a customer and say, I am the best who knows how to install, configure and maintain this product. All that I know is that I have read more or less the same material and written documentation provided by the company who actually made it. I can also learn by doing self study and experimentation.

Software service Industry is very special and creates even more complicated scenarios. One guy makes product, second designs the implementation, third implements, yet another test and finally someone else claims to maintain it. In every stage, there is possibility that multiple companies are involved. Beauty of it is that in general there is no owner. Owner is normally a company, who has no clue about the specifications. People in the customer company and all the middle-men establishments keep on changing. In general, it comes down to 2 perspectives. A) It is costly it must be good. B) I do not understand it, it must be good. Third perspective comes in view when someone asks a question that it is taking too long, can we not do it in different way. C) Already a lot of money is spent, lets keep on spending on this track as there is no guarantee that other way will not follow the same path.

Apart from technology, there are consultancy, process knowledge, management and other domains. Service industry like any other salesman try to sell the same product in same bottle with a label that always says the same thing, “New Improved”. This label demands complexity and incomprehensibility. If I make something simple that others can understand, then they will be able to figure out what improvements I brought and my whole business model will fail, isn’t it? For this reason, industry keep on coming with new ideas to make it complex and confuse the customer. For sure ,one can put it on customer also that he should know, but this is not something that is mentioned in the sales presentation. Idea is to slowly take the customer away from know-how and take so much control that changing a service provider could be too risky. This happens in all dimension of this industry and these dimension work together to create a special effect.

I had experience on one of such dimensions, that can be mentioned as billing model. The billing model known as fixed-price project. The idea is that project is based on deliverable rather than resource cot per unit costs multiplied by number of units. Customer is supposed to have more relaxed state of mind. She should not be bothered about who is working on the project, who is leaving, and if there is any unknown fluctuation In budget. Customer says,” I gave the money, for this delivery. Call me on this day, when it is done”. Of course, if customer delays and has some change in plans it is different. But, as far as customer requirement is same, cost and timeline is not supposed to change. Rest all the risk, pain, management is with service provider. Some can argue on the details and nitty-gritties of it. In simple way, this is how I can explain this idea, or at least this is how customer bought it; pay fixed money and relax. This is purely a dimension of finance. But it is interesting how other dimensions mix with it to create an amazing blend of flavor.


In one project, I was playing customer role. We had to upgrade a B2B platform to next version of software which is released by the product vendor. It was not even a major upgrade, just a minor project. Complete systems is supported by this service company and it is preferred vendor for project management, service management, technical implementation, support and consultancy. Now, it is given to this company based on the data produced by company that they are best in Industry, maintain some 3rd party standards, has some relationships with other companies and product vendors, has very special skilled set of people in all kind of fields and other blah. After some discussions, paper work, agreement of scope, definition and timeline, project is signed based on project methodology that this service company has built and has been using for years. Project starts, but soon you realize you do not get updates. You ask for it only to start a conversation, that this is not part of project scope. You get it done by reading the contract to service company. Next you find, there are delays because service company did not align other teams (also from same company) for this project. This get aligned after some escalations, then half way down customer gets contacted for “Change request”. This change request means more money. When asked, the reply is that initial estimate of the work involved was not accurate. Now as the project has proceeded, service company sees that effort is more, it need more people and time! Being a customer, it raises different questions

  1. Wait a minute, is this not the reason that I signed for fixed-price project?
  2. I did not change any scope, timeline and not delayed on any of my deliverable as suggested. Why am I paying more?
  3. I gave the contract to you that you know the product and especially, you implemented this system and have been maintaining it for years. How are your estimates so drastically different?
  4. If you come to me to ask for a change request for this reason, then do you even understand the contract that you signed?
  5. You said you know the product and one of the best in industry, but it does not look like that you are competent and also professional enough to deliver the contract.
This is what I say I can do
This is what I can actually do

But, nevertheless such discussions keep on happening and based on who you are in contact, you can get additional money. In this case, I rejected it. But, later I saw another case where project was delayed by 2 months because one person from service company will be on holiday. Major concern was that this decision is made 8 months in advance, before finalizing the project. How exactly is this a service or fixed-priced project, if customer is still impacted by such things.

This is just one example that I used for this writing. I came across many such cases. Once the team is doing an upgrade of a software system and get the project signed. Later when the project starts, the team (from service company) asks the customer to provide a software developer, who will at the end will be resourced by the same service company. When asked that it is your work, then answer is that, we did not plan for it. Now, you need to provide developer or project is delayed. Yet another example, I recall, from of Human Resources upgrade project. In this case, as usual all documents are signed and project begins. During the testing phase, customer is contacted to mention that it needs more people than estimated. Customer asked for reason naturally. Reason is that project budgeted only testing effort. There was no effort budgeted to fix the issues that would be identified during testing!!!! Now almost all of the questions raised above are valid here too. In addition couple of more questions.
1. Did you ever perform an upgrade before?
2. If you think only testing is required and there will be no error reported that will need correction, why would I customer pay for the testing effort also? Have you thought about it?

partners vs making money

These are just few of the many such situations I came across while working on these “fixed-priced” project. It is not just the pricing model, which fools the customer. When the octopus uses all of its tentacles and with various sucking pumps to get that money out of customer, it is already too late to jump out of the water.

Well, I am not saying all fixed-projects are like that. I am not involved in all of them and in some way it is good for me. All these observations have been a big source of frustration and at the same time a big reason for smile and laughter as well. If I was involved in “all” such projects, then if not frustration, then I would definitely have injured myself laughing too much. I do not know when will I come across another such project. But, I hope if it ever happens again then I am ready to avoid frustration and simply embrace the amusement and laughter of these projects.

Two engineering students were walking across campus when one said, “Where did you get such a great bike?”

The second engineer replied, “Well, I was walking along yesterday minding my own business when a beautiful woman rode up on this bike. She threw the bike to the ground, took off all her clothes and said, “Take what you want.”

“The second engineer nodded approvingly, “Good choice; the clothes probably wouldn’t have fit.”

Love

Arundeep 

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  1. Dev

    nice one at the end 😛