March 2004
Some companies prefer to hire the lowest bidder. If you are buying a commodity, where all products are exactly the same, then that is not a bad idea. But for services, where the quality differs greatly, you get what you pay for.
Our goals are:
To find win-win situations with customers.
To be the most knowledgeable, best educated and trained systems integrators.
To offer the highest quality services at a price at least 20% less than the other companies that provide high quality work.
When we bid on a project and the company hires the lowest bidder, we ask to be removed from their bidder's list. Our experience is:
Inexperience leads to underbidding. There are always companies out there that have no clue what they are doing and are going to bid the project lower than what they should because they don't know any better. For example, everyone way under estimates how long a task will take when they do not have a lot of previous experience. Think about your home projects where you estimated how long it would take. In most cases it takes at least two times, usually four times, as long to finish the task. For inexperienced engineers, programmers, and companies you can typically take their time estimates and multiply them by 2.
The "Change Order" game. There are a lot of low bidders that play the game of bidding low and then any little thing, no matter how small, that can be considered a change order they start nickel- and dime-ing the customer to jack the price up over a fair value.
Companies that usually hire the lowest bidder are usually not good customers. They will demand much more than what you bid on. They change the specification. They vaguely worded the specification so that they can interpret the specification in their favor. They won't pay you. They are inflexible, won't work with you and demand a lot of things. So not only are you bidding below your costs -- you will have to do much more than expected. In other words, no matter what you do, you will never make them happy, and you will never have a successful project with them.
Typically, companies that hire the lowest bidder, get the worst service, they think that all service companies are bad, so they might as well only hire the lowest bidder, etc., etc., and it is a vicious, slow spiral into destruction.
Likewise, the worst integrators have to take any project they can get (i.e. be the lowest bid, do projects that no one else will do, work for the worst companies that no one else will work for), which leads to many cost overruns, projects are late, can not meet requirements, and eventually go out of business. This business is very brutal. No wonder 95% of all systems integrators go out of business.
Some groups have estimated that the automation project failure rate is as high as 70%! For companies that only hire the lowest bidder -- I would estimate that 70% is probably correct. For companies that hire the best company at a fair price (best value for the best price) I would bet the failure rate is around 10%.
We have seen companies hire a competitor for a project that we turned down to develop a system that was suppose to take 3 months -- still not have a working system 3 years later. So over years who is saving the most money? The company that went with the lowest bidder but their systems never work right and never last long OR the company that paid more but their system started production on time and ran with little problems for ten years?
Truth is -- it is hard to have a highly successful automation project. It requires that both the customer and vendor work together, they both do their jobs well and efficiently, and they both are flexible. If either side is not willing to work together -- then failure is the most likely result.
To be the lowest price bidder on a project:
How much experience do you need?
How much training and education do you need?
How successful do you need to be?
How efficient do you need to be?
How honest do you need to be?
To be the best:
How much experience do you need? We typically require 10 years for a manager and 20 years for an architect. Many $200 per hour companies only require half as many years.
How much training and education do you need? We usually hire college degreed programmers. Exceptions are if someone has 10 years of experience and proves to be as professional as degreed programmers.
How successful do you need to be? We found an old business plan from the early 1990s. In it we defined about 20 of our closest competitors. Only two out of the twenty are still in business only ten years later. One of those survivors got out of the systems integration business and into a different business. The other has been acquired by another company. Add in another 20 companies that came and went in the past ten years and that leaves one (us) out of about 40 that survived. This is an extremely difficult business to be successful in.
How efficient do you need to be? This is a culmination of a person's education, experience, training plus the resources they have available to them. Resources include a manager to back them up with 10 years of experience and architects with 20 years of experience. And of course, our website, plus other resources too good to list on our website.
How honest do you need to be? This really has to do with sales people. We refer you back to our "Churn and Burn" editorials. Anyone can be a short-term successful sales person if they lie, cheat, and steal. Our preference is to undersell, charge a little bit more but work with the customer and do more than asked for (we rarely have change orders).
So why are we successful?
We are brutally honest with the customer during the sales process. We are not rude or insult anyone but we do not tell them what they want to hear. We tell them what they need to hear. We tell them the honest truth even though we know it means we will probably not get the project. We think that someone paying big money for something deserves to be told the truth.
We spend as much time selecting customers as they spend selecting us. Again, successful projects require a commitment on both sides. Either side can make a project fail.
Experience, training, and an efficient business system that supports and enhances our operations.
We say "no" a lot. We have identified nine different reasons to say "no". If any one of the items is marked "no" then we do not do the project. Whereas all nine areas have to be positive before we will quote a project.
Note that just because we don't want to be the lowest bidder does not mean that we are not. Many of our projects in the last year are because we were a fraction of the cost of other bidders. Because we use Microsoft technologies we don't have to pay thousands of dollars per computer before we start working on project.
For one customer, we were 1/6 the cost of the preferred vendor.
Another customer was getting quotes from $100,000 to $350,000 for some simple software that we quoted $12,000 on.
Another customer was getting quotes of $15,000 to $25,000 to read a few variables out of a PLC and display them on the screen.
In all of these cases we still made a fair profit, projects were delivered on time and on budget and it was a win - win situation.
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