What's ridiculous about pay-as-you-go in software development

The industrial standards for software development are charged according to working hours.

Enterprises generally calculate charges, costs, and gross profits according to the following formula.

Billing amount = estimated development work hours X Labor hour unit price

Direct cost = Development hour X Labor hour average cost

Gross profit = billing amount-Direct Cost

If the development investment time is equal to the estimated work hours,Gross profit = (Labor hour unit price-average cost) x labor hours

Therefore, the annual income of an enterprise for a person is calculated based on the following formula:

Revenue = Unit Price X working hours-Cost Price X annual time

Therefore, developers tend to pay attention to an indicator to increase the rate of return:Failover rate (that is, work fullness)

Failover rate = working time/full year time

The duration of the year is a fixed value, so the employer will try to increase the employee's working time to maintain the profit level. Of course, lowering employees' salaries is also a way to increase earnings.

In this case,The salaries of employees of a company charged by working hours are clearly determined: that is, it is impossible to exceed the external unit price.Otherwise, the employer will not make money.

The preceding formula does not cover the expenses of management personnel, site expenses, employee benefits, and other expenses.

So,The first drawback is that the unit price limits the level of talent.

The second drawback is that enterprises will "improve" Towards low efficiency".

For enterprises, there are two ways to increase revenue:

A. Increase the Working Hours
B. increase unit price

Once the unit price is determined, it is difficult to increase the income by increasing the working hours. Since it is necessary to increase work hours to increase earnings, efficient methods will reduce earnings and be rejected. This is not the direction of industrial development.

This is doneSide effect: employees cannot grow.

 

Third, the destruction of benign Competition

Assume that there is a bidding, and several companies are bidding for the bidding.
Enterprise A is in the above situation, and their bidding price is 20 thousand yuan/person month x 100 person month = 2 million
Enterprise B is an efficient enterprise whose bidding price is RMB 60 thousand/person-month x 30 person-month = RMB 1.8 million
Enterprise C is similar to enterprise A. Its bidding price is 22 thousand RMB/person-month x 90 person-month = 1.98 million.
D. Enterprises are completely out of control. Their bidding price is 20 thousand yuan x 20 person-months = 0.4 million.

So what does the above enterprise offer for Party A mean?

1. The working hours should be about 100 man-months.
2. The total project price is about 2 million.

Note that party a often conducts a comprehensive evaluation based on the prices of each bidder, rather than knowing what it is.
Therefore, unqualified Enterprise D is excluded and competent Enterprise B is also excluded. Select one between A and C, and throw a dice. Suppose a wins the bid.

In actual development, it takes 120 person-months to complete-this is the practice of such enterprises-the work cannot be completed on time, and the cost is always overspending.

As a result, they listed a lot of evidence (this is summed up by experience and will be done in each project), proving that the extension and overpayment were caused by Party A's lack of specific requirements (this is indeed the case, because no one can fully clarify the demand), they requested a fee of 0.4 million yuan from Party.

At this time, Enterprise B is still looking for their orders.

In such an environment,High efficiency means no competitiveness.

 

Fourth, Party A's money is wasted on hourly charges.

For some professional Party A, they also have their own estimation of the project scale, and will also provide a reference person month number, however, the increase in investment due to Party A's lack of efficient work methods also exists.

Similarly, for the above example, Party A cannot trust company B's quote in any way-because it gives a person-month which is beyond imagination-this is impossible!

In this case, Company B should adopt the X3 STRATEGY FOR THE NUMBER OF quotors in each month.

The price is 60 thousand RMB/person month x 90 person month = 5.4 million. The price is more than twice that of other companies. Still not competitive.

Originally, we could use an efficient way to complete the work with 30 people a month. We had to use 100 ~ This is the status quo.