Blog homeIn this time of credit crunch and fuel surcharges many travel companies are looking again at IT / web projects and wondering whether they are really going to give the return as projected in their business cases.
Rather than cancel or postpone a project here is an idea how to bring down your technology supplier costs. You need to understand the principle of a risk premium.
The temptation when asking a technology supplier to provide a quote for a project is to start too early to talk about price. The goal should be to hold off discussion about price until the latest possible moment.
This ensures that your technology supplier:
- Has the most detailed understanding of what the proposed project will require (in terms of their own time and IT resources)
- Will be wondering whether the project really will convert - so may be prepared to negotiate - especially if they have been holding back people to work on your project - so may struggle to allocate these people to alternative client projects at the last minute should your project not progress.
If you head for a discussion about price too early, the supplier will have to take more of the risk of not fully understanding the nature and scope of the project - hence will inflate their proposed price to take this into account. This is a risk premium - a premium that the supplier will charge you based on them taking more of the risk.
What I would do is have a senior member of your project team permitted to talk about price - but make them unavailable for a couple of weeks (for example by going on holiday) - while other team members get on and talk about the detail of the project…….
[Of course this works better on fixed cost estimates than on Time & Materials estimates - but the principle still applies to both styles of project]
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