I have been working in the software industry since 2012.
Most of my experience and impressions have been formed by seeing inside more than 50 companies in Central and Eastern Europe selling software services or technology to clients in the US or Western Europe.
If I were to reduce my impressions to a few sentences, these would be:
Great engineering and delivery skills.
Self-inflicted wounds on the making money part.
While I don’t have any expertise to comment on why people are so good at engineering, there are some common symptoms and behaviours that explain how companies are losing revenues every year.
1. Winning projects at price levels that are lower than they should be
Every single project that software services companies try to win is unique.
There are tens, if not hundreds of variables that could be taken into account: some of them are linked to the delivery team and its skills, others to the vendors financial objectives and reality. Competition, market conditions, the customer’s expectations, needs, industry and many other characteristics.
All of these have a direct impact on the price level that will be agreed.
The reality is that most software companies are winning most projects at price levels that are lower than they should be, in proportion to the value delivered and the customers’ willingness to pay.
2. Giving discounts when they shouldn’t
Most companies I have seen tend to agree to discounts or lower rates for some customers, even if they would have objective reasons not to reduce the prices.
Very few companies have the structure in place to document value created for customers and use that to defend higher rates.
3. Rigid structure
For all the use of agile in software development and the delivery process, the commercial side is surprisingly non-agile.
Many companies apply a rigid sales process and a fixed rate card, which leads to not being able to capture opportunities from different types of customers.
This means they are not leaving enough room in the sales process for adjusting the pricing, up or down, based on the customers’ context and the project’s specifics, including costs, risks and competition.
WHAT THIS MEANS FOR YOU
Just as the reasons for why this is happening are unique to a particular set of circumstances and context, so is the solution.
Getting out of this trap could require changes to the team’s belief in the value and quality of what they are selling, in the methods they use to sell to customers or in the tools they use day to day.
Or to all of them.