My company is marking up way too much. I know it, but I can't change it

[Stelio Kontos]

If your employers were screwing over regular folks or small businesses with this, I'd say your feeling is justified.

But they're skimming from big, amoral (at best) corporations that in turn screw over any and everyone they can. I don't see an issue with taking as much of their money as possible.

[caractacus]

Go find a back-breaking manual labour job then morals will be the least of your problems.

[StayTuned]

Go find a back-breaking manual labour job then morals will be the least of your problems.

Not like my job isn't brain breaking or extremely exhausting or anything...

[shadowmouse]

It's not that we say that there is a risk associated, so that they can prepare a reasonable budget buffer. We just flat out say that we need 10 hours, knowing full well that we only need 5.

If it has reached the point that you are uncomfortable enough to be talking about quitting, start looking for a new job. Ethics can serve as an early warning for situations that can lead to you discovering if your actions hold up in court. Back when I was in practice, there were times that a client would leave following their initial intake interview and I had to wonder how they missed the warning signs. The next question was how much that would hurt their case.

In your situation, your company sounds like it is at risk and could go under, downsize, or keep taking bigger risks that will eventually cross lines more clearly. None of those make staying seem like a good gamble. You may have a higher profile if you encounter trouble since you have a leadership position and client contact. If you get out, I suggest seeing a lawyer to get a better idea of your risks and evaluate whether you should consider becoming a whistleblower. There may be more awkward stuff going on in the ledgers that you don't know about, and you don't want to find out when things go splut.

[Altrec]

So your company pads some extra time into their quote? I don't really see the issue. The customers big companies or small should be getting quotes from more than one company, and if your company comes in too high due to all the extra padding then you don't get the job, or you do get the job and it just means the customer is willing to pay what was quoted. If the customer doesn't bother getting multiple quotes then its on them. Not really a moral dilemma if you ask me.

[breadisfunny]

The bottom line was struggling? So that means the company was not making enough money? Seems to me that it's a good idea to raise prices. Also, the customers are companies that can easily afford the new prices, so what's the problem?

I think you're looking for problems where there are none, but if it bothers you so much, go find a new job.

and who exactly do you think those clients i.e. companies pass that expense on to? thats right the customers and or employees by cutting jobs. they don't just eat the cost. this doesn't occur in a vaccumn.

[cuafpr]

don't see the issue clients are happy, projects are getting done on time and profits are up. Maybe ask for a raise? I always over estimate how much time I need anyways to be safe.

[Cracked]

Okay, so tell yourself the internal cost of your labor went up to double, but for reasons that might actually make accounting sense, instead of increasing the cost of your labor in the estimate, they increased the length. Same outcome.

[Deja Thoris]

Sounds like you're misunderstanding this.

If you need to charge more for jobs then you can increase the estimated time or the labour rate. Same outcome.

If it gets too expensive for customers they say "You aren't offering us value" and they go elsewhere.

Drop the angst and handwringing, its a simple equation for both sides.

[Grym]

Does your company have total controls over all their clients? Are the clients free to choose alternative suppliers if they wish?

In the event the clients didn’t have a choice, eg a government granted contract, then yes it is unjust to increase prices as you please.

However if choices are there, then it is a different story.

The client is free to choose alternative if they believe the value is not as good as other competitors, if the clients stay with the company, then either the company is still the cheapest amongst others, or the service is better that they are willing to pay a premium for, or a combination of both.

If that is the case, the client decided that the money is well spent, then what is the problem?

[Krastyn]

In your situation, your company sounds like it is at risk and could go under, downsize, or keep taking bigger risks that will eventually cross lines more clearly. None of those make staying seem like a good gamble. You may have a higher profile if you encounter trouble since you have a leadership position and client contact. If you get out, I suggest seeing a lawyer to get a better idea of your risks and evaluate whether you should consider becoming a whistleblower. There may be more awkward stuff going on in the ledgers that you don't know about, and you don't want to find out when things go splut.

You are seriously misunderstanding what is happening here. The company has done nothing even remotely close to illegal.

The company was previously providing estimated pricing, and then providing a final invoice based on actual time used (with their books open for the customers to review, as much as one can trust those).

They are now providing their clients a firm quote, showing the breakdown of how they came up with the number, but the quoted price is the final price to the client regardless of whether they spend more or less time on the project.

The OP is unhappy because they feel their estimators are putting in too many hours from what they actually need to finish the project.

However, the OP's company has shifted from a model where before they assumed almost no risk from quoting jobs to one where they now bear most of the risk. AS such, they're likely overestimating in order to create contingency.

It has been interesting though seeing all the posters jumping on and instantly assuming the company is being shady.

[StayTuned]

If anyone is interested. I actually handed in my resignation.

I wasn't alone in my network feeling that this business practice feelsbadman. I got an offer from another company that does it much better.

There is absolutely no problem with fixed price sums. But don't rip your clients off. My reputation is worth more.

- - - Updated - - -

The OP is unhappy because they feel their estimators are putting in too many hours from what they actually need to finish the project.

Well, yes. Do you think we make our numbers up by sticking our fingers in the air and measuring the moisture? Our estimations already include complex enough calculations for risk factors, overhead factors, unexpected circumstances, QA fuckups, bugfixes... you name it.

There is zero reason to make up an arbitrary number on top of that. If there is, explain your reasoning to me so that we can consider it directly in our own calculation, because we, the development team, are liable for our estimations. Not some account manager.

[cubby]

If anyone is interested. I actually handed in my resignation.

I wasn't alone in my network feeling that this business practice feelsbadman. I got an offer from another company that does it much better.

There is absolutely no problem with fixed price sums. But don't rip your clients off. My reputation is worth more.

Well done, imo perfectly handled. You show your protest/concern, note it publicly, and move to a better position.

[Krastyn]

There is zero reason to make up an arbitrary number on top of that. If there is, explain your reasoning to me so that we can consider it directly in our own calculation, because we, the development team, are liable for our estimations. Not some account manager.

As you have described things to date, the bold is factually untrue. You may be liable internally, but the company has no liability with the client. As you mention in your opening post:

Normally, my performance is efficient enough that I can manage my job with 5% to a max of ~15% of time on top of the total estimation of the work. It depends on the complexity of the task and the team size.

So you say that you sometimes go over your estimations. In those cases, since you opened your books to your clients, you also charged them for those times you went over, based on the actual hours used. You confirm this when you said:

We would communicate these hours openly in our cost quote stating how long we expect each task to take, who is performing it, and what their rates are. We then communicated also openly a risk register, that would give reasons for any additional budget on top of that.

You weren't accountable. If you went over, you communicated that to your client, and billed them for it. You didn't bear the risk.

Now, you quote them a fixed price, and regardless of whether you go over or under, they still pay the same amount. The customer sees little to no risk, while now your company takes almost all the risk. That comes at a premium, one which many customers are willing to pay.

To go back to your original car example, let's say a person knows next to nothing about cars.

Mechanic A says "Yes, I can fix that, it will probably be about $200 in parts, and around 4 hours of labor @ $75/hour, so you're looking at $500. You will be billed based on what the final tally comes in at though"

Mechanic B says "Yes, I can fix that for $550."

All other things being equal, I'd go with B. I want cost certainty.

[shadowmouse]

If anyone is interested. I actually handed in my resignation.

I wasn't alone in my network feeling that this business practice feelsbadman. I got an offer from another company that does it much better.

There is absolutely no problem with fixed price sums. But don't rip your clients off. My reputation is worth more.

- - - Updated - - -



Well, yes. Do you think we make our numbers up by sticking our fingers in the air and measuring the moisture? Our estimations already include complex enough calculations for risk factors, overhead factors, unexpected circumstances, QA fuckups, bugfixes... you name it.

There is zero reason to make up an arbitrary number on top of that. If there is, explain your reasoning to me so that we can consider it directly in our own calculation, because we, the development team, are liable for our estimations. Not some account manager.

Thanks for the update. Just on a personal comfort level, I think you made the right choice. Will something blow up later on and make you feel like you dodged a bad situation? Who knows! Then again, by the time things blow up (if they do) you've already stepped in the fewmets.

Good luck!

[StayTuned]

As you have described things to date, the bold is factually untrue. You may be liable internally, but the company has no liability with the client. As you mention in your opening post:

It's not that easy. Yes, we are internally liable. But the company also has a liability with the client. Do you honestly believe we can just charge the client every time we mess up and end up going over what's estimated? normally we have a fixed deadline and the end result isn't always that the client has to pay, because charging more than expected is always a hard topic. Sometimes extra payment is outright refused. When we go over estimated time with clients (or rather, departments within our clients) like these, we usually try to cut scope from the end product. Normally you realize you're running out of time early enough.

So you say that you sometimes go over your estimations. In those cases, since you opened your books to your clients, you also charged them for those times you went over, based on the actual hours used. You confirm this when you said:

See above. It's not always that clear cut, but this is certainly my preferred method. Cutting scope feels unsatisfying for all parties, so my first reflex is to ask for more budget. Some clients are more understanding of how SW development works, others not so much.

You weren't accountable. If you went over, you communicated that to your client, and billed them for it. You didn't bear the risk.

Have you ever had a discussion with your client's POC about extra charges? I am still running after bills I've written 6 months ago.

Now, you quote them a fixed price, and regardless of whether you go over or under, they still pay the same amount. The customer sees little to no risk, while now your company takes almost all the risk. That comes at a premium, one which many customers are willing to pay.

Absolutely true. Which is why I never said a fixed sum is a problem. But there is a professional way to calculate the end result, that is fair to both your company, and your client. And then there is my account management.

To go back to your original car example, let's say a person knows next to nothing about cars.

Mechanic A says "Yes, I can fix that, it will probably be about $200 in parts, and around 4 hours of labor @ $75/hour, so you're looking at $500. You will be billed based on what the final tally comes in at though"

Mechanic B says "Yes, I can fix that for $550."

All other things being equal, I'd go with B. I want cost certainty.

And then there is my company, who for the same work says it will take 1000€. Our projects are often so time sensitive that finding another offer in time isn't always possible. Again, the only reason we can do it is because of the size of our clients. This doesn't excuse it though.

[dwarven]

The cost you charge for a service is not up to you or even your company. It's up to the market.

[Cracked]

And then there is my company, who for the same work says it will take 1000€. Our projects are often so time sensitive that finding another offer in time isn't always possible. Again, the only reason we can do it is because of the size of our clients. This doesn't excuse it though.

That in itself says to me the clients are not paying enough even now. No matter, you quit, enjoy your peace of mind. Even if I think you are wrongfully righteously willing to die on a stupid hill, especially if you liked the job. If you continue on, I think you will eventually find that honesty is rarely a good business practice in the long run.

[Logen Ninefingers]

Do you honestly believe we can just charge the client every time we mess up and end up going over what's estimated? .

Honest question, don't want to sound rude. Is it your 1st job? Are you working as junior in software development company?

What you are describing as issue is how things work ... if you are allowed to see the internal workings...
It doesn't matter whether client is charged $500 or $5000 for the same work...
One company will charge $500, another $5000 and maybe you can get someone on elance to do it for $50 if you are lucky.

You won't be breaking down the bill to show cost from electricity/building, to director's dividends... It doesn't show how many layers of management have to be paid from that amount, and how many non-directly chargeable resource e.g. HR has to be paid as well.
They are also paying for the brand, think buying Armani jeans vs normal jeans.

On the side of scope and requirements. It's not about how you feel or how your boss or the client feels. It's about the contract.
Contract is signed and contract defines which level of faults/errors are being fixed for free and which are chargeable. In some cases things can be totally broken, it can be developers fault but still client will be charged extra.

[smityx]

Your company will survive or die on it's product/services on what the market will bear. Take designer garbage for example. Same place that makes your $1000+ phones during it's normal hours turns around and makes they same crap with different logo/badges on it for local markets for pennies on the dollar at night.