It used to be so much simpler. Do you want chocolate, strawberry or vanilla ice cream? Coffee: with or without white/sweet? How many pages will your new Web site have? Now we have an infinite number of ice cream flavors, Starbucks inspired myriad coffee concoctions, and database/CMS controlled Web content. Everything is possible... but at what price?
When a print collateral piece is produced, it is done. It is well understood that once something is printed, it is finished and the cost of changes is high (reprinting). But because Web sites can be changed at any time, they are. The problem is that these changes occur continuously throughout the project since doors are continually opened to new possibilities. What is not always understood is that each time you step through one of these new doorways, additional costs are incurred... either robbing from other budgets or the generation of Change Orders.
How do you quantify something that is constantly being redefined? How can you estimate costs when a multitude of parameters have not even been thought of yet?
In the communications design industry, a value-based fee structure has been used for decades. Meaning the value of the ideas, not the time it takes to uncover them, is what the client really needs or cares about. It is our responsibility to generate those ideas and create a delivery mechanism that is appropriate for the intended audience(s). This tradition works well for well-defined projects such as print collateral, video, strategy, planning. Where it breaks down is when elements are added downstream and costs need to be covered with additional funding.
I started looking around for pricing models that traditionally work with these types of situations. It occurred to me that industrial/product design has a large engineering component that makes their designs work. Gee... sounds like a Web site. So, how do industrial design firms price their work? I started asking friends who own firms around the country, and found diverse answers:
"We only charge on a fixed-fee basis. T&M (time and materials) sets up an adversarial environment with the client (last time it was 37 hours, and this time it took 40. why?)"
"We only charge on a T&M basis. Fixed-fee sets up an adversarial environment with the client (you said it would cost $100,000 and now you are nickel-and-diming me to death). We explain it by saying we are guides taking clients up the mountain: Every time the trip is different, even though the route is similar."
"We charge fixed-fee for the scope assessment, research and design, and charge T&M for production. The production is segmented into small pieces to allow cost overrun controls. Then, if the client has made a change at that level, corrections are easier and quicker to account for."
Not exactly a conclusive answer, but plenty of ingredients for my brain soup. Here are my conclusions:
1. Create a fixed-fee budget for the Scope Assessment that maps to specific deliverables.
2. Create a Budget Estimate for design and production. This is based on past experience (both with the specific client and others), deadline considerations (how will the staff utilization work with the timelines), anticipated client changes in direction (since it always happens at least a little). This estimate is based on hourly projections and many smaller segments that need to be signed off by the client before proceeding. This can help avoid the "robbing Peter to pay Paul" syndrome.
3. Have the Project Manager get a clear set of goals for the project from the client: Is cost control the most important factor? Is meeting the business objectives the most important?
I'm sure this thinking is only good for a few months till the next online revolution shakes things up again. On Monday you figure out how to work with a certain tool, only to come in Tuesday and find it missing, and a new tool has taken it's place. But I'm not complaining. All this chaos is what makes Interaction Design so fun.
