When you outsource IT, stop paying them by the hour!

by | Jan/13/2010

To help ensure your IT projects are finished on time and in budget, pay IT outsourcing a flat fee. Do you realize that when you pay outsourced IT companies by the hour, unless you put some other restraints in place, you basically reward them for taking longer?

For real—you can find companies that will work with you for a flat rate. They are rare, but they are often the best IT companies to work with. They are sharing the responsibility with you to get the systems up and running quickly. If they drag out a project, they are losing money right along with you. I think that is fair. IF they finish sooner, you both win, and they’ve earned their money.

Some executives tell me, “We found a new IT company that only charges $50 per hour instead of our old company that was $150 per hour. Aren’t we smart?” I explain that the hourly rate is irrelevant without knowing how long they take to accomplish a task. You would much rather pay $150 to a company that solves a problem in an hour than pay another company $150 for 3 hours of work to solve the same issue, especially if they gave you an estimate of $50 to being with.

The most important part is defining the scope clearly from the beginning. Planning is usually a good thing anyway!

I work with my clients on a flat fee basis.

When you outsource, I strongly encourage you to find an IT company that will work with you for a flat fee per project as well! Your projects will be more on time and in budget.