While this research would be especially fun if you could get your hands on data across multiple firms, it's more realistic to assume this would be an intra-company study. Start by selecting which segment(s) of your business you want to study. You could do it by monetary size, industry, software type, etc. For this example, let's say we're going to look at all ERP implementations.
Gathering the Data
Once you have selected the projects you want to study, you can begin to gather data. For each project, you would gather the following data twice. First, you would gather it based on the bid. Second, you would gather it based on the completed project actuals.
- Overall project budget
- Budget by team
- Budget by customization
- Initial bid vs. final negotiated bid
- Overall timeline
- Timeline for each project phase
- Major milestone dates
- Adjustments to timeline based on client request
- Total number of resources
- Number of resources per team
- Number of client vs. consultant resources
- Proposed level of each resource
So, what do I expect to find using this data?
- Looking at the bid vs. actuals for the overall project budget, you will be able to see how accurate your bids are to what the projects actually cost. Are you off by 5%? 20%? 50%? This will give you an idea of how much your future bids will need to change.
- To set the new baseline for future bids, you can look at the aggregated results of your actual data to determine what would be a more accurate bid that will save your client from potential budget overruns.
- Comparing bid and actual amounts for budget by team and budget by customization will also help you pinpoint if there are certain areas where your sales team is really having a hard time coming up with accurate figures. You can use this data to adjust your pricing model.
- For example, you might find that you are always running way over budget on form customizations. Armed with this knowledge, you can work with the developers to determine what you should really be bidding for customized forms based on their level of difficulty.
- Are you using up all of your contingency? How early in the project do you need to tap it? Many clients are uneasy about the concept of contingency, but having data can help support your argument for including it in your bid.
- Finally, looking at your initial bid vs. what you finally agreed to after negotiations will help you determine if clients are consistently haggling you down from an appropriate bid to a budget that won't cover the full cost of the project. This data should help your sales team adjust their negotiating tactics.
- In my experience, clients always want the project done faster. Use your overall timeline comparison to show them how long it truly takes to complete the type of project they want to implement. This will set realistic expectations.
- Breaking your timeline data down by phase and milestone will also help you determine if there are certain parts of the projects that are taking longer than conventional wisdom would suggest. Your methodology might say the test phase should take a month, but if it consistently takes two months, it's best to bid based on the actual time required.
- Clients often see cutting resources (and by resources, I'm talking people) as a quick way to save on costs. You don't really need 3 people to develop training, do you? Use the data on actual number of resource per project by team as a baseline for how many people you need to complete the project on time.
- This data should also help you find the right resource mix. Look at the projects that came in closest to their timeline and budget. What allocation of client vs. consultant, junior vs. senior, on shore vs. off shore did they use? Find the winning combination, then replicate it as appropriate.
Using the Data
So, how does all of this data actually help you during the sales pitch? Imagine being able to walk into a client and saying, "I know our bid is 10% higher than everyone else's. We have the data, though, that shows that our budget and timeline are accurate for this type of project. Not only does this mean that we are most likely to come in on time and on budget, but this also means that three months from now, you won't be standing in front of the steering committee asking for more money and a schedule extension. Instead, you'll be standing in front of them each month with a status report that shows the project on track."
This helps move your people from being just a sales team to becoming trusted advisors. And as word spreads that your company provides accurate bids that save companies from overruns, and individuals from embarrassing meetings with Executives, more and more clients should see the benefit of a higher up-front cost versus lots of hidden surprise costs along the way.
The one main caveat I want to include here is that if your consulting firm has a culture of ghosting hours, your actuals will be off. The research is still worth doing, and should still improve your bid process, but don't be surprised if your bids are still lower than the reality.
Let Me Know: Do you know of any firms that have done this kind of research? How has it improved their bidding process?