A critical yet often misunderstood aspect of any IT project is defining exactly what you are selling. This may sound obvious, but it can become quite confusing. While clients believe they are purchasing a digital product, they often overlook the complexities involved in creating something from scratch.
Clients naturally push for fixed pricing to control their budgets. However, offering a fixed price for something that does not yet exist can be risky. Without knowing all the factors involved, it's impossible to predict the true cost accurately.
Why is precise cost estimation so difficult?
To set a price, you need to calculate production expenses, add overhead costs, and include your desired profit margin. But in software development, most production expenses are tied to people — the skilled professionals who create the product. While their salaries are fixed, the duration of the project is not.
Uncertainties such as incomplete requirements, evolving client expectations, unforeseen technical challenges, team performance variability, and human errors can all affect timelines. These factors are largely out of your control and make accurate forecasting difficult.
Research from leading global organizations consistently shows that only a fraction of IT projects meet all their original goals for schedule, budget, and quality. Experienced project managers often hit their targets only 30-40% of the time.
Key Takeaway:
Offering fixed prices for custom IT projects is inherently risky. Embracing flexibility and openly communicating the realities of digital product development can lead to better client relationships and more successful project outcomes.
Project Management
29 March 2025