| Don't get me wrong. I certainly don't think the | | | | improvement or dealing with performance decline |
| majority of vendors who use a fixed-price model | | | | is not even in the contract. Also missing is any |
| are trying to rip you off. In fact, when I started | | | | diagnosis of complex performance or network |
| my business that's the way we workedwhich | | | | issues which may involve more than one piece of |
| is why we have such great insight into the flaws | | | | the architecture puzzle. |
| in the system. But there needs to be a | | | | As soon as the fixed price DBA determines that |
| transparency to the work. You need to know | | | | "it is not the DB", the client is on their own trying |
| exactly what you're getting, how long it takes, | | | | to correct an issue where a DBA could be |
| and how much it costs. You need to know that | | | | invaluable in diagnosis and building a plan for |
| you're only paying for time actually spent on your | | | | corrective action. |
| account. And you need to know that no risk will | | | | Fixed pricing estimates are high. They are high on |
| ever be taken with your system just to maintain | | | | a per hour basis and on an hours spent basis. This |
| your contractor's profitability. The inherent | | | | is because fixed-price contractors have to back |
| structure of fixed pricing makes this kind of | | | | their estimate for a year. You are paying for the |
| transparency an impossibility. Here's why: | | | | risk that they have estimated another account |
| Fixed pricing is designed to function with the | | | | improperly and need to make it up on yours. You |
| absolute minimum amount of human attention. | | | | are also paying for the risk that you may develop |
| The more the company does not work for the | | | | chronic problemsand so they charge for that |
| client, the higher the profit. This creates an | | | | in advance whether it happens or not. |
| adversarial system where the caretakers fight to | | | | Once the year is out, the best case scenario is |
| do as little work as possible no matter how much | | | | that you have managed to be a "problem |
| they are being paid. | | | | account" for them and have actually received |
| Fixed pricing encourages wastage. Since a fixed | | | | some bang for your buck. Now that they know |
| price contractor has an hourly rate in mind - say | | | | what kind of hours it takes to manage your |
| $120/hr - then when they quote $12,000 per | | | | account, you will receive a new estimate that will |
| month, that really means that they intend to | | | | be calculated as follows: (yearly hours)*(markup |
| spend no more than 100 hours per month on | | | | for risk)*(200/hr)/12=(monthly rate). You will |
| your account. But if near the end of the month | | | | most likely not be told this formula but I |
| they have only done 20 hours, for example, then | | | | guarantee that it exists. You can never beat it. |
| what happens to the other 80 hours? Nothing. | | | | You will always pay premium rates, even if you |
| You would have received inferior services for an | | | | make it through the first year fighting for |
| astronomical hourly rate and have no recourse to | | | | attention. |
| approach the contractor and ask that they put in | | | | Fixed pricing never goes down, and it usually goes |
| a little TLC. | | | | substantially up after the first year. Whatever the |
| Fixed pricing encourages increased risk. This one | | | | price is, the fixed price contractor always has an |
| has a little math behind it: If a problem can be | | | | hourly rate in mind, like $200/hour. Ask. If you |
| corrected in 1 hour but has a 10% chance of | | | | have already hired a fixed rate contractor, ask |
| reoccurring in 2 months, or can be corrected in 5 | | | | for a monthly report of how many hours they |
| hours and will never happen again, the fixed price | | | | spend on you. Ask. You will most likely be denied |
| contractor will always pick the 1 hour solution. | | | | since the hourly rate can be astronomical if they |
| Why? Imagine that they have 10 different clients | | | | have successfully avoided doing work, but |
| with the same problem. They can spend 50 hours | | | | definitely ask. |
| fixing it the right way for everyone, or spend 10 | | | | And what happens if your technical needs are |
| hours fixing them all the wrong way knowing that | | | | much greater than anticipated? At the end of the |
| only 1 in the 10 (10%) will have a problem in 2 | | | | year, your fixed rate will be increased based on |
| months (incurring another 1 hour then). Therefore, | | | | your hourly usage in the previous year so that |
| the total time saved by doing it the wrong way is | | | | you are back at their target profitability level |
| 39 hours. A huge savings to the contractor. | | | | (which they will still not share with you). Since you |
| Now imagine if that problem has downtime or | | | | can never know how many hours they are really |
| data loss associated to it. This will never factor | | | | spending, you will never know what you are |
| into their profitability equation. | | | | buying. |
| Fixed pricing can be deceptive as far as measure | | | | No matter how good it might seem at the outset, |
| of quality. Take database administration, for | | | | fixed pricing never adds up. You can never truly |
| example, since that's what I know best. The | | | | get the best dealand you may be putting |
| measure of the DBA job in a fixed price model is | | | | valuable data at risk. Because with a fixed-price |
| to ensure that the database is up. Performance | | | | model, if it ain't broke, they won't fix it. |