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Vendor TurnoverI was meeting with a customer this week, and we got to talking about the pricing models of the vendors we were evaluating. He mentioned his fear of the "time and materials" approach. What happens if, halfway into a project, the developer quits? This is a legitimate concern. The new programmer assigned to the project is probably going to need some time to get up to speed, and will probably not like a significant portion of the code written by the previous individual. Programmers generally don't think much of the approach of any other programmer. How does my client make sure he's not paying for all that extra time and effort that is not his fault? Yes, the vendor will probably offer to make an adjustment, but how much of one? And how does my client know that he's not being screwed (to put it bluntly)? While there are many problems with fixed price agreements, which is the subject of another article, this is one of the few benefits. The client pays the same, no matter what turnover problems the vendor has. There will, of course, be inefficiencies, delays, and quality problems. So the best course of action is to confront the turnover risk head-on, and try to avoid it. One of the basic and early questions that I ask a consulting firm is about their turnover. How many people left during the year? How many techs do they have? What's the average tenure of their engineers? These are questions that you have the right to ask. You need to get some idea of the stability of the staff that will be working for you. The frightening thing is that the average turnover rate in the industry is about 20%. The IT consulting business is nothing if not a revolving door when it comes to its employees. But there are some gems out there, and asking about turnover will allow you to weed out the cubic zirconia. A word of caution, though. Questions about turnover are rarely asked. So the rep may not have a ready answer, or may simply say something like "it's pretty low - our people stay." Ask for more specifics. Use the questions shown above. If the turnover is more than 10%, approach with caution. If it's more than 20 to 30%, alarm bells should be going off. Based on my experience and some unscientific surveys, I've found that smaller organizations, with fewer than ten or fifteen engineers, often have a lower turnover rate than larger organizations. The reason is open to speculation. It may be that the owner is likely to be closer to the action, therefore friendlier with the staff. It might be that the engineers have a freer hand. Or it might be that my survey methodology is dopey. I'd be curious to hear from you about your own experiences. Big or small? That's not the issue. And depending on your situation, you may be forced into one or the other. BUT, pay attention to that turnover rate, and do whatever you can to avoid having to switch horses in mid-stream. Then it won't make any difference whether it's a time and materials contract or a fixed price deal. You'll have consultants that will be with you for the life of the project, and you'll be more assured of success.
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