Digital Offers: A Guide to Thorough Evaluation

If you have ever purchased a website, an online shop, or custom software for your business, you know the procedure: You are presented with an offer.

These offers vary greatly - from short one-pagers to extensive 42-page documents that almost resemble complex contracts. Such offers are filled with technical terms and a plethora of details, which can be difficult for non-experts to understand. However, it is essential that offers are clear and comprehensible so that you are informed about all important aspects, risks, and assumptions.

In 25 years, I have written and reviewed over 200 offers for complex software projects. In this post, I share my experiences and insights to help you better understand and evaluate offers.

I will cover the following topics:

1. Output vs Outcome: Understanding what is actually delivered and what goals are to be achieved.
2. Guarantees: The importance of guarantees and what they mean for your project.
3. Time & Material (T&M): The pros and cons of Time & Material versus fixed prices.
4. Contract Details and Termination Conditions: What you need to know before you sign.
5. How Important is the Technology Stack?: The role of technology selection and its impact on your project.

Output vs. Outcome: What Really Matters in Software Offers

When you receive an offer for a new website or software, you will hopefully be presented with a detailed list of features and functions - the so-called "Output". However, what is often missing is the "Outcome", the long-term, measurable effects of this work.

What are Output and Outcome?

Output refers to the direct, tangible results of work, such as developed features, designs, or hours worked.

Outcome, on the other hand, focuses on the long-term effects of this work, such as increased revenue or a higher order volume.

Both aspects are important, but the outcome provides the "why" behind the software. It ensures that the technology serves a greater goal and is not just a technical gimmick.

Why Understanding Outcome is Important

During a software project, many decisions need to be made. To make these decisions in line with your goals, the service provider must understand these goals. This prevents endless meetings and unnecessary costs.

My Tip: Make sure your goals are clearly stated in the offer. This ensures that the service provider understands your "why" and that the software is not only functional but also strategically aligned with your business.

Guarantees in Offers: What They Really Mean

Guarantees in offers are more than just marketing tools - they are promises meant to build trust and minimize risks. There are two main types of guarantees: those that relate to the collaboration and those that promise a specific outcome.

1. Guarantees Regarding Collaboration

This type of guarantee, such as money-back guarantees, fixed prices, or warranties for error-free work, shows that the service provider is willing to take responsibility. They are a strong signal of seriousness and trustworthiness. However, pay close attention to the wording to avoid empty promises.

2. Outcome-Oriented Guarantees

Guarantees that promise a specific result, such as a top ranking on Google or a certain number of leads, are tempting but should be approached with caution. While experienced service providers can increase the likelihood of a positive outcome, guaranteeing specific results is unrealistic. Be skeptical of such promises, as they are not sustainable.

Overall, guarantees are an important aspect when choosing services. They can help you separate the wheat from the chaff and make an informed decision. Remember to critically evaluate offers and not be blinded by unrealistic promises.

Time vs. Money in Offers: A Critical Look

A topic that is particularly close to my heart: pricing in offers, especially Time & Material (T&M) offers. T&M means that you pay for the time spent and materials used, usually combined with an estimate of the time required.

When you receive a T&M offer, you should take a close look. Why? Because this shifts the risk onto you as the client. This might be acceptable if you are well-versed in software development. But if it is not your field, how well can you really assess the risk?

A T&M offer essentially says: "We believe it will take roughly this long, and you will pay x euros per hour/day, no matter how long it actually takes." Even with experience, an estimate is still an estimate and is almost certain to be exceeded.

Another problem: The interests are opposed in T&M offers. You want the result quickly and cheaply, but that means less revenue for the service provider. There is no incentive to work efficiently.

So what can you do?

• Option 1: Find a service provider who delivers the result at a fixed price. This gives you a fixed cost you can plan with, without unpleasant surprises.

• Option 2: Get someone with real software expertise on board. This way, you can better understand and assess the risks.

If you have an offer based on estimates and hourly rates, take a close look. It is worth it to avoid unpleasant surprises.

Contract Details and Termination Conditions: What to Watch Out For

Contract details and termination conditions are usually found at the end of the offer, but they are crucial for your decision. Here are some important points to keep in mind:

• Contract Duration: How long is the contract? For example, 12 or 24 months.
• Payment Terms: How and when will payments be made? What payment methods are accepted?
• Service-Level Agreement (SLA): What are the agreed service levels? What about support times and guaranteed availability (personnel & software)?
• License Scope: How is the software licensed? User-based, device-based, location-based?
• Data Protection and Security: What measures are taken to protect your data?
• Termination Notice: How much notice do you need to give to terminate the contract?
• Refund Policy: Under what conditions are refunds possible if the contract is terminated early?
• Data Release After Termination: How and when will your data be released or deleted after the contract ends?

This list is probably not exhaustive, and I am not a lawyer. I just wanted to highlight some relevant points so that you don't overlook them when evaluating the offer. It is important that you also seek legal advice to fully understand all obligations and risks.

Tech Stack: More Than Just a Footnote

In offers for software development, the Tech Stack should not just be a footnote but clearly and understandably described. Why? Because the technology behind your project is crucial for its success and future viability.

In recent years, much has changed in the world of software development, particularly with the rise of No-Code and Low-Code tools. These tools enable the development of software with little to no code and have now reached a quality that cannot be ignored. What used to take weeks or months, such as implementing an interface between two applications, can now be realized in days - thanks to tools like Hasura.io, Nhost, Baserow, Zapier or Retool.

The Role of Open-Source Technologies

Another important aspect is the use of open-source technologies. Open-source software offers not only cost advantages but also high flexibility and adaptability. It allows you to tap into a broad community of developers and experts, benefiting from their innovations and improvements. Open-source tools are state-of-the-art and offer high security through regular updates and an active community.

If your offer does not reference No-Code/Low-Code or open-source tools, it is worth taking a closer look. An outdated tech stack can mean you pay more than necessary. And who wants that?

Summary: Why a Thorough Evaluation of Offers is Essential

Choosing the right software or service for your business is a decision with far-reaching consequences. A hasty decision can lead to unnecessary costs and jeopardize the success of your project. From a thorough analysis of workflows to gathering team feedback to the careful selection of the tech stack – each of these steps is crucial to ensure that the chosen solution truly meets your needs.

Guarantees, pricing, and contract details are more than just formalities; they are the foundation of a successful collaboration. An offer that does not carefully consider these elements can lead to misunderstandings, disappointments, and ultimately financial losses.

To avoid such pitfalls, it is important to thoroughly evaluate offers.

Good luck!