Outsourcing Web Design – Hourly vs Fixed Contracts
Posted on 02.05.2009
If you are a small to medium-sized company, you’re probably faced with the age old dilemma of how to get the best website for your buck. This is a difficult decision for many business owners because of the lack of understanding of web technology and metrics to justify the return on investment. To help you with this decision, we have prepared an analysis of the strengths and weaknesses of the two most prevalent web design models – the hourly designer and the fixed contract design firm.
Model #1 – The Hourly Designer
Hourly designers are very common in the industry. These individuals are typically found via sites like Craigslist, UpWork or Outsourcely and often charge very competitive rates because of their low overhead (especially if they are offshore providers). Here are some of the strengths and weaknesses of this model with respect to SME websites:
- Competitive rates: Hourly rates are good because of low overhead, especially in a down economy.
- Flexible: Since they are in it for the hours, they will be more receptive to change requests.
- Easily terminated: If it isn’t working out, an hourly designer can be “let go” without too much grief.
- Limited knowledge: They may not have all of the skills and expertise that you need.
- Limited time: Single designers cannot deliver as quickly as a well managed team.
- Costs: Budgets are exacerbated by an hourly designer who’s full cost is not realized until completion.
- Quality assurance: Everyone makes mistakes. A single designer may not catch everything.
- Limited SEO: These designers may be artistic but may not appreciate or understand search engines.
- Sunk costs: After spending the money, SME’s are reluctant to redesign their site and risk it going stale.
- No empowerment: Designers retain feature control to ensure they get hourly pay for site changes.
- Not strategic: Few are able to think strategically and align websites with SME business objectives.
- Wrong motivation: They are motivated solely by how many hours they can get out of you.
- Not ongoing: Once the site is built and functioning, the hourly designer moves on to their next project.
Model #2 – The Fixed Contract
A fixed contract is often offered by more mature design firms working on larger-scale websites. Companies that hire fixed contracts firms are slightly larger often with recognized brands. They may have in-house marketing expertise but are not at the scale where it is worth employing their own web design staff. Here are some of the strengths and weaknesses of this model with respect to SME websites:
- Fixed cost: The main reason why companies choose contracts is because it controls the budget.
- Expertise: Contracting firms quote on projects that they have the skills and expertise to complete.
- Speed: Fixed contract firms are motivated to complete projects quickly in an effort to increase cashflow.
- Quality assurance: To manage costs, these firms strive to deliver a bug free product the first time.
- Empowerment: Depending on the terms of the contract, these firms may provide feature training.
- Strategic: The best firms do work strategically with their clients but again it depends on the contract terms.
- High margin: In order to cover their costs and any uncertainty, the contracts are relatively high-priced.
- Fixed Requirements: Once signed, the scope cannot be changed without revising the contract.
- Termination: Once signed, these contracts are difficult to terminate.
- Sunk costs: In this case, the sunk costs are even worse because of the high priced contract.
- Not ongoing: Payment is made upon completion. Expensive ongoing maintenance may be included.
- Wrong motivation: Contracting firms want to reduce costs to capture as much margin as possible.
Yardstick Services firmly believes that there is a better model for small to medium-sized companies. As such, we are currently testing a model that aligns the motivations of the web design firm with the long-term business needs of the website owner. If you do decide to go down the path of one of the traditional models, make sure you understand the strengths and weaknesses of that model and do your best to drive down the costs and expand the scope before you agree to anything.
Because of the down economy, designers and design firms are getting hungry. As such, there has never been a better time for SME’s to make a long-term investment in a top-notch website.