Why Would ANYONE Judge VALUE Based on Hourly Pricing Alone?

About a week ago an overseas outsourcing company contacted me through a venue that I frequent. Since I was looking for a coder for a specific database conversion project, I asked them for a quote – they had told me that it could be done for $10 per hour. I send them the two databases, along with instructions about what needed to be done. I knew it would take me about 5-6 hours to do it. It was not work I liked doing, so I was interested in outsourcing it.

Their quote came back for 24 hours of work, at $360. Hmmm. That isn’t $10 per hour…. And it is more than triple the maximum amount of time that I’d allote to the project.

I then contacted a regional coder – she charges $85 per hour. Ouch! That is a LOT compared to $10 per hour! Or even $15!

But, she could do the work in 2-3 hours. Hmmm…. $170 to $255, instead of $360! Which one is the real bargain? Especially when you consider language, cultural, time zone, and legal recourse limitations.

Even when you are comparing local with local, hourly rates are just NOT a reasonable basis of comparison. The best way to judge, is to ask for a list of included services, and a flat rate, or at least a firm estimate. Any experienced professional can give that, and a newbie can still offer reasonable guarantees that it won’t go over a certain amount.

Often, higher hourly rates pay for the following:

1. Reduced legal recourse risk. It is easier to recover from people who are within the same country as you, or who are in a country that has reciprocal agreements with your country.

2. Easier communication – time zones, language and cultural differences, or inexperience on the part of the technician in communicating with clients can all cause communication barriers, which equate to lost time or poorly done work.

3. Better tools – Better tools mean better quality output, and faster work speeds. The right tools can shave hours off many kinds of tasks, so hourly rates become meaningless when you are trying to compare the cost of one service that is done manually, and one that is done with better tools to do it more efficiently.

4. More experience – this means both faster output speeds, AND better quality. But it also means that an experienced professional has knowledge of “gotchas” that might bite you if you work with someone who is less experienced. For example, in our industry, there are certain things that municipalities or non-profits of certain types have to do with their sites, or which they cannot do on their sites, which are different than the standards required by small businesses. Experience protects those entities from potential lawsuits.

5. More Accurate Applicable Charges – One company may charge for research time, if they lack experience in a certain area, another may not. One company may charge for negotiation time, another may not.

6. Less Lost Time – Higher quality and accuracy can be worth paying a higher hourly rate for, because it saves you in the long run. If a lower hourly rate means work has to be redone, it costs you even if you don’t have to pay for it directly.

7. Attention to Different Kinds of Details – Often higher hourly rates are charged for higher risk projects because there are more details to attend to. Simple projects do not require this, but complex ones may. Often, as a business grows, so do their risks, so a service level that was appropriate for a startup may not be appropriate for a larger faster growing business. Higher risks almost always mean higher hourly rates, but they also result in more protection for the client.

There are MANY good companies who charge low rates. There are MANY new businseses and service providers who can do a very good job at a fair price. This is not in any way a condemnation of lower priced companies.

Rather, it is an encouragement to actually compare the REAL price, and the REAL VALUE rather than making a knee-jerk reaction based on the appearance of price, by using a number which is actually meaningless.

It would be like saying “A car that gets 35 MPG is better than a car that gets 12 MPG” without comparing anything else, like the reliability of the car, the size, the intended purpose, or even the side the steering wheel was located on!

Judge price and value based on factors that really matter, and you’ll find that what appears to be the lower price, often isn’t!