Are web agencies affected by bid dumping?

What does a web solution cost? What must it be able to do? And above all: What additional costs and services should be included in the price? These questions cannot be answered uniformly. This is why agencies are often confronted with requests for quotations for which the client does not want to specify a budget in advance. The classic pitch approach is thus lost. Clients receive quotes, which they then use to request cheaper quotes from other agencies. This so-called offer dumping is mainly due to the exceptional expert knowledge of the programmer: the customer often cannot see the full scope of a website or the extent of subsequent costs and additional services that were not included in the basic offer. It is therefore a good idea to ask various agencies for quotes and compare them.

Lack of budget framework

The problem for the agencies, however, is that without a budget or clear content specifications, it is difficult for them to estimate what options the website should include or how expensive the whole thing may become. Especially with medium-sized and large web projects, it is very difficult to precisely define the exact amount of work and every expense. "We have no transparency," says the agency. Agency A may offer the optimum, agency B apparently the same, but cheaper. However, shortly after the launch of said website, the customer may realize that small details are missing - which can be expensive, depending on the details. Due to the sometimes very complex programming of a website today, even seemingly simple details can become a huge job. This difficulty not only puts the industry in a bad light, but may also force agencies to submit applications with the risk of being undercut. Now you could argue that this is a free market economy, and you would basically be right. However, quality is often lost in this way. After all, how could an offer that is underbid almost to zero deliver the necessary quality? A start-up, for example, which is not subject to wage pressure but is looking for references, could undercut the offer to almost zero in this game, but at the same time usually lacks the entrepreneurial experience, comprehensive marketing and media know-how. A concrete example: A request from a customer for the conception, creation and production of a relatively comprehensive e-shop solution (including a tool for product comparability in 7 subject areas) in Typo3 was followed by the client's information that an offer from an agency was already on the table for "under CHF 15,000". Is there already a lack of creative effort and perfection in the execution, or can such an offer be implemented without further ado - and above all as a reliable and satisfactory project? Or can this be solved by outsourcing parts of the production to the cheapest countries? According to industry experts, such solutions are not uncommon. "They are based on a lot of after-hours work by freelancers and production (programming) in Asia, for example in India," says the agency. The majority of such solutions may be cheap, but the bottom line is that they are very expensive - because such offers become "pipe-dumpers" on the market. Is this really bid dumping, or is the client simply reliant on such an approach in the impenetrable jungle of programming? Ten of the leading Swiss digital agencies have commented on the problem.

Customers in the IT jungle

All ten Swiss web agencies surveyed stated that they were confronted with requests for quotations without a budget for web-based solutions. According to the agencies, this often occurs in almost every pitch and every comparison of offers. This is often due to a lack of know-how to cover all the critical points of a web project. In addition, clients usually do not specify a concrete budget, so that this can only be determined during the process of clarifying requirements. As customers often do not yet know exactly what they want or what the implementation of their idea will cost, a clear cost estimate is only possible after these clarifications. This means that the specific requirements are often not known in advance, but are only defined in the initial phase of the project. On the agency side, however, it is also suspected that some clients may use this uncertainty to compare the prices of the offers. However, this is probably rarely the case.

As most agencies only cover a certain budget range in a meaningful way, it would usually be valuable for potential clients to provide information on the size of the budget. How the individual agencies react to requests for quotations without a budget range and what attitude they adopt varies greatly in this case:

(Image larger)

Detailed information from the agencies on quality features and additional services as part of the initial offer (PDF)

IT suppliers from Europe, Asia and overseas

One company has responded to the pricing problem with a business idea. With the IT outsourcing platform It-suppliers.com, the client has access to over 2500 IT service providers worldwide. The outsourcing brokerage platform for IT projects is now also available in Germany. Clients of all sizes can find IT companies from all over the world specializing in the entire spectrum of IT services. The client only needs to advertise their project on the platform, including budget and time frame, and then waits for applications from IT companies from Eastern and Western Europe, Asia or overseas, who boost their business via Itsuppliers. com to boost their business. In order to simplify this search, the system searches for the best service providers for the respective client and suggests them on their own initiative. It-suppliers.com also guarantees the completion of the project. If the client is not satisfied with the progress of the project, he will get his money back, according to the company. The platform receives ten percent commission per project. As the founder of It-suppliers.com, Igor Putrenko, explains, he attaches great importance to secure and professionally completed IT projects. Therefore, no freelancers are placed via the platform, but only service companies that can guarantee such a realization. To ensure this, clients evaluate the collaboration with the respective service provider according to proven online symbols, which other clients can assess at first glance and use as a basis for their own contract award. "We work with investors in Europe and the USA who are totally convinced of the potential of our idea," says Putrenko. In addition to SMEs, start-ups in particular are interested in working with It-Suppliers.com. Outsourcing does not appear to be a priority for the leading Swiss web agencies, but there is no denying that this business idea has a certain potential - at least for start-ups. As far as orders handled by web agencies are concerned, however, demand still appears to be low. Almost all of the Swiss web agencies surveyed said: "A project like this generates unnecessary follow-up costs for the agency", "the focus is on the quality of the end product", "as an agency, we work across borders ourselves", "we use synergies and partnerships", or simply: "no". Unless the agency commissioned does not offer the technology requested by the client in-house. But even then, the savings are often much lower than expected. This is also confirmed by Gerry Reinhardt, Manager Content and Social Media at The House Agency: "The consequences and responsibility levels of near- and offshoring should be generally known by now. Whether such resources should play a role within a project can be decided according to rational criteria." Martin Sauter, Chief Knowledge Officer of the Y&R Group Switzerland, explains what these criteria can be: "Relocating programming to Eastern Europe in particular is now an integral part of the business model of many Swiss digital agencies in order to remain competitive. However, this only makes sense for larger and relatively technical projects."

Ursina mason