I have been part of presales and solution architecting in various IT services firms. One common struggle and frustration in all these firms is with using tools (software, often web-based) for solution modeling and pricing. They keep trying, but just can't get them to work reliably.
The reason may be within the underlying data and the process. And it's complicated.
The sequence of steps to get to a price, in simple terms, is: resource-estimates → resource-loading → costing → pricing. In other words, there's a 'solution' to customer requirements - which is primarily the 'how', but also the 'who', the 'what', the 'when' and the 'where', which would determine the cost of doing it.
(1) Understanding the requirements, depth of solutioning and confidence in resource estimates is the foundation the commercials would be built on. This is also the first input, and the most common source of errors.
(2) The solution - including the estimates, staffing and the delivery model - have to be mapped into the modeling/pricing tool, coz the architect who built the solution is unlikely to be able to do it 'on' the tool; it's a technical and creative process.
On the surface it sounds like a simple porting of data. But this is the point where using the tool starts feeling like a waste of time, especially for large and complex deals. The transferring of data is pretty much manual, and each major or minor change in solution will need a repetition of the whole effort. A lot of tools have capabilities to read excel sheets, but those are rarely seamless, and still require manual effort to get to certain formats each time something changes.
(3) The next input tools require is access to an accurate, exhaustive, complete and well-maintained database of costs. Besides people, there are a whole host of delivery model considerations that determine a lot of the costs, most of which are very context specific. Most companies don't have such databases with all the characteristics listed above. They end up working with averages or ballparks - another source of errors.
(4) Solutioning and pricing are iterative, and may involve numerous rounds of back-and-forth adjustments, even manipulations, to make pricing attractive. Besides for the humungous manual effort it implies, there are things that don't add up, which are easier done in excel spreadsheets.
Errors add up in strange ways.
Conventional wisdom says processes and tools bring greater efficiency and reliable outcomes. But in the case of solution modeling and pricing, the tools seem to represent vicious circles companies don't know how to get out of, yet they are things they can't get rid of.
Companies that have the best handle on the four areas - (i) depth and confidence of solution, (ii) standardized solution modeling, (iii) robust cost database, and (iv) minimum solution meddling for better pricing - also have the most successful delivery, manage risks better, make healthier margins and have sustainable growth.
