Making Money on Clarion & CWIC Projects - A Fortune 500 Case Study Comparison by Greg Gubrud

by Mike Grigsby

Published 1998-10-01    Printer-friendly version

Greg Gubrud's session was a tremendous primer for those who want to begin selling projects to Fortune 500 customers!

While originally intended as a session that included the use of CWIC, it was packed so full of how-to's on identifying, selling, negotiating and deploying systems to Fortune 500 accounts that no time was left for CWIC.

Gubrud, the CEO of ONTOP Systems and ExtranetWorks Corporation, based in Portland, Oregon, starts out with an impressive client list, including FedEx, Sears, American Express, and Epson.

Extensive experience in selling and working with large organizations caused his organization to classify accounts in two categories: Project-based, where projects are large, revenue is high, but profits are lower. Relationship-based accounts are those that may not have large projects, but provide continual income flow on smaller projects with shorter duration and have higher profit margins-as much as 1000%. Gubrud says that both types are necessary because projects can bring you fame, but smaller work keeps the overhead paid.

When estimating costs of projects, Gubrud says that an established development methodology is as important for building and managing projects as for estimating them. Costs generally break down into five categories: Analysis accounts for 20 percent of the total cost; Design, 20 percent; Development, 40 percent; Testing, 15 percent; Deployment, 5 percent. Gubrud's ExtranetWorks Corporation works extensively with Internet and Intranet projects, and he suggests that development and deployment timelines are about double in these areas due to:

1. How finicky CWIC is
2. Workflow issues with Internet projects
3. Security and firewall issues (always a factor in larger accounts).

Costs can easily get out of control, and Gubrud suggest the following steps to save time and money:

1. Document the required functionality to make the system work
2. Concentrate on usability and reliability issues from the start
3. Note where performance will be an issue
4. Ways you can streamline and enhance support of the products (what can you do to prevent phone calls later on).

Gubrud focused on scope creep as a serious threat to large project success and profitability, and says you must nail this down early on, and later spell it out in the contract.

Getting money up front is quite feasible with large organizations, especially for analysis consulting. Gubrud says that research money is often available for building a prototype or a smaller scale system-often as much as $300k. At minimum, consult with the client for two to five days to understand the project before you ever quote a dollar amount. He points out that most clients don't understand the scope of the project themselves until you help lead them through it.

Gubrud suggests the following guidelines for bidding projects:

1. Double your original estimate
2. Double or quadruple CWIC projects
3. Never bid too low or you may, at the least, lose your credibility, and possibly risk your business.

Also, use at least $150/hour as your consulting rate or you will look foolish to a Fortune 500 company, and $200 is very common. You will also have to negotiate larger projects, so go in high, know what your walk-away position is, and prepare, prepare and prepare for the negotiations by postulating their strategies ahead of time, and being able to counter them. Don't prepare single price; prepare a half dozen. For instance, if you quote a per-client price, the prospect may want server pricing-be prepared to offer lease terms, rental arrangements, or whatever creative strategy you can come up with to make the sale and get what you want. Don't sacrifice profitability just to work with the big companies-they are very demanding and can drain financial and human resources if you don't manage them properly from the start.

Gubrud pointed to several elements of the proposal his firm uses, including executive summaries, technology discussions, business arguments, market positioning, and cost, timeframe and payment schedules. You should also know who will be reading the proposal and balance the business and technology discussions accordingly. If just the VP of Sales is reading it, make it heavy on ROI and TCO analysis. If you think that the CIO or CTO will read it, put in technology arguments. Gubrud says that technology is always an important factor in larger companies. "If you meet your resistance anywhere, it will be the technology folks."

Even though you have negotiated what you think is the final price and terms, you will almost always run into the purchasing and legal departments during the contract phase. They will try to beat you down even more, so Gubrud says not to give up too much before the contract is discussed. He also suggests you understand the billing cycle and how to get paid, and even specify it in the contract. "Getting paid can be a real hassle with big companies," says Gubrud.

Also look for other revenue opportunities as you work on the project. Train staff to identify other projects, to listen for other problems that need solving, and to know who is in charge of each project. For intelligence purposes, create as much of a company org-chart as you can, given the information you have. It will help in expediting issues as well as identifying whom else to talk to about projects.

Gubrud concluded with some tips on building CWIC apps: "Make your applications look like their applications, and don't get stuck in the browse/form way of thinking." Be willing to string together forms and build applications according to business processes rather than make their business processes conform to your templates. Gubrud suggests that you should be willing to reinvent your organization -- from the leadership you bring in, to the sales staff who have experience with Fortune 500 accounts, to developers who are technology savvy.

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Clarion Magazine ISSN 1718-9942