Price is what you pay, Value is what you get.
27 June 2007
I got my new business cards today. Our business cards at Improving are unique, they are customized for each person including pretty much whatever text each employee wants. My cards include a quote from Warren Buffett: “Price is what you pay, Value is what you get.”
I heard this quote a couple years ago and it has really stuck with me. I know what it means to me, but I decided to google it today, just to see what others had to say about it. I found a 2003 post from Business Journal [http://www.sideroad.com/Marketing/creating-value.html] gives an analysis of the relation between cost and value.
I think the quote applies especially well to software development. More than most professions, software development is a very volatile undertaking. An organization that can reliably deliver quality software is extremely valuable. If they can do so faster than their competitor, they are even more valuable. Then why is it software consultants are paid by the hour? This is my fundamental problem with time and materials contracts for a consulting organization. If companies were more thoughtful about price vs value, they might consider paying a little (or a lot) more for a high-quality software organization to develop their software at a fixed price.