How to finance non-programming activities when clients don't want to pay for these activities?

Question

On one hand, software development involves a lot of non-programming activities like requirements gathering (including analysis), estimating, planning, testing, tracking work, change request management, and more.

On the other hand, our clients don't want to pay for these activities. When a non-programming activity shows up on their invoices, they usually get angry and complain to upper-management. Of course, they always win their cause. Therefore, we (the company) don't get paid.

The result of all this is that upper management is pressuring us (programmers and project managers) to not perform any of these non-programming activities. It generates all the problems that are commonly known to result for having a "code & fix" approach to software development.

Our poorly tested software is often released with bugs, and of course, clients don't want to pay for us fixing them. Moreover, we often release, just in time, software that don't correspond to what the client's wanted or needed because we never had the chance to invest the time to understand what the client needed. The release is therefore rejected by the client who then complains to upper managment. We then have to make all the requested changes for free.

I don't know how other companies solve this problem and I don't know where to look at to get the answer. Do they bill their clients for non-programming activities? More importantly, how do they get to finance these non-programming activities? Do they convince their clients to pay for these activities? Do they hide instead, unlike us, the real nature of the work they are doing? Do they charge so high for programming activities that it doesn't matter if non-programming activities don't generate any income? How?

I expect agile to be suggested as an answer, but please understand that I will not accept "you must do agile" as an answer, because it would not explain how agile would solve the problem. In a scrum team, for example, you perform a lot of non-programming activies and you still get paid for them. I cannot begin to imagine how our clients will ever accept to pay us for doing sprint retrospectives for example. If you want to answer "agile", please explain how agile solves the problem. For example, how do you finance all the non-programming activites happening during the scrum process?

Answer 1

Stop work immediately and get the work under a contract. Get a detailed Statement of Work that clearly identifies what is getting delivered, what activities will take place, what finished looks like, how you will invoice, how they will pay, etc. Your issue is not methods or communications or convincing them. You have no contract or are not enforcing your contract and they're beating you up to their benefit. You need to take a seat at the negotiating table and put YOUR requirements on it. If they don't allow you, walk away and go find another customer who will pay you.

Answer 2

Stop billing them for the activities they complain about and roll the costs into what they are willing to pay for (deliverables). You're not cheating them--you're not burdening your clients with the details. Your clients want the sausage, not the details of how it's made.

Also, if your client doesn't want to pay for the requirements gathering activity, then tell them you'd be happy to receive the requirements from them. This teaches them that there are costs involves and someone has to pay them.

Your company needs some people who understand what a Statement of Work is, how to write contracts, etc., and some project managers. It seems your clients and your upper management don't understand how software is properly built.

Answer 3

Is the "upper management" your management or theirs?

If yours, you need to have a discussion with them that makes absolutely clear that treating all "non-programming activities" as non-essential costs them money.

If theirs, with whom do you have a contract? The client or their management? Either way, you need to make clear that these non-programming tasks are absolutely still necessary to get satisfactory results. Alternatively, you could not bill the non-programming tasks at all but increase the prices so they're still covered.

Obviously, the problem is that your client has been getting away with their demands, so you'll have a lot of trouble convincing them that this is going to change. You might be better off cutting your losses and find a new client, this time including planning, testing, feedback sessions etc. in the contract from the get-go.

Answer 4

Tricky situation. The reason that the other company & your upper management don't want the charge for non-programming work is almost certainly because they don't value it.

The other company probably see it as a way to pad out the bill & would probably claim that they are doing the specifying & much of the project management themselves (been there seen that!).

Your upper management are not interested in the process - they are interested in the results, so they would say that the results should be charged for, but the rest of the process should be as lean as possible. When companies like Netflix say that they can eliminate roles like Project Manager (http://www.projectmanagers.net/i/9-current-trends-and-more-in-project-management/) upper management can believe that lots of middle management roles are mere padding.

What to do is simple.

Either only charge for programming & risk upper management sacking the middle management tier as it is a cost that generates no revenue; or inflate the deliverable charges to cover the costs of the non-programming activities.