The hidden cost of controls

Paul Graham has an interesting article here about the hidden cost of controls.

He makes a good point (as usual), that some of the controls large organisations implement have a hidden, rarely considered cost.

One example given is the big co’s who do solvency checks on suppliers. Seems to make sense, except perhaps that discourages or prevents the best suppliers from even bidding for work.

I have walked away from potential work because the (potential) client makes the procurement process too burdensome. If I was short of work I might have sucked it up, but actually if there is enough work from reasonable customers, why bother with restrictive NDA’s, or submitting tonnes of insurance certificates, or providing bank statements or any other back covering bullshit?

Same with the government, they won’t even consider Codematic as its too small. Likewise many big Co’s want to use an agency to protect themselves from employment law obligations. Even though the cost of using the agency is worse than the worst worse case scenario of getting a ‘deemed employment’ judgement.

Have you seen this hidden cost in operation?

Have you walked away from work or projects because of them?



10 Responses to “The hidden cost of controls”

  1. alastair Says:

    controls = red tape. we live in a country stuffed full of it. Personally I would refuse to do business with them. Someone should set up a website – red tape organisations not to do business with!

  2. Charles Says:

    I am OK with signing NDAs, that seems reasonable to me.
    I have only had one customer ask me if my company carries PI insurance (yes it does: daylight robbery but arguably neccessary).

    Another customer sometimes insists on working through an agency rather than direct (but not consistently), thus increasing their bill without any added benefits: probably a sign that I am not charging enough.

    For offsite project solution work (as opposed to onsite dayrate time and materials work) the biggest problem is creating the proposal and quote, which can be a lot of unpaid work if you don’t get the job.

    Its actually much worse in the Netherlands than in the UK, the bureaucracy is unbelievable, and if you aren’t careful you wind up paying both NL tax and UK tax and then trying to get a refund from the UK.

  3. Simon Says:

    If the project is interesting then I can be very flexible, but I’m not that keen on reading and signing a 10 page NDA just to find out what the project is. In fact I’d take that as a strong warning sign the client was going to be hard work.
    Yep failed proposals are a pain.
    I’ll give NL a wide berth based on your recommendation then.

  4. Ross Says:

    I have work with a few organisations where people are employed to create such red tape, once started on it’s a slippery slope – cant see it getting much better in big orgs tough can you?

  5. jonpeltier Says:

    NDAs are fine, in fact most NDAs I sign are afterthoughts.

    Noncompetes are a different story. I once had to pay a lawyer for 10 or 12 hours (at a higher hourly rate than I charge) to babysit an agreement on which the client’s lawyer kept reversing our changes. Finally, I’m out a few grand, and before I got started the client rescoped the project, and I was able to bill only about 0% of my legal fees.

    I once declined to bid on a sizable (for me) government project because satisfying their due diligence would have taken as long as the project. Not worth it.

  6. Giles Says:

    We just dropped our big-ticket product (which cost $500/month) because the cost of selling it – just the saleman’s time dealing with clients’ procurement departments, not the cost of delivering the solution – was winding up costing more than a year’s worth of license fees!

    I guess (as PG says) that’s why software always seems to cost either a few hundred pounds or tens of thousands. Either it’s cheap enough for the end user to buy on their credit card and bypass all the bureaucracy, or it’s expensive enough to pay a salesman to deal with the red tape.

  7. Simon Says:

    I think its hard as a developer to swallow the reality that sales and marketing effort can easily top 80-90% of the cost of selling a product or service.
    Of course sales johnnies have no problem believing this.


    This has always been a problem, but now that so many corporations have outsourced IT the outsourcers have a vested interest in making things long and complicated for outside suppliers (both as job security and to give their own people the upper hand).

    Now that we are in what looks like is going to be a Depression of sorts (that will damage busines discourse for years until the effects shake out) watch IT departments and outsoucers to make this far worse. It is going to be almost impossible for individual or small vendors to break in to the big companies (even though all of this will increase rather than decrease costs and even though people like us can do more for less consistently at a time when they should be finding ways to get more done for less). It’ll be interesting to watch (as we may have a lot of time to watch :-) ….


  9. Giles Says:

    Although at times it feels like the IT people in large companies are being slow just to keep their jobs safe from our exciting new technology, I think the real problem – or at least a large part of the problem – is more where blame would lie if things went wrong.

    From my time in a Big Bank, I remember well that if IT systems broke down then the fault was IT’s, whereas if a new system came online faultlessly the praise would go to the visionary business guy who pushed the project through. So the procurement hoops people have to jump through to sell to big companies are there because there’s no advantage to *not* having them, and plenty of advantages to having them, for the people who put them there in the first place.

    IMO the best solution would be for large companies to stop treating their internal IT guys as a cost center to be blamed, bureaucratised and downsized, and instead give them some kind of stake in the company’s overall success. But that’s easier said than done, of course.

  10. Simon Says:

    I agree.
    A big part of the problem is short sighted orgs where IT reports to finance. Those orgs with a full IT seat on the board are in a stronger position to leverage IT.

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