Monday, April 13, 2009

Cogent is talking about open rates

Some of you will already know this, but Cogent is an ongoing social experiment along the lines of Thoughtworks, but with different axioms. Transparency is one of our axioms, but historically we've applied this internally and the public information about Cogent has been much the same as what you'd know publicly about any other consulting company. We're about to step that up a notch and publish our rates schedule publicly.

As usual, we see pros and cons to this decision. First thing is that no one else seems to do it, so perhaps we're just being stupidly naive and we'll discover the reasons why no one else does it in some catastrophic way.

More obvious to us that we lose one of our supply-and-demand levers. Our supply (our employees) is fixed in the short term, and it's always been hard for us to figure out what the "real" demand for our services is (we get plenty of unsolicited contacts that don't turn into any business). One of the levers we can use to affect demand is price - if we had lots of people doing non-billable work then we'd clearly think about dropping prices to get people onto billable work. Historically this would have been transparent to customers, unless they talked to one another, but with public pricing it will be clear if we offer discounts.

We may also find that we get less contacts because people look at our prices and decide that we're too expensive without even talking to us. It's not clear if that's good or bad - we may actually save time because we don't waste time doing estimates for work that's never going to proceed anyway. Or we may miss out on legitimate business.

And finally, our permanent colleagues on consulting gigs will now have a pretty good idea of what the consultant sitting next to them is being charged out at. That may or may not prove embarrassing (hoprefully not).

So why do it? We have some feedback that clients like simple, public rates schedules. It means less discussion internally about "how much as we going to charge this client?". And it means extending the reach of our core principles, and each time we've done that in the past it's been good - if nothing else it tells the employees that we "walk the walk" consistently.

We've split the rates along two dimensions - the type of work and where the work happens. We do two types of work - agile coaching from senior staff, which involves some hands-on development but is focussed on influencing the entire team rather than producing features directly, and development work, which is mostly focussed on delivering features but also on influencing the entire team to work more effectively. We have different rates for agile coaching and development work, and we also charge less for development work that's performed at our own premises. There are three reasons for charging less for working on our own premises - i) we aren't able to influence the client staff as well, so we deliver less value; ii) we prefer working on our own premises and price our services to encourage this; iii) when we're working on our own premises we're effectively competing against teams all over the world and we need to reduce prices accordingly.

So here are our rates for new work in 2009, all exclusive of GST:

Agile Coaching

  • Senior Agile Coach: $1400

  • Iteration Manager: $1300

Development (consulting / offsite)

  • Tech Lead/Architect: $1200 / $1000

  • Senior Developer: $1100 / $ 900

  • Developer: $1000 / $ 800

  • We're interested in what people think of this approach to pricing, so please let us know.


  1. I thought that was pretty interesting publishing your rates. It should shorten some of your sales cycles because customers will self-select out if they don’t like your rates. You might miss out on some interesting opportunities that flexibility on rates might allow.

    How about time frame? I know myself I’m interested in long-term engagements, so I’ll be flexible on those rates if I can count on a steady source of cash flow.

    Shane Hayes

  2. We might miss some interesting opportunities, but the most interesting works come via word of mouth anyway, rather than from people who just land on the website, so I don't worry about it too much.

    In the current Australian market very few people are offering anything long-term anyway. We're offering a starting point - we can still have a dialogue with people over rates. Your concerns seem to be about these rates being too high, but I know that they're already significantly lower than some of our competition, so it doesn't hurt to get that into the public domain.


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