My Work Log

 

The commercial aspect of a proposal is a very key driving artifact on which most often – the entire deal wrests.  Here is a listing about the various aspects of the commercial proposal:

 

1. Application Development Effort
2. IT Hardware and Software cost
3. Specialized Hardware cost
4. Maintenance Support cost
5. Onsite Application installation service cost and specialized service cost
6. Travel and Logistics
7. Implementation Timelines
8. Payment Milestones
9. Terms and Conditions

 

While broadly the above encompass most aspects of the proposal details are provided below

 

Application Development Effort

This summarizes the estimate to develop the application (function point or use case) and thereon goes on to map this development estimate to the resources, their role level and the duration for each resource to develop the application.  From there it elaborates the cost of each resource in terms of offshore development rates and then this is multiplied with duration for each resource – to give the total.   In this case the customer retains the IP.

 

At times organizations choose to employ a licensing model – wherein they do not expose these details to the customer.  They simply charge the customer a standard licensing cost for the entire software and retain the IP with themselves (vendor company).   This strategy is more so suited when the vendor organization suspects that the same software (which is being developed) would be installed in our sites as well.

 

IT Hardware and Software Cost

To support the software you need servers, operating systems, databases, user management and other software.  You need the server hardware and the software licenses.  These are elaborated here.  At times the vendor organization even prices the customer for the development servers/licenses also along with the production servers/licenses

 

Specialized Hardware Cost

If the system which is being developed has some specialized hardware – then details of this hardware and its costs are provided here.  If these have to be imported – then the import duty, along with freight, insurance, backup stock are also factored in here.  The bill of material of this hardware has to also be included.

 

Maintenance support Cost

Once the application goes live then what kind of support structure does the customer wants.  Does he want onsite support or offshore oncall support? Does he need a helpdesk? These costs would be factored in here.

 

Onsite Application installation service cost and specialized service cost

During application hardware/software installation at onsite and also during onsite UAT – there could be a host of services which would have to be rendered at onsite costs.  These would be elaborated here along with the duration of this service.

 

Travel and Logistics

The travel, lodging, conveyance, food, per-diem and such kind of logistics costs would be elaborated here.  For this we would need to know how many people would be at onsite for what duration and this should be elaborated.  At times the vendor organization would absorb these into their costs.  At times the customer would provide for this – on giving bills-on-actuals

 

Implementation Timelines

Here the development/uat/go-live timelines are elaborated here

 

Payment Milestones

Here the various milestones for payment during the entire progress of the system development is provided. 

 

Breakup could be like this:

 

Terms and Conditions

Here all the terms , conditions, assumptions, constraints from either end would be listed out.  This has to be fairly elaborate and the vendor has to cover his arse properly.  Consultation and buy-in from legal team would be good here.

 

Meta Information

1. After all this is done – a buy-in and approval from the Finance team should be got
2. In all categories – a markup of 20% should be provided.  This generally is done to give a buffer – so that while negotiating with the customer ….it could be brought down to 10%.  This is to provide for some negotiating leverage.
3. It is better to do this exercise on excel
4. On the excel one should have a ‘Summary’ sheet in the very beginning – from where the various other categories mentioned above – should be linked …….to separate sheets.   The summary should show the sub-totals of each category and the grand total.  It should be organized neatly to indicate to the reader how he should see this document.  As mentioned there should be hyperlinks and formula reference throughout. 
5. The rates for resources should be on a separate sheet.  All other sheets which need resource costs should refer to this sheet through forumlas. 
6. Hard-coding should be avoided as much as possible. 
7. Each sub-sheet should have a link-back to the ‘Summary’ sheet.