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It’s Legal, But Is It Right?

November 8, 2013

We should give Frank more money.

What? Why? We already paid him for his program!

I know, but he’s put in a ton of work adding bug fixes. He charged us $500 and we were considering a competing program that cost $20,000. Call it “consulting money” or a “maintenance fee” or something.

Are you crazy? Why would we give a vendor more money after they’ve already signed a contract?

Because it’s the right thing to do.

We didn’t do the right thing. And that pains me to this day. We were rolling out a 30,000 seat Microsoft Exchange installation at a large non profit organization. The particular feature that we were buying from Frank was a piece of software that made the message waiting light on your desk phone light up when you got a new voicemail to your corporate email server.

(Photo credit: Extreme Voice and Data)

With this version of Exchange 2007, we were implementing Unified Messaging. In other words, your voicemails would now appear in your mailbox. This was a very useful and innovative step. You could now forward voicemails, save them to a network drive, have your computer read them to you.

The problem was that Exchange didn’t have a way of telling your desk phone that you had an unread voicemail. But, Frank had figured out how to make that work. So had a couple of big companies. The one we were evaluating offered the reasonable pricing of $0.80 per user: about $20,000. Frank was a programmer, but he wasn’t a business man. He put a flat price of $500 on his software. He was mostly selling to small companies. He had never had a customer with more than 500 users. I’m not sure how we found him, but we were happy we did. But, since his program was written for small businesses, it didn’t scale to an organization our size. Frank was constantly fixing bugs for us. Sometimes sending us 2 or 3 updates per day.

And given the amount of work he was doing, I thought it was reasonable for us to provide him a little more for his software. My father always said, “If a small business owner underprices his product, pay him what it’s worth and educate him on pricing.” It was clear in our project meeting that no one agreed with me. They all had reasons:

This will make his product better for other companies.

Microsoft has announced this functionality in the next release. Frank has a window of six months and then his market will be gone.

Having his product installed in our organization will help him get into other large accounts.

Contractually, he’s not allowed to tell anyone he’s working with us. Not sure how that’s helping him.

He should have known better.

Maybe, but what about US. What are OUR values? Do we believe in paying people what they are worth, or do we pay them as little as we can get away with? We are a non-profit charitable organization. We are cheating him out of his time and labor. Why? Simply because he didn’t know the value of what he’d built. How is he going to view our organization in the future? I’m thinking we offer him something like $2500. Isn’t it worth that to do the right thing?

Apparently it wasn’t. The team kept coming back to the argument that “He should have know better.” Well, maybe he figured he was dealing with this well know, large, charitable non-profit organization and that they would offer him an equitable deal, so he didn’t have to worry about getting screwed out of thousands of dollars?

I have no idea where Frank ended up. The next update to Exchange came out and we replaced Franks software with what was included in the Exchange product. I’ve often reflected on that meeting. We all hope that when presented with the opportunity to do the right thing, we would respond appropriately.

What do you think? Should you pay people less than they are worth, or less than their product are worth simply because you can? Is it always “seller beware” in these cases? Or, should you help small business owners correct their pricing if they are better programmers than they are salespeople?

My answer is pretty clear, but I understand I’m probably in the minority.

Rodney M Bliss is an author, columnist and IT Consultant. He lives in Pleasant Grove, UT with his lovely wife and thirteen children.

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One Comment
  1. I worked at a terrible little company about 5-6 years ago, and we brought on a second developer under me. In his first month we had him working some 16 hour days, through the night, to get a product ready for a client. When we pulled it off, I suggested we give him a little $100 bonus. A hundred dollars.

    Management refused. The President said,”I’m trying to run a business here.” Neither I nor the other developer stayed at the company for more than a few months after that — I wonder if he ever realized how much the turnover cost him.

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