Alternative Costs

- We can buy that control for 100 euro or we can develop it ourselves.

- How long it would take?

- A week or two.

- How do you think do we need the control in future implementations?

- So far we’ve always used different protocol. I guess this is one-time shot.

- OK, 100 euro is no money here. Let’s buy it,

- Hm... We have to wait for customer opening the tunnel anyway. Maybe we should spend the time to prepare the prototype. We’ll always have buying the control as a plan B if something goes wrong.

- Well... First, two weeks of any of those guys costs us more than a hundred. Second, think how much value we lose in things he won’t do during those two weeks. That’s not cheaper.

This time the situation was a no-brainer, but I think about others when someone forgets about alternative costs. Sure, you can spend months trying to win that deal investing a lot of time of both sales and technical staff and you’ll end up a runner up, which in case of bidding is a lose. Sure, you can take that project and engage the half of the team to finish barely on time rescuing the rest of not-so-impressive margin, maybe developers will have fun at least. Sure, you can spend long weeks developing your own implementation of that protocol, which was already done by other 561 companies although I wouldn’t bet it will either the best quality or the cheapest option.

Considering all those things as atoms, they can be easily justified. But remember – people engaged to those “projects” won’t do other work, which probably brings you some money. Your core projects can be jeopardized by doing a bunch of non-essential things. You’re going to take maintenance of all the new crap on your back with no repeatability asset making support engineers life a bit closer to hell than it used to be. These all are alternative costs. Things which can’t be easily shown in income and costs analysis, but are happening.

That’s why it’s often the best option to choose the “no go” option on the very beginning. If you have guts to do it of course.