“What do you mean my app will cost $80,000 to develop?  I have a stack of quotes in front of me that are all around $2000! One guy here says he’ll do it for $500!”

That amusing image has been popping up in my LinkedIn feed more and more lately, which tells me that clients are starting to feel the effects of the “me too” rush into app development.  A recent flood of low-bidding, questionable developers and studios have appeared lately, causing chaos and confusion, and leading to a lot of frustration and wasted money and resources.

It’s a problem I’ve discussed here many times before. Mobile development is a terrific business. It’s expensive to hire qualified developers to work on projects, and 6+ years into the mobile boom, a successful app is more complex and polished than ever – a rushed, low-budget app hacked together by an incompetent team just isn’t going to cut it these days. As a result, budgets have increased, and a flood of unqualified developers and studios have rushed in to bid on every project up in the air. One big problem remains: clients often have no idea how to distinguish one developer from another, aside from the price quote. And that being the case, they usually go with the lowest quote. It makes sense in a way. If you didn’t know the difference between a Ferrari and a Kia — all you knew was one was $250k and one was $24k, wouldn’t you go with the cheaper option?

But would you?  Wouldn’t you want to know why the Kia is so much cheaper?  Its a question far too many aren’t asking.

At the end of every year, we here at Glowdot sit down and review the previous year.  We review our projects, how well we served out clients, and we also look back at contracts we didn’t get.  This usually involves looking to see if the app came out and how it looks, and if we don’t find it out there, we reach out to those clients and see how the experience went for them with whoever they ended up contracting with.

I’m not exaggerating when I say that when we check in on those clients who went with the cheaper option, we have discovered that either no app ever materialized, or a disastrous, poorly built app was released in every case.   And we’re not talking about small companies or individuals.  Some massive companies have made the mistake of going cheap, only to end up with nothing in the end.

The lowest bid is almost never the best bet, and here’s why: the app developers you receive your bid from fall into one of these categories:

• Qualified app development studios comprised of a team of developers, project managers, artists, UI/UX experts, etc.
• Qualified individual freelance developers
• App development studios presenting themselves as on-shore development houses, but outsourcing the work overseas and managing projects in-house
• Outsourcing agencies located in India, China, or elsewhere
• Completely unqualified freelancers, located in the US or elsewhere, who have no idea what they are doing but are willing to get in way over their head because they heard app development is a great gig.

I’ve listed those categories in order of most likely to succeed to least likely.  Not coincidentally, I’ve also listed them from most to least expensive.

The last two categories of developer are the ones I want to talk about here, and I’m going to take off the gloves and just say this straight: avoid these developers at all costs.  You will end up disappointed, and you will lose your money (although, to be fair, you’re likely to lose only a small amount of money since these shops underbid so severly!)

These companies are doing much more than just taking money and delivering garbage, however.  They are confusing the market by upsetting pricing which is based on developer cost, and throwing everything out of whack.  When a qualified developer bids, say, $100,000 on a project, and the client receives 20 other bids ranging from $500 to $2000, naturally the client has no idea what to think.  The low bids should be a red flag, but in our experience, for far too many clients, it isn’t.  And that’s bad for us if we lose a potentially good client, but its worse for the client, who is about to lose their money and suffer months of frustration.

Why is a lowball bid a red flag?  Because in 2014, qualified developers are extremely expensive and extremely rare.  We live in a time when companies like Google and Apple and Facebook have billions in cash-on-hand, and hire the best and the brightest minds — even if they don’t have anything for them to work on.  These companies have the resources and the clout to bring amazing talent under an even more amazing banner, and they have entire teams devoted to seeking out and finding that talent.  When they find them, they move them to California, and they reward them handsomely.

Let’s put aside Google for a moment, where apparently developers can earn $3 million a year.  A developer in the US will usually earn anywhere from $80,000 a year to $140,000 a year depending on experience.  As any business owner knows, there are other costs involved with hiring anyone — benefits packages, stock, perks, and the search itself — which brings the cost of hiring and retaining a developer up to around $120,000 on average.  That’s $10,000 a month.

That very same developer will have studied at least 4 years, but often 6 or 8 years, of computer science and mathematics at an accredited university, at a cost of anywhere from $20,000 to $120,000 and years of dedication.  And when he’s done, he will have the largest technology companies in the world inviting him to work for them.  Not to mention that the top talent in the country can easily find work in some of the most desirable parts of the country: Los Angeles, Santa Monica, San Francisco and the surrounding area. It’s not cheap to live close to the pacific ocean, and its not cheap to get educated in the US.  No developer who’s put the time in to get to the competence level you need him or her to be at is going to work for $20/hour.  The reality is: really competent, proven, experienced contract developers charge anywhere from $150-250 per hour on a contract basis.  If they quote you significantly less than that, you can be sure they don’t know what they are doing, or they don’t live and work in the US.

Now to get to the point.  Let’s say you have a one month project (which is a short development cycle in 2014, incidentally).  You put out an RFP, and you get the following quotes:

• $60,000 from a qualified studio, including one developer working full time, a project manager working full time, a UI/UX designer working 10% time and an artist generating assets at 20% time.
• $30,000 from an on-shore, experienced, US educated freelancer.  But he tells you that you will need to source the UI/UX and art assets yourself, and you will be managing the project yourself.
• $10,000 from a studio claiming to be a qualified studio offering developers, a project manager, and UI/UX.
• $700 from a studio located overseas.

Given what a qualified, US based developer earns at a comfortable, stable company that isn’t going out of business anytime soon, I think we can agree that the $700 bid is a joke.  The freelancer might be a good option, if you want to manage the project yourself and you have resources available for design and UI/UX.  That just leaves the high and low studio bid.

How do you tell the difference between two studios, one bidding $60k, and one bidding $10k?

Remember how much that developer is to hire.  The cost of any software project starts with the developer and works outward — not only because he’s typically the most expensive member of the team, but also because he’s the only one working full-time on the project.  If the studio bidding on your project is paying market value for their developer, the entire budget they quoted you is going to him or her.  That leaves nothing for project management, UI/UX, or art.  It also leaves nothing for rent, utilities, and the sales team.  It also leaves nothing for profit.  And it leaves nothing for the span between projects, where the studio has to keep their doors open while looking for their next gig.

In short: it makes no sense.

Scratch that.  It makes sense if they are outsourcing your project to an unqualified studio who will fail to deliver quality software, if they deliver anything at all.

This is why we have seen a 100% failure rate with clients that have opted for the cheaper or even cheapest bid.  I cannot stress that enough, it really is a 100% failure rate.  Please, be careful out there.  And as always feel free to reach out to us if you have any questions about project budgets, the process, or anything else.  We love speaking to potential clients and helping to clear up the confusion!  Our team is 100% in-house, located here in Santa Monica, a few blocks from the beach.  We never, ever outsource. Our lead developer has almost 20 years experience as a developer — 30 if you count the code he wrote in grade school, years before most households even had a computer in the home!  If your project matters to you, and if your money is important to you, make sure to only hire a qualified, local developer or studio to guarantee the highest chance of success.

And if you’ve already been burned in the past, don’t feel too bad.  Remember that the government spent $70 million on a website that didn’t work.  See?  It can happen to anyone.