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A Minute of Our Time or What We Need to Unlearn About Software Contracting

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A Minute of Our Time or What We Need to Unlearn About Software Contracting

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A large part of software developers in our community do contracting. Despite a number of interesting startups popping on the scene I do not see this trend ending anytime soon. The fundamental problem of contracting as it is done today is that the contractors are torn between serving their customers and serving their own companies.

What causes this problem and how could it be solved? My argument is that it boils down to the contracting companies using the billing rate of contractors as the main indicator of success.

This leads to a dynamic where spending the customer’s time and money is beneficial to the contractor in short term whilst simultaneously damaging the customer-contractor relationship in the long term.

In my speech I’ll demonstrate this phenomenon in software contracting with concrete examples. I will also describe potential alternatives to how to lead and buy software contracting.

A large part of software developers in our community do contracting. Despite a number of interesting startups popping on the scene I do not see this trend ending anytime soon. The fundamental problem of contracting as it is done today is that the contractors are torn between serving their customers and serving their own companies.

What causes this problem and how could it be solved? My argument is that it boils down to the contracting companies using the billing rate of contractors as the main indicator of success.

This leads to a dynamic where spending the customer’s time and money is beneficial to the contractor in short term whilst simultaneously damaging the customer-contractor relationship in the long term.

In my speech I’ll demonstrate this phenomenon in software contracting with concrete examples. I will also describe potential alternatives to how to lead and buy software contracting.

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A Minute of Our Time or What We Need to Unlearn About Software Contracting

  1. 1. A Minute of Our Time or What we need to unlearn about software contracting Antti Kirjavainen (@anttiki)
  2. 2. Photo by ToniVC, CC-lisensed (non-commercial, sharealike, attribution)
  3. 3. BSOD by Martin Deutsch
  4. 4. Major contributor to this is the way we do SOFTWARE CONTRACTING
  5. 5. FAIL #1
  6. 6. FAIL #2
  7. 7. FAIL #2
  8. 8. FAIL #3
  9. 9. THE DYSFUNCTIONAL DYNAMICS
  10. 10. Needs Contractor Customer
  11. 11. Risk Mitigation Contractor • Doing work that customer does not want to pay for • Employing people who do not produce income Customer • Get fair contribution in exchange of payment
  12. 12. The Man-Hour • • • • De-facto industry standard Smallest unit of work Value can be evaluated Billable or not billable
  13. 13. Contractor billable man-hours ratio of billable and unbillable man-hours on an individual basis unbillable man-hours
  14. 14. Customer definition of valuable (=billable) man-hours billed man-hours price of man-hours
  15. 15. Alert
  16. 16. Actual Dynamics billable man-hours definition of valuable (=billable) man-hours ratio of billable and unbillable man-hours on an individual basis billed man-hours price of man-hour unbillable man-hours
  17. 17. Actual Dynamics billable man-hours experiments definition of valuable (=billable) man-hours Do only work everyone agrees on missed opportunities motivation analysis paralysis
  18. 18. Handcuffs by Mark Zwolanek
  19. 19. Actual Dynamics billable man-hours billed man-hours Competition, conflict motivation trust
  20. 20. Actual Dynamics work units (=people) are the same Let’s compete with unit price! favor cheaper labor quality of work price of man-hour
  21. 21. Actual Dynamics growing competences developing business model(s) opportunities to improve Ability to attract and satisfy customers unbillable manhours Possibility to correct failure situations
  22. 22. Actual Dynamics billable man-hours definition of valuable (=billable) man-hours ratio of billable and unbillable man-hours on an individual basis billed man-hours price of man-hour unbillable man-hours Valuable contributions to the customer?
  23. 23. Impacts of focusing on billable manhours • De-motivation of people • Losing trust • Losing competitiveness • Missed opportunities • Losing trust • Getting low quality work • Losing focus on producing valuable contributions to the customer • Losing focus on getting valuable contributions in exchange for pay
  24. 24. WAYS TO MAKE IT BETTER
  25. 25. Option 1. #NoContracting ?!
  26. 26. Option 2. First Build Trust 1. 2. 3. 4. Build trust relationship with the customer Start contracting for the customer ??? Profit
  27. 27. Option 2. First Build Trust 1. 2. 3. 4. Build trust relationship with the customer Start contracting for the customer ??? Profit How to be (or appear to be?!) trustworthy before working together?
  28. 28. Option 3. What is the smallest potentially valuable unit of work?
  29. 29. Actual Dynamics billable man-hours experiments definition of valuable (=billable) man-hours Do only work everyone agrees on missed opportunities motivation analysis paralysis
  30. 30. Handcuffs by Mark Zwolanek
  31. 31. Option 3. Team Smallest Value-Producing Unit
  32. 32. Option 3. Team And smallest potentially valuable units of work Outcome Time
  33. 33. Option 3. Smallest potentially valuable units of work Outcome Time Sprint
  34. 34. Option 3. Smallest potentially valuable units of work Outcome Potentially shippable product increment Time Sprint
  35. 35. Option 3. Smallest potentially valuable units of work Outcome Minimal Marketable Feature (MMF) Potentially shippable product increment Time Sprint
  36. 36. Handcuffs by Mark Zwolanek
  37. 37. Option 4. What should we offer to the customer?
  38. 38. Actual Dynamics work units (=people) are the same Let’s compete with unit price! favor cheaper labor quality of work price of man-hour
  39. 39. Option 4. How to focus on valuable contributions for customers?
  40. 40. What is your unique value proposition?
  41. 41. Option 4b. Compensation tied to actual valuable contribution for customer?
  42. 42. Profit Sharing • Works best for developing commercial products and services • Customer and contractor partner up • Parties agree on profit sharing
  43. 43. ”No Cure No Pay” by Tom & Kai Gilb • • • • • Fixed Price Payment only if Value Definition is met Validated e.g. by trial use Value Definition done with EVO method Allows definition of desired impact of the software • http://www.gilb.com/dl38
  44. 44. What is your unique value proposition? We Need New SW Contracting Business Models!
  45. 45. CONCLUSIONS
  46. 46. Photo by ToniVC, CC-lisensed (non-commercial, sharealike, attribution)
  47. 47. BSOD by Martin Deutsch, CC-lisensed (non-commercial, sharealike, attribution)
  48. 48. Major contributor to this is the way we do SOFTWARE CONTRACTING
  49. 49. The Man-Hour • • • • De-facto industry standard Smallest unit of work Value can be evaluated Billable or not billable
  50. 50. Impacts of focusing on billable manhours • De-motivation of people • Losing trust • Losing competitiveness • Missed opportunities • Losing trust • Getting low quality work • Losing focus on producing valuable contributions to the customer • Losing focus on getting valuable contributions in exchange for pay
  51. 51. Smallest potentially valuable units of work Outcome Minimal Marketable Feature (MMF) Potentially shippable product increment Time Sprint
  52. 52. Compensation tied to actual valuable contribution for customer?
  53. 53. What is your unique value proposition? We Need New SW Contracting Business Models!
  54. 54. Antti Kirjavainen Twitter: @anttiki Email: antti.kirjavainen@houston-inc.com SlideShare: http://www.slideshare.net/anttikirjavainen THANK YOU!

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