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Skills Matter 
November 2014 
Agile Contracts 
Truth & Options 
Allan Kelly 
Twitter: @allankelly.net 
allan@softwarestrat...
Allan Kelly… 
 Provide advice on software 
development & business strategy 
 Training in Agile, Coaching, 
Consulting 
A...
Fixed Price 
Fixed Time 
Fixed Features 
Really?
Features 
Resources 
(People) 
Cost = 
Resources x Time 
Quality = free 
Time 
Fixed over 
short run 
(Brooks Law) 
Fixed:...
In traditional work … 
you decide the features before day-1 
and try not to change until you have to 
(usually near the en...
In Agile you decide features on day-1 
And on day-15 
And on day-29 
…. And every two weeks 
… and when STOP when the 
cli...
Truth 
You ALWAYS trade features 
Agile is just more open about it
You always trade features in the end 
(Especially on traditional work) 
But clients want to know what they 
will get…
Agile Contracts?
Agile contracts 
• Probably most “Agile” contracts still 
– Time and Materials 
– Fixed price, Fixed scope, Fixed schedule...
Agile contracts 
Customers need to expect: 
• More involvement 
• Regular Show-and-tell 
• Regular Reprioritization 
• Hel...
Option 1: Hide IT 
• Do Agile but don’t tell the customer 
• Sign a perfectly normal contract 
• Do Agile behind the scene...
Option 2: T&M + Agile delivery 
Guess: This is what most firms do 
+ Easy to understand 
- Incentive for supplier to accep...
Option 3: No cure, No pay 
Best for “Solve my problem” objective 
No good for “Do this list of 100 things” 
Honesty to the...
Option 4: Money for Nothing, 
Change for Free 
• From Jeff Sutherland ~ 2007/8 
– http://jeffsutherland.com/Agile2008Money...
Option 4: Money for Nothing, 
Change for Free 
Set up an ordinary fix, fix, fix contract 
Add: 
– Client may cancel at any...
Option 4: Money for Nothing, 
Change for Free 
Sounds good 
Incentives aligned
Option 4: Money for Nothing, 
Change for Free 
Few examples in practices 
Will clients actually reprioritize? 
And accept ...
Option 4: Money for Nothing, 
Change for Free 
Difficult to judge
Option 5: Rolling 
• Contract is a framework for work 
• Contract for services, not things 
• Contract to do work 
– Clien...
Option 5: Rolling 
For example: 
• Agree work for 2 weeks 
– Find opportunities 
– Develop some technology 
– Show client ...
Option 5: Rolling contract 
+ Team has incentive to deliver 
something 
+ Client has incentive to be 
involved 
+ Regular ...
Option 5: Rolling contract 
- Client must devote time 
- Difficult for supplier to 
schedule people 
- No long term contra...
Rolling contracts 
Toby Parkins 
Sell customer a little bit 
Sell a bit more (if they like it) 
Fewer big contracts 
More ...
Option 6: Two bids 
• Bid twice on the same piece of work 
• Offer the client a very traditional contract 
• And offer the...
Bad News, Good News 
• There is no Silver Bullet for Agile contracts 
• There is no easy fix 
But 
• If we rethink the con...
Think Again
Think Again 
Software is a service 
Software development is a service 
Therefore 
Sell the service not a product
Deciding what to build 
is part of the work
Think Again 
Don’t sell 
Do sell 
We will build 
product A with 
features B, C, D, …. 
We will provide a 
development serv...
Contracts do not state what will be built
So sales thinking needs 
to change…
Think Price - Typically… 
Price = Profit – Cost 
Cost = People x Time 
Price = Profit – (People x Time) 
Therefore 
We mus...
But… 
How much will the customer pay? 
How much value is this worth? 
When do they want it? 
How much can we do something ...
Think again 
Profit = Price – Cost 
Work to customer deadlines (time is fixed) 
Start with a small team 
Prove you can del...
With a rolling contract… 
Small upfront price tag should make sale easier 
Work will keep coming in from happy clients 
Tr...
Further Reading – by Allan 
• Agile Contract Options 
– InfoQ http://www.infoq.com/articles/agile-contracts 
– Software St...
Update 
This presentation is now 
available as series of short 
videos with audio 
http://tinyurl.com/kvjjwa3
Xanpan 
Agile Contracts 
allan kelly 
Twitter: @allankellynet 
allan@softwarestrategy.co.uk 
www.softwarestrategy.co.uk 
e...
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Agile Contracts

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A look at the options available to companies when delivering development services using Agile methods.

October 2014 - Presentation to Agile4Agencies, London.
November 2014 - Updated for Skills Matter, London

Published in: Software

Agile Contracts

  1. 1. Skills Matter November 2014 Agile Contracts Truth & Options Allan Kelly Twitter: @allankelly.net allan@softwarestrategy.co.uk http://www.softwarestrategy.co.uk
  2. 2. Allan Kelly…  Provide advice on software development & business strategy  Training in Agile, Coaching, Consulting Author – Xanpan: Team Centric Agile Software Development https://leanpub.com/xanpan – Business Patterns for Software Developers (2012, Wiley - ISBN: 978-1119999249) – Changing Software Development: Learning to be Agile (2008, Wiley)
  3. 3. Fixed Price Fixed Time Fixed Features Really?
  4. 4. Features Resources (People) Cost = Resources x Time Quality = free Time Fixed over short run (Brooks Law) Fixed: Time boxed Constraints
  5. 5. In traditional work … you decide the features before day-1 and try not to change until you have to (usually near the end) … and stop when you run out of time
  6. 6. In Agile you decide features on day-1 And on day-15 And on day-29 …. And every two weeks … and when STOP when the client doesn’t want more
  7. 7. Truth You ALWAYS trade features Agile is just more open about it
  8. 8. You always trade features in the end (Especially on traditional work) But clients want to know what they will get…
  9. 9. Agile Contracts?
  10. 10. Agile contracts • Probably most “Agile” contracts still – Time and Materials – Fixed price, Fixed scope, Fixed schedule – Agile as better delivery
  11. 11. Agile contracts Customers need to expect: • More involvement • Regular Show-and-tell • Regular Reprioritization • Help set acceptance criteria (specifications) • Frequent questions • Be part of the retrospective
  12. 12. Option 1: Hide IT • Do Agile but don’t tell the customer • Sign a perfectly normal contract • Do Agile behind the scenes & reap the reward + Sounds like it could work + Doesn’t upset customers - Trust, Honesty? Conflicts with Agile ideals
  13. 13. Option 2: T&M + Agile delivery Guess: This is what most firms do + Easy to understand - Incentive for supplier to accept everything - and let the backlog GROW - Client sold on “Agile” may also believe everything is possible, it will be fast, cheaper… - and they can do what they like - No particular incentive to change behaviors'
  14. 14. Option 3: No cure, No pay Best for “Solve my problem” objective No good for “Do this list of 100 things” Honesty to the fore - All risk transferred to provider - No incentive for client to be involved
  15. 15. Option 4: Money for Nothing, Change for Free • From Jeff Sutherland ~ 2007/8 – http://jeffsutherland.com/Agile2008MoneyforNot hing.pdf – http://scrum.jeffsutherland.com/2008/10/agile-contracts- money-for-nothing-and.html
  16. 16. Option 4: Money for Nothing, Change for Free Set up an ordinary fix, fix, fix contract Add: – Client may cancel at any time for payment of 20% of the outstanding fees – Client may add work during contract – Client must agree priorities each iteration – Client accepts some work will not be done
  17. 17. Option 4: Money for Nothing, Change for Free Sounds good Incentives aligned
  18. 18. Option 4: Money for Nothing, Change for Free Few examples in practices Will clients actually reprioritize? And accept work not done? A complicated rolling contract? A fancy T&M contract?
  19. 19. Option 4: Money for Nothing, Change for Free Difficult to judge
  20. 20. Option 5: Rolling • Contract is a framework for work • Contract for services, not things • Contract to do work – Client is buying capacity to do work – Open ended time – Discovering what is needed is part of the work – Duel track discovery & development
  21. 21. Option 5: Rolling For example: • Agree work for 2 weeks – Find opportunities – Develop some technology – Show client results • Client options – If they like it: 2 more weeks – If they don’t, if they are done: finish.
  22. 22. Option 5: Rolling contract + Team has incentive to deliver something + Client has incentive to be involved + Regular reviews keep focus on value delivered + Option to fail fast, fail cheap
  23. 23. Option 5: Rolling contract - Client must devote time - Difficult for supplier to schedule people - No long term contracts Money men won’t like, no big headlines
  24. 24. Rolling contracts Toby Parkins Sell customer a little bit Sell a bit more (if they like it) Fewer big contracts More repeat business
  25. 25. Option 6: Two bids • Bid twice on the same piece of work • Offer the client a very traditional contract • And offer them an “Agile” contract
  26. 26. Bad News, Good News • There is no Silver Bullet for Agile contracts • There is no easy fix But • If we rethink the contract process • Within a rolling contract framework Then … It might just work!
  27. 27. Think Again
  28. 28. Think Again Software is a service Software development is a service Therefore Sell the service not a product
  29. 29. Deciding what to build is part of the work
  30. 30. Think Again Don’t sell Do sell We will build product A with features B, C, D, …. We will provide a development service to you We will work with you to solve problem A And unlock benefits ( which might be B, C, D, …)
  31. 31. Contracts do not state what will be built
  32. 32. So sales thinking needs to change…
  33. 33. Think Price - Typically… Price = Profit – Cost Cost = People x Time Price = Profit – (People x Time) Therefore We must know cost to start Add a % for contingency Add a % for profit Fudge (what we think the customer will pay)
  34. 34. But… How much will the customer pay? How much value is this worth? When do they want it? How much can we do something for? Do sales people leave money on the table?
  35. 35. Think again Profit = Price – Cost Work to customer deadlines (time is fixed) Start with a small team Prove you can deliver Prove you can deliver benefit Only then flex team size
  36. 36. With a rolling contract… Small upfront price tag should make sale easier Work will keep coming in from happy clients Trade big sale for ongoing sales
  37. 37. Further Reading – by Allan • Agile Contract Options – InfoQ http://www.infoq.com/articles/agile-contracts – Software Strategy (PDF version) http://tinyurl.com/mq4qpsn • Dear Customer, The Truth about IT projects – http://www.agileconnection.com/article/dear-customer- truth-about-it-projects – http://tinyurl.com/lw9kqlj
  38. 38. Update This presentation is now available as series of short videos with audio http://tinyurl.com/kvjjwa3
  39. 39. Xanpan Agile Contracts allan kelly Twitter: @allankellynet allan@softwarestrategy.co.uk www.softwarestrategy.co.uk eBook https://leanpub.com/xanpan Print http://tinyurl.com/nnu7hom Xanpan discount code SMITBNov2014 $8 in November

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