More Related Content Similar to Mary Poppendieck: Agile under contract Similar to Mary Poppendieck: Agile under contract (20) More from Agile Lietuva (20) Mary Poppendieck: Agile under contract1. lsoftware development
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Agile Under Contract
Win–Win Contracts
mary@poppendieck.com Mary Poppendieck www.poppendieck.com
2. A True Story
The Cast of Characters Act II
Harold (Senior Plant Product Engineer) Every month for 18 months
Dave (Division Engineering Manager) I travel to XRI
Harold often comes with me
Me (Process Control Engineer)
We review the work of the
XRI (The Vendor) XRI development team
Act I Act III
Dave signs a time-and-materials System is delivered on time.
contract against his boss’s Saves plant ½ its cost 1st month.
advice to go fixed price. Harold is a hero.
My job is to keep Dave out of Dave looks brilliant.
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trouble and make sure Harold I become plant IT manager.
gets what he needs. XRI: profit + reputation.
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3. Lessons Learned
Lesson 1: Detailed “requirements” are actually
solution design.
Observation 1: Responsibility for success
lies with the solution designer.
Conclusion: Responsibility for success lies with the
organization that specifies the detailed “requirements”.
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4. Why Not Fixed Price?
Early Scope Definition (protects the vendor)
Excess Scope (protects the customer)
Features and Functions Used in a Typical System
Often or Always Sometimes
Rarely
Used: 20% 16%
19%
Never
Often
45%
13%
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Always
7% Rarely or Never
Standish Group Study Reported at XP2002 by Jim Johnson, Chairman Used: 64%
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5. Lessons Learned
Lesson 2: Development is a learning process.
Observation 2: An experienced vendor can guarantee a
solution that works; but it should not be expected to
guarantee the exact details of that solution.
Conclusion: Solution design emerges during
the course of a contract, not as its first stage.
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6. Case Study:
Stamping Dies
Japan US
Mistakes very expensive Mistakes very expensive
Never-ending changes Never-ending changes
Focus: Reduce Time Focus: Reduce Waste
Early Design – Early Cut Wait to Design – Wait to Cut
Designer makes changes Slow change approval system
Target cost (includes changes) Fixed cost (changes are profit!)
10-20% cost for changes 30-50% cost for changes
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Half the time, Half the cost Twice the time, twice the cost
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7. Lessons Learned
Lesson 3: Start with a clear understanding of the
critical business results that must be delivered.
Observation 3: It is the job of the development team
to determine how to deliver those results.
Conclusion: Both parties must be committed to work
together to achieve the business goals.
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8. The Purpose
of Contracts
Conventional Wisdom
Companies inevitably look out for their own interests
Contracts are needed to limit opportunistic behavior
The Agile Approach
Assume other party will act in good faith
Let the relationship limit opportunism
Use the contract to set up incentives
Align the best interests of each party
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with the best interests of the joint venture
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9. Lessons Learned
Lesson 4: Mitigate development risk with frequent
delivery/assessment.
Observation 4: It is technically possible, less expensive,
and very desirable to deliver software in small increments.
Conclusion 4: Regular delivery, deployment and evaluation
of useful functionality is the best software development
risk mitigation strategy.
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10. Case Study: T5 Agreement
Heathrow Terminal 5 In Practice
2002 – 2008 147 Sub-Projects
₤4.2 billion Integrated Team
Target Cost
BAA
Pool of incentive/risk money
Delay would threaten existence
2/3’s split among contractors
Studied other terminal projects On Time
Assumed responsibility for risk On Budget
T5 Agreement Very Safe
Legally binding
Contractors agree to:
work in teams
mitigate risks
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work to achieve the best
possible results
10 October 11 Copyright©2008 Poppendieck.LLC
11. Contracting Approach
1. Treat software development as a professional service.
Most organizations contract for services
(legal, marketing, engineering, software maintenance).
Software development contracts should follow
the patterns established for service contracts.
2. Contract for measurable business (not technical) results
Specify levels of desirable/acceptable performance
Multiple levels: aspiration, acceptable, unacceptable
Plan for incremental delivery/deployment/assessment
Maximum of 10% of contract (or 1 month) per increment
Assess/adjust overall approach after each increment
3. Make both parties mutually responsible for results
Risk should be born by the party most capable in the area
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Use the contract to align incentives of both parties
Consider overall target cost with short fixed price sub-contracts
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12. Target Cost
Based on high level business goals.
Target cost includes all changes
Target is the joint responsibility of both parties
Goals and target cost are clearly communicated to
workers who are expected to work together and
compromise to achieve the goals within the cost
Negotiations occur if target cost might be exceeded
Neither party benefits
Workers at all levels have clear incentives to work
collaboratively, compromise, and meet the target.
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13. Partnership Contracts
Structure
Umbrella or framework contract
Establishes critical business expectations
Establishes target cost / schedule
Release work in stages
Keep stages small
Each stage is an iteration
Iteration scope depends on the most pressing business needs
and the professional judgment of the development team
Contract Form
Describes the services, not the deliverables
Establishes high level expectations and constraints
Establishes ownership and intellectual property rights
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Provides the framework for negotiating iteration details
Provides for disagreements: escalation, mediation, and termination
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14. The Agile Approach
Win-Win Contracts
Based on mutual commitment
To critical goals and constraints
Provide for risk sharing
Risk born by party most able to manage it
Establish correct incentives for all parties to work
together for the good of the Joint Venture
Assume learning will occur over time
Expect a professional response to change and uncertainty
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Almost always yield faster, better, cheaper results
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Thank You!
More Information: www.poppendieck.com
mary@poppendieck.com Mary Poppendieck www.poppendieck.com