As more and more organizations adopt agile outsourcing, the recent declaration of government to adopt agile, the topic of agile outsourcing contracts is becoming more important than ever before. Agile Outsourcing projects can be more successful and better governed with agile contracts. Learn the best practices in agile outsourcing contracts and scenarios of agile offshoring. Get your agile outsourcing success kit - http://www.people10.com/agile-development-outsource This presentation are slides from the webinar- Agile contracting best practices to maximize outsourcing value part held on October 31st 2012. https://blog.people10.com/agile-contracts-best-practices/ Register for the re run this November 27th - http://www.people10.com/resources/webinars/agile-contracting-best-practices More and more organizations are following agile software development methods to delivering early value moving away from traditional development methods. The issues they face with contracting while moving to agile outsourcing opens up numerous challenges - including conflicts between customers and vendors on scope changes, timely completion, budgetary constraints among others. In this presentation, we have addressed the pitfalls of traditional outsourcing contracts in the agile outsourcing scenario and defined the need for agile outsourcing contracts. Secondly, we have defined the different contracting models and the various scenarios in which they fit in the bill for agile outsourcing projects. Third, we have illustrated the sizing framework for software scoping that will again helping define your size of agile outsourced project. Let us know your feedback, post comments! Do share if you like. catch the webinar recording - http://www.youtube.com/watch?feature=player_embedded&v=hNJDQ0rM9c4

1. Agile Contracting
Best practices for maximizing
outsourcing value
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2. Agenda
• Contracting challenges and the agile context
“The challenges, need to move away from traditional
contracts, introduction to the agile context"
• Measuring the requirements scope in agile
“Software sizing and its importance”
• Choosing the right contracting model
“Different scenarios and choosing the appropriate
contract model for each”
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3. And then..
Structuring contract clauses from specific agile
perspective
– The purpose
– Defining contract types and standards
– Scope, Schedule, Cost
– Roles and responsibilities of key stakeholders
– Project Governance : Meetings and status reports
– Defining Mutual obligations of customer and supplier
– Defining Acceptance criteria for Agile deliverables
– Deliverables with respect to Agile
– Defining Change control in Agile
– Structuring Payment terms and schedule
– Simulation of a Payment structure
– Recommendations
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4. 4
Context of IT services Application development contract
• The purpose
– Getting the expected delivery
through a clear agreement
between customer and supplier
• Contract means
– All agreements between two
parties like
• Master Service Agreements (MSA)
• Statement of Work (SOW)
• Other legally binding agreements
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5. What are we trying to tackle here…
5
TRADITIONAL
AGILE
?
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6. 6
The Traditional Challenges
• Requirements / Scope
– Up-front requirements
gathering
– Scope remains
constant
– Sign-offs at every stage
• Deliveries
– Late business value
– Delivery risks are too
late to recover
• Changes
– Overwhelming
– Tightly controlled
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7. Conventional contracting factors…
SDLC
Roles
Scope
Schedule
Milestones
Deliverables
Payment terms
Change management
Project control & status
7
Traditional contracts are built on the basis of clear
requirements, tight control and documented changes
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8. 8
The Agile context
• Fix the scope to deliver
• Estimate the time and cost
• Fix the time and cost
• Estimate the scope to deliver
How to handle the ‘inverted pyramid’ scenario ?
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9. Agile contracting factors…
9
Almost every aspect is different in Agile and the
contracting terms should account for these differences
SDLC
Roles
Scope
Schedule
Milestones
Deliverables
Payment terms
Change management
Project control & status
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10. 10
Factors governing Agile contracts
• Ensure early business value (ROI)
• Secure time and cost
• Lower delivery risk
If you do not expect multiple
and incremental deliveries, do
NOT go for Agile Contracts
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11. 11
Definition of ‘Scope’ in Agile
Time = Fixed (known)
Cost = Fixed (known)
Scope = ?
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12. 12
How to address Scope in Agile
Scope = Business Value delivered
= Working features
Scope ≠ Project tasks
Examples:
Sales forecast report
Screen to capture employee details
Register a retail customer
Make an online payment transaction
Examples:
Project status reports
Risk register
Earned value report
Task assignment register
Specific project management effort is
factored separately in the cost. They are
not considered as scope delivered.
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13. 13
How to measure the Scope ?
• In ‘Size units’
– Story Points
– Feature Points
– Epic Points
– XYZ Points etc.
Size is ≠ Effort
Size is relative
Size is measured through mutually
agreed parameters
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14. 14
Size as the measure the Scope
Many methods
• Simple / medium / complex
• Small / Medium / Large / Extra Large / XXXL
• Fibonacci size (1,2,3,5,8,13,21,34,etc…)
How do you measure
size ?
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15. 15
How do you derive the size ?
Pre-agree on the sizing framework & ground rules
Sizing / Scoping Framework
• Through defined parameters (technology,
acceptance criteria, risk, business complexity)
• Agreed between customer and supplier in the
contract
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16. 16
Choosing Agile contracts : The 3 Scenarios
Requirement
Stability
possibility of
requirement
change
Requirement Clarity
degree of requirement clarity
Partial
requirements/
High level view
All requirements
are available and
stable
No requirements
/ only objectives
& goals
Low Medium High
LowMediumHigh
1
2
3
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17. 17
Let us start building
the contracting
scenarios now
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18. 18
Scenario 1: All requirements available and stable
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19. 19
Scenario 1: All requirements available and stable
Fixed
scope
Fixed time
On-time
delivery
Late
delivery
Sprint1
Sprint2
Sprint3
Sprint4
Sprint5
Sprint6
Sprint7
Sprint8
No
payment
Execution steps
- Size the requirements
- Derive effort an cost
- Agree on timeline
- Deliver iteratively
- Frequent demos
- Frequent releases
One contract; One SOW
SOW (Fixed price)
Execute the scope
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20. 20
Scenario 2: partial requirements (or) high level view
?
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21. 21
Scenario 2: partial requirements (or) high level view
Fixed scope
Fixed time
On-time
delivery
Sprint1
Sprintn
Sprintn+1
Sprintn+2
Sprintn+3
Sprintn+4
Sprintn+5
Execute
available
requirements ;
size the
remaining
Execution of the size (scope)
Fixed modeFixed mode
One contract; Two SOWs
First SOW (Fixed price)
- Execute the available scope
- Size the remaining at high level
( +/- 15% variance)
Second SOW (Fixed price)
Execute the remaining scope
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22. 22
Scenario 3: No requirements; only objectives & goals
?
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23. 23
Scenario 3: No requirements; only objectives & goals
Fixed scope
Fixed time
On-time
delivery
Sprint1
Sprintn
Sprintn+1
Sprintn+2
Sprintn+3
Sprintn+4
Sprintn+5
Feasibility/
Proof of
Concept/ size
the
requirements
Execution of the size (scope)
Fixed modeT&M with a cap
One contract; Two SOWs
First SOW (T&M with cap)
- Proof of concept
- Size the scope at high level
( +/- 25% variance)
Second SOW (Fixed price)
Execute the remaining scope
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24. 24
• Include sizing variance (+/- X% ) depending on requirement
clarity and maturity of the sizing framework
• Contract must include the vocabulary of ‘size delivered’ instead of
‘scope delivered’
Some additional considerations…
In case of contract with multiple SOWs ( e.g.. 3 months fixed
iterations)
• MSA breakage from client goes with a penalty (e.g. 10% of
contract value to the supplier)
• Penalty clauses if supplier walks away before the tenure
Consider these factors…
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25. 25
Start building agile contracts!
Learn to draft the clauses depending on
project purpose, contract type, project
execution model, schedule, governance
and payment schedules. Know the best
practices and recommendations.
Download part 2 of the presentation
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26. People10 Technosoft Private Limited | 2012.08 26
Thank You
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www.people10.com
info@people10.com
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