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Agile Outsourcing - Agile Contracts Best Practices

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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.

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

Agile Outsourcing - Agile Contracts Best Practices

  1. 1. Agile Contracting Best practices for maximizing outsourcing value People10 Technosoft Private Limited | 1
  2. 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” 2People10 Technosoft Private Limited |
  3. 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 3People10 Technosoft Private Limited |
  4. 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 People10 Technosoft Private Limited |
  5. 5. What are we trying to tackle here… 5 TRADITIONAL AGILE ? People10 Technosoft Private Limited |
  6. 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 People10 Technosoft Private Limited |
  7. 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 People10 Technosoft Private Limited |
  8. 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 ? People10 Technosoft Private Limited |
  9. 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 People10 Technosoft Private Limited |
  10. 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 People10 Technosoft Private Limited |
  11. 11. 11 Definition of ‘Scope’ in Agile Time = Fixed (known) Cost = Fixed (known) Scope = ? People10 Technosoft Private Limited |
  12. 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. People10 Technosoft Private Limited |
  13. 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 People10 Technosoft Private Limited |
  14. 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 ? People10 Technosoft Private Limited |
  15. 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 People10 Technosoft Private Limited |
  16. 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 People10 Technosoft Private Limited |
  17. 17. 17 Let us start building the contracting scenarios now People10 Technosoft Private Limited |
  18. 18. 18 Scenario 1: All requirements available and stable People10 Technosoft Private Limited |
  19. 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 People10 Technosoft Private Limited |
  20. 20. 20 Scenario 2: partial requirements (or) high level view ? People10 Technosoft Private Limited |
  21. 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 People10 Technosoft Private Limited |
  22. 22. 22 Scenario 3: No requirements; only objectives & goals ? People10 Technosoft Private Limited |
  23. 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 People10 Technosoft Private Limited |
  24. 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… People10 Technosoft Private Limited |
  25. 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 People10 Technosoft Private Limited |
  26. 26. People10 Technosoft Private Limited | 2012.08 26 Thank You Any questions? Contact nisha@people10.com www.people10.com info@people10.com +1 718 551 9484 +91 80 3342 0800 Agile Outsourcing Agile Consulting