2. A Vicious Circle
project
failure
increased
lower control
productivity
lower increased
morale documentation
increased
stress
3. …it’s all in the system…
“your organization's productivity is influenced by
the production process itself”- Edward Deming
“Simple, clear purpose and principles give
rise to complex, intelligent behavior.”
Complex rules and regulations give rise
to simple, stupid behavior.” Dee Hock, VISA
6. The Agile Manifesto
We are uncovering better ways of developing software by doing it and
helping others do it.
Through this work we have come to value
Individuals and interactions over processes and tools
Working product over comprehensive documentation
Customer collaboration over contract negotiation
Responding to change over following a plan
That is, while there is value in the items on the right, we value the items on
the left more.
8. The Principles
Eliminate Waste
Build Quality In
Create Knowledge
Defer Commitments
Deliver Fast
Customer First
Respect People
Optimize the Whole / Collaboration
Working Solutions as Progress
Continuous Improvement
Economics
Flow
9. Forms of Waste being examined
Overproduction of features, or of specific elements before they
are needed
Waiting and Delay
Handoff
Extra Processing (relearning, reinvention)
Partially done work – reduce work-in-process
Task Switching and interruptions
Rework and Defects
Under using your people’s talents
Knowledge scatter or loss
Wishful Thinking
Untimely management of risk
11. “Based on a fundamental understanding
and acceptance of the unpredictable
nature of software development.”
12. Fear of Opportunism
Taking advantage of opportunities without regard for the
consequences to others.
Seeking immediate advantage with little regard for ultimate
consequences.
Self-Interest
Self-Seeking
13. Transaction Costs
Selection
Negotiation and Renegotiation
Monitoring and Enforcement
Billing and Payment
Inventory and Transportation
Cost of Diminished Communication
Cost of Loss of Skill Base
Cost of Poor Results
“Transaction Costs do Not Add Value”
14. The Purpose of Contracts
Conventional Wisdom
- Companies inevitably look out for their own interests
- Contracts are needed to limit opportunistic behaviour
The Lean Approach
- Assume other party will act in good faith
- Let the relationship limit opportunism
“The Lean Approach Lowers Transaction Costs”
15. Contract Models
Fixed Price
Time-and-Materials
Multi-Stage
Leading to Fixed Price
Progressive or Delivered Feature
Target (Cost)
16. Selecting a Contract Model
All contract models create a bi-lateral monopoly.
- Switching Costs are prohibitively high
Risk should be born by the party best able to manage it.
- Uncertainty in the domain
- Customer
- Uncertainty in the technology
- Supplier
17. Fixed Price
Generally do not give the lowest cost
Competent suppliers will include cost of risk in bid
Selection favours the most optimistic [desperate] supplier
- Least likely to understand project’s complexity
- Most likely to require
- Rescue by Customer
- Loss sustained by Supplier
- High Cost Change Orders
Fixed Price Contracts Lead to:
- Early Scope Definition (to protect the vendor)
- Excess Scope (to protect the customer)
18. Lean Fixed Price
Fundamental Rule:
- Scope Must Be Negotiable
Vendor must have confidence that when the money is gone, the
customer will either agree that the work is done or negotiate in
good faith for more funding.
Customer must have confidence that when the money is gone,
their basic business objectives will be met.
Most Fixed Price Contracting Language does not support
Negotiable Scope.
19. Time and Material Contracts
Customer is at Greatest Risk
- Supplier has little incentive to control costs
Need to Control Supplier Opportunism
- Enter – The Waterfall Lifecycle
Transaction Costs of Control are High
20. Time & Material & Agile
Fundamental Rule:
- Control with Feedback
Customer must develop confidence as the money is being
spent, that their business objectives will be met in a reasonable
timeframe for a reasonable cost.
Vendor must have confidence that they will have regular access
to the customer and obtain regular, reliable feedback.
Most Time-and-Material Contracting Language stipulates
traditional control rather than control with feedback.
21. Progressive Contracts
Start With An Umbrella Contract
Release Work In Stages
Each Stage is an Iteration
Often Early Stages are Time-and-Materials
Later Stages May Be Fixed Price
Scope Beyond the Existing Stage
Remains Negotiable
22. Summary
Trust-Based Partnerships
Require risk sharing
Adapt to change and uncertainty
Depend on the relationship to limit opportunism
Are nurtured through excellent communications
Almost always yield faster, better, cheaper results