Output Based Contracts_An Agile Approach to Software Contracts

Outsourcing and Trust

Many commentators have suggested that the agile, incremental delivery approach is incompatible with good corporate governance of ICT projects. Indeed, Alistair Maughan, an experienced corporate lawyer who has advised on large public and private ICT contracts including UK HM Revenue & Custom’s controversial 10-year £8.5bn deal with Capgemini, has recently argued < http://ow.ly/5Rr1F > that “Agile… won’t work in the real world” of government ICT projects. One basic argument used is that projects fail due to a “lack of trust between customer and supplier” and hence the “Agile credo of, “Let’s trust each other some more” is undermined from the start.
What do we mean by ‘trust’ in this context?

The Outsourced IT Experience

Corporate customers have learned not to trust outsourced suppliers. Their experience has been that software projects deliver late, over budget, and represent poor value. They are not looking at the reasons for this; they simply trust their own experience when it comes to negotiating new contracts. So new suppliers start at a disadvantage.
Dialogue and case history helps a supplier build a relationship with a potential customer, so that the client’s buying team can feel more confident they will not live to regret the new partnership. Many agile developers feel that the case they make for keeping in tune with the client’s needs and delivering to those needs is powerful enough on its own. But purchasers want to know, first and foremost, how much it will cost and what they will be getting for their money.
The business users value what the software does – aka the business outcome. In an integrated Lean value stream, the business users use the software to enhance the value delivered by their business to their customers. But the business users do not commission the software projects. The procurement and retained IT folk who commission projects want assured value for money – they don’t want their butts kicked by their senior management for overrunning their budgets. Their performance is measured by compliance to standard practices. Outcomes are a secondary consideration. For them, it is all about managing the cost.

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