Contracts: diagonal saber vs. agile
- 1. Marco Fracassi @fracassi_marco Contracts: diagonal saber VS agile
- 3. we save the salvable Why contracts? ● limit damages ● can’t take advantages of each other ● each do it’s own interests ● knowing the other do the same
- 4. I lock you From trust To diagonal saber
- 5. Suppliers advantages: ● fairness ● stability ● predictability Toyota docet Suppliers actions: ● suppliers share private infos with Toyota ● suppliers invest in specialized equipment for Toyota ● suppliers collaborate with Toyota experts Toyota advantages: ● suppliers more productive ● suppliers produce with better quality ● strong suppliers network ● cheaper and shorter procurement RELATIONSHI P
- 6. Toyota VS General Motors Target-cost contracts: ● cost includes all changes ● extra cost negotiations ● work together ● high quality ● cost reduction ● start immediately Fixed-cost contacts: ● fixed specifications ● control mechanism ● changes as profit-making ● changes need an approval process ● reduce collaboration ● low quality ● raise cost ● must wait specifications before start
- 7. but in the software world... ● it is only produced once ● complex ● expensive ● many changes ● uncertain ● if wrong it can have a great financial impact
- 8. why vendors need suppliers? ● no internal skills ● reduce costs ● vertical -> best quality ● selection ● monitoring ● negotiations ● tracking payments ● billing ● enforcing agreement ● arm's-length relationships ● change intolerance ● communication or missing communication Hidden Costs
- 9. fixed price contracts Transfer risk from customer to vendor Lowest bidder ● makes profit on changes ● needs detailed specification On changes: ● disappointed customer ● increase costs
- 10. fixed price risks Customer: ● on uncertain problem ● on changing problem Vendor: ● on technically complex problem ● estimation before doing Who will win the bid? ● vendor that does not understand the complexity of the problem ● most optimistic vendor ● most desperate vendor project fails
- 11. Transfer risk from vendor to customer time & material contracts Customer has to control vendor to avoid waste ● do not add value ● costly Vendor has no incentives to be efficient
- 12. time & material for agile When the system is partially deployed, the customer is dependent on the vendor Mitigation: ● planning ● iterations ● option to terminate ● most valuable first
- 13. multistage contracts 1 Short Contract to learn about the problem only one vendor involved 2 Large fixed price to solve the problem bid
- 15. target cost contracts Is not fixed price ● both pay more ● both enjoy the benefits Is not T&M ● Benefit if under cost or schedule ● No profit if work longer
- 16. how to implement target cost Cost + fixed fee ● Fee paid after success ● If TC is exceeded vendor work at cost Profit not to exceed ● TC includes vendor profit
- 17. other contracts Target Schedule Shared benefits ● Shared risk ● Shared rewards
- 18. the key The secret is not in the contract wording itself, but in having a sponsor at a high enough level who understands that the company can benefit more by allowing the system to evolve rather than be specified in detail at the beginning --Lean Software Development: An Agile Toolkit--