5 Questions you need to ask before you outsource an Agile project


If you think that the following points are an oversimplification of a very complex subject of outsourcing agile project – you will be right and I agree with you.

However, I think these questions are a good starting point for your research before you actually go ahead and outsource an agile project.

1. Why do you want to do the project in an Agile mode?

Here are three possible reasons for wanting to do an outsourced project in agile way. Take your pick:

(A) You are already engaged in outsourcing and have established a good working relationship with the outsourced vendor. You have tried agile way of working internally and it has worked for you. You want to extend it to outsourced projects.

(B) You want to outsource a new project because you do not have internal bandwidth to either work on the requirement or on the development. You expect that outsourcing will help you overcome the bandwidth limitation and agile methodology will help you to evolve the requirements through multiple iterations.

(C) You do all your projects in an agile and to achieve immediate cost saving you plan to outsource some piece of work. So, it is natural for you to choose agile way of executing the project.

If you have chosen (A) then you then you have a good chance of success. The primary criteria for success of agile are trust and good communication and you seem to have both in place.

If you have chosen (C) then you may pull it off but you need to scale your expectation down on the immediate cost saving potential. It takes time, effort & energy to build relationship – initially that is going to be an overhead.

However, if you have chosen (B) then …

As it is, agile is communication intensive. When you bring in outsiders the communication load becomes more. So, if you are not in a position to devote time to understand what you need and create the stories, if you are not in a position to spend time to clarify doubts and answer questions as and when required, if you do not have time to meticulously review the deliverables of every iteration – your project will be doomed.

You should either understand agile well or you should understand outsourcing well before you try agile outsourcing.

2. Do you want to outsource just this project or are you looking for a partner?

This question is relevant only if you do not already have an outsourcing partner.

Agile without trust does not work.

Trust gets established between individuals and not between organizations. There is no substitute for an initial face to face interaction. At the start of the project key people from both sides should together at the same location and work together for a reasonable amount of time. One month would be ideal. If you want to optimize on cost, you should still have at least one week of working together.

Agile without a mechanism for smooth and effective communication does not work.

Setting up effective communication channel, be it dedicated communication link, be it video conferencing facility, be it necessary tooling infrastructure all require investment.

To establish these takes time … and effort … and energy. Doing it for just one project may not give you sufficient return on the investment that you make to get the whole think working.

Therefore, take a long term view and look for a partner who can help you with multiple projects.

3. What type of commercial model you should look at?

There are 3 alternatives – either one or a combination can work for you.

(A) You can have a Time & Material (T&M) contract where you agree on the rate for different people will different levels of experience and expertise and pay the vendor according to how much time they spend on your project. Though this is the simplest mechanism all the risks are with you and the vendor has no incentive to work more efficiently.

(B) The second alternative is to have a Fixed Price contract where you define the scope of the project in sufficient detail and agree to pay a fixed price for it. This runs counter to the basic philosophy of agile where you actively encourage requirements to evolve and change. Therefore, for fixed price to work you need to have a mechanism to compensate the vendor for changed requirement and rework, which you may do in a T&M basis. However, you need to keep in mind that what is a change and what is within scope can become a very controversial topic.

(C) The third commercial model can be based on some objective measure of the amount of work done. People have tried many different methods of sizing like using Story Point or Function Point. Each has its own advantages and disadvantages. The one I like is MK-II Function Point (this and this). It gives a good basis for calculating incremental effort. However, it does not cover effort required for rework, refactoring and impact of technological change.

I do not think there is one best method of structuring a commercial model. However, a good approach is to sign a Master Services Agreement (MSA) which specifies the overall terms and conditions including rate but does not get into specifics of a project. The scope of work can be outlined through a Statement of Work (SOW) which can include high level product backlog.

You may have to try out different model – combination of models – and see which one is best for you. Starting point would be to create a flexible MSA.

4. What payment term should you have?

Since Agile is iterative and there is emphasis on continuously delivery of “potentially shippable product”, you need to pay either at the end of each iteration or you need to pay at the end of a pre-agreed time period like at the end of the month.

If you decide to pay at the end of each iteration then you need to decide if you will enforce a mechanism of accepting the delivery of iteration. You need to decide what you will do if there are bugs or other forms of deficiencies found. You have 3 choices:

(A) You accept the fact that some amount of defects are inevitable and expect that those defects will be fixed in the next iteration and go ahead and make the payment anyway – this is not a very good idea.

(B) You set a threshold of defect and create a separate sprint to close those defects and accept the iteration only after all the defects are closed – this may upset your sprint planning.

(C) You do not your sprint plan but expect the vendor to correct the defects in addition to whatever is expected to completed in the sprint and release the payment only after all the defects are closed – this will put additional load on the team but will force them to deliver better quality product.

There is one more point which you need to keep in mind. One of the benefits of agile is to fail early rather than fail late.

So you need to have a clause in the contract of project termination midway if you realize that you are not going to get the business benefit originally envisaged.

5. Are you sure the vendor understands your definition of “done”?

One of the principles behind agile manifesto says “Working software is the primary measure of progress”.

However, in an enterprise context is that enough? Would the same set of people who have developed the code going to maintain it for years to come? Is there a requirement to follow any organizational coding standard and guidelines? Do you have any architectural standards that are practiced? Is the application usable? What about performance under real life load? Does it have to integrate with other pieces of software?

So, you need to have a clear definition of what is done. Here is an indicative list of points that your definition should take into account:

  • How you are going to test the delivery?
  • How much documentation is required?
  • Is there any architectural or design standard that needs to be followed?
  • Do you have a coding standard and code review guideline?
  • Do you need to have a Usability testing done?
  • What are the integration needs and how will you test it?
  • How are you going to measure performance under load?
  • Who is responsible for fixing issues while deploying in preproduction and production?

Not having a mutually agreed and a clearly written down definition of “Done” is one of the source of future potential dispute.

Finally…

There is no clear definition of what Agile Methodology means. So you need to thrash out any difference in understanding between you and the vendor. You may find it difficult to adhere to some of the points mentioned in the Agile Manifesto but do keep in mind the 3 important elements which makes Agile agile:

  1. Iterative development and regular delivery of working code
  2. Self-organizing team and emerging design
  3. Direct communication and immediate interaction

[A version of this article is also published in Global Delivery Report]

Next>> 5 Questions to ask before you take up an Agile Contract

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