a minute of our time or what we need to unlearn about software contracting

A Minute of Our Timeor

What we need to unlearn about software contracting

Antti Kirjavainen (@anttiki)

Photo by ToniVC, CC-lisensed (non-commercial, sharealike, attribution)

BSOD by Martin Deutsch

SOFTWARE CONTRACTINGMajor contributor to this is the way we do

FAIL #1

FAIL #2

FAIL #2

FAIL #3

THE DYSFUNCTIONAL DYNAMICS

Needs

Contractor Customer

Risk Mitigation

Contractor• Doing work that customer

does not want to pay for• Employing people who do not

produce income

Customer• Get fair contribution in

exchange of payment

The Man-Hour

• De-facto industry standard• Smallest unit of work • Value can be evaluated• Billable or not billable

Contractor

billable man-hours

ratio of billable and unbillable man-hours on an individual basis

unbillable man-hours

Customer

definition of valuable (=billable) man-hours

billed man-hours

price of man-hours

Alert

Actual Dynamics

billable man-hours definition of valuable (=billable) man-hours

ratio of billable and unbillable man-hours on an individual basis

unbillable man-hours

billed man-hoursprice of man-hour

Actual Dynamics

billable man-hours

definition of valuable (=billable) man-hours

Do only work everyone agrees onexperiments

analysis paralysis

missed opportunities

motivation

Handcuffs by Mark Zwolanek

Actual Dynamics

billable man-hours

billed man-hours

Competition, conflict

motivation trust

Actual Dynamics

price of man-hour

Let’s compete with unit

price!

quality of work

work units (=people) are

the same favor cheaper

labor

Actual Dynamics

unbillable man-hours

opportunities to improve

Ability to attract and satisfy customers

Possibility to correct failure

situations

growing competences

developing business model(s)

Actual Dynamics

billable man-hours definition of valuable (=billable) man-hours

ratio of billable and unbillable man-hours on an individual basis

unbillable man-hours

billed man-hoursprice of man-hour

Valuable contributions to the customer?

Impacts of focusing on billable man-hours

• De-motivation of people• Losing trust• Losing competitiveness• Losing focus on

producing valuable contributions to the customer

• Missed opportunities• Losing trust• Getting low quality work• Losing focus on

getting valuable contributions in exchange for pay

WAYS TO MAKE IT BETTER

Option 1. #NoContracting ?!

Option 2. First Build Trust

1. Build trust relationship with the customer2. Start contracting for the customer3. ???4. Profit

Option 2. First Build Trust

1. Build trust relationship with the customer2. Start contracting for the customer3. ???4. Profit

How to be (or appear to be?!) trustworthy

before working together?

Option 3. What is the smallest potentially valuable unit of

work?

Actual Dynamics

billable man-hours

definition of valuable (=billable) man-hours

Do only work everyone agrees onexperiments

analysis paralysis

missed opportunities

motivation

Handcuffs by Mark Zwolanek

Option 3. TeamSmallest Value-Producing Unit

Option 3. TeamAnd smallest potentially valuable units of

work Outcome Time

Option 3. Smallest potentially valuable units of work

Outcome Time

Sprint

Outcome Time

Sprint

Potentially shippable product

increment

Option 3. Smallest potentially valuable units of work

Option 3. Smallest potentially valuable units of work

Outcome Time

SprintMinimal Marketable

Feature (MMF)

Potentially shippable product

increment

Handcuffs by Mark Zwolanek

Option 4. What should we offer to the customer?

Actual Dynamics

price of man-hour

Let’s compete with unit

price!

quality of work

work units (=people) are

the same favor cheaper

labor

Option 4. How to focus on valuable contributions for

customers?

What is your unique value proposition?

Option 4b. Compensation tied to actual valuable contribution for

customer?

Profit Sharing

• Works best for developing commercial products and services

• Customer and contractor partner up• Parties agree on profit sharing

”No Cure No Pay” by Tom & Kai Gilb

• Fixed Price• Payment only if Value Definition is met• Validated e.g. by trial use • Value Definition done with EVO method• Allows definition of desired impact of the software

• http://www.gilb.com/dl38

What is your unique value proposition?

We Need New SW Contracting Business Models!

CONCLUSIONS

Photo by ToniVC, CC-lisensed (non-commercial, sharealike, attribution)

BSOD by Martin Deutsch, CC-lisensed (non-commercial, sharealike, attribution)

SOFTWARE CONTRACTINGMajor contributor to this is the way we do

The Man-Hour

• De-facto industry standard• Smallest unit of work • Value can be evaluated• Billable or not billable

Impacts of focusing on billable man-hours

• De-motivation of people• Losing trust• Losing competitiveness• Losing focus on

producing valuable contributions to the customer

• Missed opportunities• Losing trust• Getting low quality work• Losing focus on

getting valuable contributions in exchange for pay

Smallest potentially valuable units of work

Outcome Time

SprintMinimal Marketable

Feature (MMF)

Potentially shippable product

increment

Compensation tied to actual valuable contribution for

customer?

What is your unique value proposition?

We Need New SW Contracting Business Models!

THANK YOU!

Antti KirjavainenTwitter: @anttikiEmail: antti.kirjavainen@houston-inc.comSlideShare: http://www.slideshare.net/anttikirjavainen