I was part of the vendor team for a large Dutch bank where work was being done in the traditional framework, using multiple vendors. The financial industry had changed drastically from 2008 onward due to a series of events such as separation of banks, mergers of banks, banks going bankrupt, and nationalizations. It was necessary to move to Agile to adapt to the frequently changing requirements.
We (customer and suppliers) discussed and adjusted many things in the existing master contracts to enable all of us to work in the new way.
A typical way we divided work was to have one vendor do the requirements gathering, another do the development, another the testing, and perhaps another the deployments. This resulted in a horizontal split of responsibilities. The problem with this way of contracting was that none of the vendors had end-to-end accountability.
We agreed that in the new way of working, end-to-end accountability and ownership of the project was essential. The master contract was adjusted to have a vertical split of the work rather than a horizontal split. This involved a painful exercise of transitioning development, testing, and requirements work from one vendor to another; however, once the exercise was complete, it ensured end-to-end accountability.
Quality (an end-to-end responsibility of the development vendor)
The development vendor was accountable for development and testing end-to-end. The KPIs were adjusted in the contracts from development/testing KPIs to end-to-end delivery KPIs.
Monthly iteration-based pricing
Pricing models had to evolve from the traditional fixed price-based pricing or time and materials. The pricing in the new way had to be conducive to Agile. The new pricing structure was iteration based, whereby a fixed price per iteration (monthly) was agreed on between the vendors and customers.
Up-front involvement of the vendors
The new way of working meant that the vendors had to work more closely with business. The openness improved as vendors moved upstream with requirements gathering and interactions with business. The contract involved changes to the scope of the vendors’ work, with involvement in the requirements gathering phase.
Committed work to vendors
The new contract provided commitment of work to vendors for a period of two years. This ensured that vendors did not need to worry about the day-to-day work and also ensured that there were fewer tussles among vendors to secure more work. Thus, communication also improved between vendors and the customer, thereby increasing trust between them.
Multivendor business KPIs
Instead of focusing only on the operational KPIs, business KPIs were introduced. This ensured that all vendors were focused on the business-end satisfaction instead of only on the operational aspects of delivering projects.
These items were some of the contractual adjustments we made. However, it must be said that the major part of the changes involved a thought-process shift among the vendors, customers, vendor management teams, and senior management.
This article was published on scrumalliance on 29 sep 2016 – https://www.scrumalliance.org/community/member-articles/1602