Case study: From time and material to the outcome-based collaboration

Our customer had a request to raise velocity, efficiency, and the quality of our long-term delivery. This meant to deal with the question of how this can be reached and what it will mean for the working model of our teams. How do higher velocity and quality reflect in measurable KPIs? The task for us as service deliverer was to find parameters that we can work on and where we can change and improve. An even more important aspect was how to do this on a long-term basis sustainably.

Process

Our ideations brought us to the thought of changing the model from time and material-based to an outcome-based model. Generally, if you have an established team, it grows more and more together and gets better with the time in terms of know-how, communication, and knowing the aspects of the project and the customer better. These are those efficiency gains the customer gets. With the same team working for the customer and the same work they can work steadily faster. On the other hand, for us as partner delivering the service, it was important to take over more responsibility and gain ownership.

In this sense, we are not only delivering the code but we are responsible for entire stories and take over responsibility for the seamless functioning. To show the customer how such a model can work, one of my colleagues arranged a reference visit at a customer who already makes use of this collaboration model. It took us approximately two months from the first talks until the agreement has been finalised for the new model of delivery. We worked closely with the customer. Initially, as part of a measurement phase, the team worked on time and material basis and the velocity in sprints has been measured. In this phase, we settled also all aspects like the definition of the process, how everything will be measured, how we will measure the velocity, what is a reference story and the definition of a story done etc.

After this, we had the average team velocity on hand, indicating also the capacity, which this team is able to deliver. Parameter for accepting the contracts and for closing the agreements have been defined. After that, we transferred the work to the outcome-based model. We have closed the agreement and further projects are going to switch to this model based on this case with the same customer.

Who

• A major telecommunications provider

How

• We have discussed the objectives of the customer.
• In the measurement phase, we measured the team velocity as well as all related parameters and defined KPIs for the outcome-based model.
• Together with the customer we agreed on the parameters for accepting and closing the contract.
• We switched to the outcome-based collaboration.

What they needed

• The customer wanted a switch to a model that sustainably delivers small efficiency gains with a stable team and at the same time, a reliable answer on what they can expect on work to be delivered wanted higher quality, better velocity, and efficiency of delivery.
• For the work that we deliver, we give a guarantee for the upcoming year. If the customer finds a bug in our software during the year, they get a fix in that time for no costs raised.

What they got

• A new contract framework giving them the opportunity to scale the required work capacity up or down without huge rework on the contract itself.
• A clear measurable KPI on what we as a service provider should deliver.
• The quality delivered raises in time with an established team and the responsibility that we carry for the results.