Principal Consultant, Strategy, Change Management,
Digital Transformation and Data Intelligence
How can I develop reliable software and increase the value for my company? This is what many companies ask themselves. An outcome-based collaboration may be the right option. Other terms describing this way of working while software development includes agile contracting or story point pricing. So what does it mean in real life? Customers often face the challenge of the software not having sufficient quality, the involved people are not engaged enough and the velocity tends to vary, meaning one time having 30 stories done and the other day only 10. With pricing based on time and resources, the tendency is visible, that people do not care about mistakes as also the time dedicated to correcting their own mistakes is being covered.
Another challenge in regard to time and resource-based planning is that the only thing set is the price per hour. Other details that are crucial for avoiding misunderstanding are often not communicated, defined, and settled in the contract. Working in shoring the diverse teams has different approaches resulting also from cultural differences which can lead to conflicts. Usually, there is no clear responsibility. In an outcome-based collaboration, the suppliers take over the responsibility for e.g. one year for the delivered story. This way, everyone at the supplier is highly interested in delivering high quality to avoid costs for fixing their own mistakes.
An important KPI for measuring the quality in the outcome-based model is the velocity, an average amount of stories that the team can deliver. This is the KPI and also the capacity that the supplier can guarantee. Together with the customer, there are reference stories defined. This is a trust and relationship basis for the entire collaboration. All other stories are based on reference cases. Stories are delivered according to quality requirements. A story ready needs to be defined as well. This can be, for example, the story that has to be written in English or the story needs to be accepted by the Product Owner.
It is the team that evaluates the given defined stories, how much points it is worth. Then this is discussed with the customer to find an agreement on the price.
Gains for the customer
The customer plans with a number of story points that will be finalised not with the number of people available for the work to be done. This means a higher precision in the evaluation of the outcome. And also of the costs that will be coming up. There are clear agreements that are measurable that causes less misunderstanding to happen. Based on this, also the atmosphere in the team improves. Nobody wants that e,g, in a month 6 people will be working on bug fixing. The customer can deal with the project like a black box. There are things he or she does not need to pay attention to. The customer only concentrates on the delivered outcome.
This article is the first one out of a series of three. In the upcoming weeks, we will publish a real case and a customer interview about outcome-based collaboration.