The IT industry is struggling with the move from traditional ‘waterfall’ projects to agile teams. As the scope of a project or product to be developed is not fixed any longer, external suppliers can’t bid for fixed prices and fixed date contracts. So, many organizations that moved to an agile way of working are now contracting external vendors using a Time & Materials contracting method.
Time and Materials contracting means hourly rates. However, this is an industry bad practice, as there is no internal pressure for a supplier to become more productive or to take ownership for quality. In fact, lower productivity and quality cause higher costs for the customer, and higher incident volumes result in unhappy customers and higher maintenance costs.
In Time & Materials contracts it is necessary to include certain output-based KPI’s. ISBSG recommends Project Delivery Rate (Productivity), Cost Efficiency, Delivery Speed, Project Quality and Product Quality. This concept is explained in the short paper, Output Based Contracting. Also, visit ISBSG Data Subscriptions web page.
