Contracting for Agile. Contractual Issues for Agile Software Development Ian Williamson 17 March 2012

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1 Contracting for Agile Contractual Issues for Agile Software Development Ian Williamson 17 March 2012

2 Overview 1. What do we mean by "Waterfall" and "Agile"? 2. Perceived problems with the Waterfall method 3. The Agile manifesto/agile in practice? 4. Contracting for Agile. Issues with in using traditional contracting methods 5. Bird & Bird UK 'White Paper' on Agile Page 2 Bird & Bird LLP 2012

3 What do we mean by "Waterfall" and "Agile"? Understanding the differences

4 The Waterfall methodology Scope fixed here Planning & analysis System design Development & coding Testing & acceptance Deployment 3 to 24 months Deliverable Here Source: The Art of Agile Development Page 4 Bird & Bird LLP IT Lawcamp 2012

5 The Waterfall model Planning & analysis System design Development & coding Testing & acceptance Deployment Page 5 Bird & Bird LLP IT Lawcamp 2012

6 The Waterfall Contract Advantages? Perceived certainty as to scope Deliverables clear Rigid timeframe Payment linked to success" (and easy to penalise failure) Page 6 Bird & Bird LLP 2012

7 Perceived Problems with Waterfall Why do things go wrong?

8 Perceived Problems with Waterfall Difficult for Customers to identify entire requirements in detail at the outset Does not deliver a product until late in the process Ignores reality it's impossible to rigidly "freeze" the results of each phase before moving on by which time, the Customer's requirements have changed anyway! Page 8 Bird & Bird LLP IT Lawcamp 2012

9 Examples of why Waterfall projects 'fail' If scope not fixed properly - price goes up ('Change Controlled to death'). If issues do not surface until end of the project, then pressure on time. Liquidated damages for a late delivery are not a proper substitute for working software. In an effort to deliver something within the constraints of price and scope, suppliers will often degrade the quality of their work reduced code quality, less testing, and so forth. Customers often do not get what they really need, and developers can easily lose money. Page 9 Bird & Bird LLP 2012

10 The Agile Alternative Considering Agile Software Development

11 The Agile manifesto a statement of values Individuals and interactions Working software over over Processes and tools Comprehensive documentation Customer collaboration over Contract negotiation Responding to to change over Following a plan Page 11 Bird & Bird LLP IT Lawcamp 2012

12 Some of the principles behind the Agile manifesto Customer satisfaction through rapid delivery of useful software. Working software delivered frequently (weeks not months). Working software is the principal measure of progress. Welcome changing requirements, even late in development. Close interaction between developers and business team. Page 12 Bird & Bird LLP IT Lawcamp 2012

13 The Agile methodology Iteration 1 Iteration 2 Iteration 3 Design Design Design Plan Code Test Deploy Plan Code Test Deploy Plan Code Test Deploy 2 to 4 weeks 2 to 4 weeks 2 to 4 weeks Page 13 Bird & Bird LLP IT Lawcamp 2012 Source: The Art of Agile Development

14 An example of the Scrum method Page 14 Bird & Bird LLP IT Lawcamp 2012

15 Potential Criticisms of the Agile Methodology Less certainty for the customer Scope - what are you going to get? Timing no contractual guarantee that final product will be delivered on time. Price if more iterations required, who pays? Warranties easy for developer blame the customer for faults? Extra effort from customer side for regular governance. For the developer Termination if customer walks away, potential sunk costs. Cannot rely on receipt of future revenues. Page 15 Bird & Bird LLP 2012

16 Contracting for Agile A different approach

17 Agile Contracting Principles "A lawyer writing a contract for an Agile project...needs to grasp the key ideas before she can articulate an Agile contract." Practices for Scaling Lean & Agile Development: Large, Multisite & Offshore Product Development with Large-Scale Scrum by Tom Arbogast, Craig Larman, and Bas Vodde Page 17 Bird & Bird LLP 2012

18 Agile Contracts in Practice No real standard contracts in the market for Agile. Themes are the same as Waterfall contracts. However, the drafting is not necessarily the same. Page 18 Bird & Bird LLP 2012

19 Contractual Differences for Waterfall and Agile THEME WATERFALL AGILE Scope and planning Delivery cycle Acceptance Fixed Specification against which deliverables are measured Long term (i.e. from planning and analysis to product deployment) At the end of the process for final deliverable A broad Product Vision which can evolve with each iteration Short iterations (i.e. 2-4 weeks) Each iteration accepted (with issues rolled into the next iteration) Page 19 Bird & Bird LLP 2012

20 Contractual Differences for Waterfall and Agile THEME WATERFALL AGILE Pricing /Payment Contract governance Termination Price generally fixed (BUT - increased if scope changes). Supplier generally left to progress customer s requirements. Focus on reporting developer's progress and reactive resolution of issues Commonly limited to big events material breach, insolvency... Various models (e.g. T&M) - generally with payment per iteration Close interaction and collaborative approach - customer often part of development team. Regular meetings (can even be daily). Common to see termination on an iteration by iteration basis (although need to consider sunk costs.) Page 20 Bird & Bird LLP 2012

21 Bird & Bird "White Paper" UK Agile Working Group

22 What is Bird & Bird doing? Many people have spoken about the problems we want to see if we can fix them. We have an Agile 'focus group' in the UK. Our intention is to produce a useful standard form Agile contract. White paper to be issued April 2012 responses will help shape the process. Keen to hear from all interested parties - developers, customers, in-house counsel and you! Page 22 Bird & Bird LLP 2012

23 Vielen Dank Ian Williamson Bird & Bird LLP ist eine Partnerschaft mit beschränkter Haftung nach englischem Recht, eingetragen im Companies House of England and Wales unter der Nummer OC Der Name Bird & Bird bezeichnet eine internationale Anwaltssozietät, bestehend aus Bird & Bird LLP und ihren verbundenen Sozietäten. Bird & Bird praktiziert in den nachfolgend angegebenen Standorten. Die Gesellschafter der LLP werden von Bird & Bird als Partner bezeichnet. Counsel, Senior European Consultants und Of-Counsel sind nicht Partner oder Gesellschafter der LLP. Weitere Informationen finden Sie auf unserer Homepage

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