The Traditional Software Development Contract Needs to Go

In “The Traditional Software Development Contract Needs to Go,” Susan Atkinson and Gabrielle Benefield assert that the traditional contract model has to bear significant responsibility for failed IT projects.

The three elements of the model (fixed requirements, sequential development and change control mechanism) are all flawed when applied to software development. Traditional contracts call for practices that oppose generally regarded best practices for creating high quality software, increasing project risk and potential for failure. Ultimately, this results in a poor return on investment.

According to the authors – and something we often say here at DCG-SMS as well – most organizations do not consider IT to be a business activity. It is a separate but necessary cost centre rather than a centre of value creation for an organisation.

The traditional contract model perpetuates this idea by generating a process that is neither effective in terms of delivering the software the business needs, or cost effective; therefore, most projects have a low return on investment, and the business continues to see software development as a drain.

The authors suggest an overhaul of the contract model where performance is measured by movement towards goals rather than against a previous plan.

This immediately raises the issue of how such goals are defined, and how progress towards them is to be managed in an efficient and business-like manner. This all comes back to how software performance is measured, and whether ‘traditional’ project metrics are fit for purpose. Outcome-based contracts require outcome-based measurement.

In order to manage the commercial risks of such an incremental approach, we suggest one essential is to improve software estimation practice, to give the development team’s business customers more predictable performance and greater visibility of the cost impact of changing requirements. With the use of any contract model, a good estimation program provides the development team with a better understanding of how and when it can deliver, resulting in an improved return on investment and increased customer satisfaction – and, most importantly, making IT a centre of value creation for the business. IT investment can be prioritized effectively to meet business needs and goals – in other words, software development can be managed like any other critical business operation.

If you’re interested in this topic, join DCG-SMS and Susan Atkinson for webinar on September 17, Contracting for Agile. The webinar will examine current thinking on how contracts for software development can better support the delivery of the desired business outcomes. Register now.

Software Development: Why the Traditional Contract Model is Not Fit for Purpose
Susan Atkinson, Keystone Law
Gabrielle Benefield, Evolve Beyond Limited
Presented at the 46th Hawaii International Conference on System Sciences

Do you agree that the traditional software development contract model needs an overhaul? What changes to the model do you suggest?

Sue Rule

Written by Sue Rule at 02:00



"It's frustrating that there are so many failed software projects when I know from personal experience that it's possible to do so much better - and we can help." 
- Mike Harris, DCG Owner

Subscribe to Our Newsletter
Join over 30,000 other subscribers. Subscribe to our newsletter today!