How do agile organizations manage third party vendor contracts?
Under an agile approach you’re actually going to have a lot more control as a buyer. Historically, stage gates were at the phase level — you would do requirements, you would do design, they would all get signed off on. And there was the sense that you had a termination point at the end of each of those phases. But in reality, you didn’t. You would do requirements gathering–it’s a paper document. You would do design–it’s a paper document. You would then move into development. Many times your vendor would get so much work in-progress that the switching cost was too high to get rid of them, even if you found out that you had the “A” team for business development, but you actually got the “C” team for implementation itself.
Organizations wouldn’t find out that there’s a disconnect until the testing phase (when they’re 70% into it). So they thought they had these stage gates of control, but they didn’t.
Under an agile approach, we’re going to move those from phase stage gates to sprint-level stage gates. So what we’re going to say is, “Here’s an RFP, we’ll RFP it, and we’ll take what we think is the most realistic solution,” and then we’ll say, “Congratulations! You’ve won the project–it’s a year-long project, it’s a million dollars. However, we retain the right at the end of every single sprint to either continue with this contract or not continuing with this contract.”
Now, at the end of every single sprint I’ve got a true stage gate, because whatever that vendor has built, they built it to completion. We either know that it works or it doesn’t work. Everything ahead of them they haven’t even touched yet. So, we’re actually going to give procurers of vendor services a lot more control in ensuring that the people that are working on their project are the people they were promised during the business development phase.