Challenges & Solutions of Outsourcing the Contracts in Agile

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19th Apr, 2023
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Challenges & Solutions of Outsourcing the Contracts in Agile

While contracting for Agile development, both the parties agree on the scope & vision at the outset but the project is developed iteratively. The traditional contracting practice seeks to agree with “what” & “how” about the project but Agile contract agrees just with “what” leaving the “how” to be managed at  the development stage by both the parties. The traditional contracting approach is focused on collaborative working rather than procedural working; this philosophy encourages going ahead with a flexible & innovative approach to software development. Still, in most cases, buttoned-up Agile contracting approach doesn’t work up to the satisfaction level. So, what are the most experienced challenges and the time-tested solutions to overcome the hurdles in outsourcing the Agile contracts?  

Challenges of Outsourcing the Contracts in Agile: 

Signing the ‘Time-&-Materials’ contracts for Agile software development is the most used practice, but it has some serious flaws also that create complex challenges for the buyer (outsourcing vendor) and seller (client) both:


  • In most cases, contract is awarded to the seller who takes full ownership with responsibility for managing all the risks. The seller executes the project with outsourced human resources in ‘Time & Material’ (T&M) model.
  • The client owns and manages the project; therefore, the client hires the high number of IT professionals that results in unexpected and unaccounted increase in operational cost.
  • The buyer has very little scope to add more values at different stages of project development despite feeling capable of delivering more.
  • To sustain the estimated profit ratio, the project managers at client’s side overburden the buyer with more work superimposing new stories; it results in low-quality & delayed software development.
  • The pressure to complete the project with estimated profit ratio despite several changes in workflow and scope wears down the outsourcing vendor; thus, damaging the project development and quality. 
  • Under Agile environment, it is expected that as the knowledge level of engaged Agile team members increases with the passage of time, they should deliver more with enhanced velocity; this approach doesn’t take into account the pressure of coping with new developments after Scrum meetings.
  • Experiencing such complex problems, the organization (buyer) decides to shift from Agile approach and to return to traditional waterfall model.  

No doubt, Agile is more advanced software development model than to waterfall model but everyone likes to adopt the hassle-free model. So, what you need to do differently for successful and profitable outsourcing of Agile contracts?

Solutions for Hassle Free Outsourcing the Contracts in Agile: 

1.Buyer’s Responsibilities:

Agile is built for long-term partnership nurtured with honesty and trust; if the buyer is contracting Agile project just for a short period, Agile model wouldn’t deliver the expected benefits. Agile implementation needs the mindset change of all the team members; investment in training and introduction of Agile tools will make the Agile team members more confident to perform better with gained technical excellence.

2.Seller’s Responsibilities:

The trust between the seller and buyer is the key to success in an outsourcing environment. Agile team members must be free to accept the roles and responsibilities in their due capacity to avoid any pressure to deliver more than their capacity. 

3.The Key Agile Contract Parameters:

Team size, sprint duration, procedure of identifying team’s velocity, story point standards based on scaled complexity, DOD (definition of done) etc are the key specifications that make outsourcing the contracts in Agile a pleasant experience. 

4.Hybrid Styled Contract for Outsourcing Agile Project:

Agile project development can be stipulated into two stages in the context of outsourcing - stabilizing period and post-stabilizing period. You can choose to work with ‘Time and Materials’ (T&M) model during stabilizing period with an agreement to switch over to ‘Pay-per-story-point delivered’ model during the post-stabilizing period. 

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To improve the success rate of any Agile project, it is a must for the outsourcing vendor and client both to be equal partners in tasting the success and failure of project. The journey to Agile adoption is about accepting the changes in workflow, working culture and mindset; and, it takes time and improved skills to accept and incorporate changes. The certified Agile and Scrum training, focused on implementation of Agile development and Scrum practices, empowers you to complete each Agile project within agreed time at the best rate profitability that too without any compromise with quality parameters.  


Shubhranshu Agarwal

Freelance content writer

Shubhranshu Agarwal is a technical writer with special interest in business management and project management subjects. Over the 15 years of freelance content writing, he has written a lot to help the industries, businesses and project managers to achieve the sustainable growth by implementing strategic critical management methodologies.

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