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Fixed Price vs Agile Development

Written on: Feb. 25, 2015

When meeting with new clients we often get asked to explain the benefits of Fixed Price vs Agile Development. We have explained it briefly on this page but we also recommend you read this insightful blog from Neil Killick titled 'What Price Estimation?'.

In order to explain the arguments more clearly we have used the sources above to develop a simple presentation which you can click through in a matter of minutes. Please have a read and tell us what you think?

Transcript:

  • 1. The Benefits of Agile 
 vs. Fixed Price Software Development by Bright Interactive
  • 2. If you want to get custom software developed for your business, you’ll usually have:
  • - a maximum budget
  • - a fixed deadline
  • - a detailed specification
  • 6. So, let’s say you have a budget of £100,000 and need the software complete
 and deployed in 10 weeks’ time.
  • 7. You have two options…
  • Option 1: Keep Quiet About the Budget
  • You: “I need custom software developed for my business. My deadline is 10 weeks from now.” Software development company:
  • Scenario 1: ''Sure, we can do that in time for your deadline. It’ll cost £80,000. Any additional work required due to unforeseen circumstances or a change in your requirements will be charged at our hourly rate.” (In other words, you could end up paying much more than your original budget)
  • Scenario 2: “Sure, we can do that in time for your deadline. Allowing for all possible permutations we can do it for £180,000.” 
  • You: I'll take scenario 1 (Great! I saved £20,000!)
  • 14. So you sign a contract with a fixed price, and details of exactly what you’re getting for your money
  • 15. BUT...
  • 16. You can't know everything about a software development project before you start it. You might also have stakeholders who haven't read the specification and want additional features. Unfortunately any changes not agreed in the contract will cost more!
  • 19. That's not the only problem with this 'fixed price' model.
  • 20. Fixed price is normally used in conjunction with Waterfall software development. Waterfall is a sequential design process. Progress flows steadily downwards (like a waterfall) through the various phases; Conception, initiation, analysis, design, construction, testing, implementation, maintenance. You'll sign off at each stage, and (just like you can't send water back up a waterfall) it's near impossible to go back in the process without incurring further costs and significant delays.
  • 24. That's why projects structured in this way rarely come in on-time and on-budget. 
  • 25. So what about Option 2?
  • 26. Option 2: Disclose your budget
  • You: “I need custom software developed for my business. I’ve got a budget of £100,000.”
  • Software development company: 'Ok. £100,000 buys you 10 weeks of our time. In that time our team will build you the best software possible within your budget. (We won't do every item on your spec, we'll work with you to prioritise the essential features of your software, removing, if necessary, high cost low value features which people won't use). 
  • 31. The company should demo similar systems they have developed so you can understand the quality of their work. You should speak to their existing clients too. 
  • 32. You’ll have a ‘working version’ to review almost right away, giving you scope to provide immediate feedback…
  • 33. You can see the software developing in real-time, ensuring you’re on the right track…
  • 34. And in the very unlikely situation that things aren't working out you can stop the project without having spent all your budget. 
  • 35. This way of working is called ‘Agile.’
  • 36. The benefits of Agile software development include:
  • 37. No need to spend days creating a long technical specification that few people read and even fewer understand! 
  • 38. Fixed deadlines - work is carried out through a series of
 fixed development phases (sprints) which are usually 1-2 weeks long. 
  • 39. Highly visible progress - at the end of each sprint, you’ll have
 properly finished, working features, which can be tested by
 your project team and end users. 
  • 40. Face to face analysis - all analysis and design work is 
done together in a face to face Sprint Planning meeting. 
  • 41. Flexible development - because there's a series of flexible development increments, it's easy to change priorities and even include new features that are now known to be important. 
  • 42. At Bright Interactive we use an agile framework called 'Scrum'. It's a modern approach which our clients find provides better ROI than Fixed price and Waterfall development.
  • 43. We'd be delighted to talk to you about how Agile & Scrum can work for your development project. 
  • 44. Please get in touch.
  • 45. Call us on +44 (0) 1273 923 150 or email us. 

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