April 20, 2021

The Danger of "Agile" in IT Services SOWs

By: Chris White
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By all accounts, the marketplace for IT services procurement has blown up over the past several years.  During the pandemic, companies already pursuing digital transformation strategies found themselves turning to outside help, even more, to accelerate those programs given the pressing demand for digital commerce and collaboration.  And now, as the pandemic eases and enterprises anticipate both warming markets and greater competition for development capabilities, their need for contract labor support will spike even further.  As just one measure of the vector, Brightfield’s TDX data shows a 48% year-over-year increase in contingent worker use across software development categories.    

Along with surging demand comes increased rates.  TDX data also shows a 12% year-over-year observed increase in rates for most categories of Technical and Software Development skills.  So, at a time when companies are furiously seeking to extract savings from the contract labor category in order to fuel growth investments, they’re facing the countervailing winds of rising IT services market rates.  Making matters worse, then, the manner in which this work is committed to paper in SOWs (statements of work) often makes it even harder to identify and realize savings gains.  

The culprit?  As it turns out, at the same time that Agile is a great methodology for managing the software development lifecycle, it’s not the best methodology for writing effective SOWs.  A couple observations from our work:

Observation #1:  Many enterprises are not prepared to receive Agile IT services.  Agile software development is by far the predominant choice of both technology services buyers and providers in the market, but the effectiveness of an Agile engagement is hugely dependent on the buying organization’s ability to be agile itself.  Our assessment of F500 Technology SOWs indicates failure to operate with agility is one of the top-three causes for unplanned change orders and financial scope creep in both T&M-based and fixed-fee SOWs.  All too often, the IT service provider may be an expert at Agile but the recipient organization is not.

Observation #2:  Agile SOW payments are too often divorced from outcomes.  Agile or not, paying for results is the best motivator to align an SOW for a successful technology services engagement.  Unfortunately, labor buyers can easily get caught up in the Agile theater of “sprints” and “stories” as a distraction from how best to anchor payments to delivered value.  With or without prescribed deliverables, SOWs should at least be linked to agreed-upon milestones with sign-offs to ensure progress is being made against the real needs and desired outcomes of the business.

Observation #3:  Agile statements of work can contain unreasonable statements of dependency.  When it comes to Agile, the ability of the service provider and the enterprise buyer to deliver successfully is dependent upon nailing down roles and assumptions so that a clear and concise set of engagement dependencies can be mapped out before the SOW is executed.  Buyers of Agile services should take extra care in examining supplier-specified dependency and assumption callouts, watching for unrealistic expectations placed on the buyer or, worse, wiggle room for the supplier to place blame on the buyer for failed outcomes.  

Recommendation:  Modernize buy-side SOW governance through automation.  Our caution to IT services buyers is to not let the zest for agility come at the expense of a runaway Agile SOW.  Brightfield’s experience and TDX data suggest failings in enterprise SOW agreements can often represent as much as 30% overpayment, but can also be improved through process and behavior change, bringing about both improved economics and greater likelihood of successful project outcomes.  

To learn more about the Brightfield TDX platform and the power of AI and to automate the management and optimization of SOWs and work orders at scale, please Contact Us.

About Chris White

Chris is responsible for customer success and value realization across Brightfield’s Technology and Aerospace customers while also serving as a contributor to aiding enterprise leadership teams looking to modernize their Extended Workforce portfolios through the use of automation.  Prior to Brightfield, Chris held multiple Technology and Financial leadership roles, including 16 years with Fortune 50 retailer Safeway, with particular expertise in IT Financial and Vendor Management, M&A, and Technology Transformation. Chris also held CIO and management consulting roles, advising both Public and Private-equity backed organizations on matters involving technology finance and M&A.

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