Mar 12 2009

Go Time & Material Model

Published by xiaoming under Buisness,Howto

What is time & material model and when it applies

A simple definition of “Time & Material” Model is that the purchaser exchange “material” with a service provider’s certain quantity of “daily rate”. The material could be a bunch of document which contains advanced management process, intellectual property, a piece of software or one side of well painted wall. The daily rate could vary from £20 to £8000 depends on how precious of the service.

 

This business model applies when scope, specification and implementation plans of a project are not easy to define at the outset, Time & Material Model becomes an attractive option. Under this model, you pay as per use of the hourly development efforts, making it the most flexible of the three models. [From http://www.continuum-systems.com/price-timeandmaterial.htm]. Time & Material business model is developed for long-term projects, where the total effort cannot be estimated in advance and the scope of work can vary during the implementation. [From: http://www.qarea.com/outsourcing-services/pda-time-and-material.php].

 

If compared with Fixed price model, which is ideal for projects with a detailed technical specification, Time&Material model is the best for scalable projects. This business model is highly efficient in case the project is hard to predict in terms of time and creative effort and in case the development process needs control and improvement upon each iteration. Thus, it allows for cancellation at virtually any stage of the development project[From: http://www.qarea.com/outsourcing-services/pda-time-and-material.php].

 

Corporation old procurement process

So Fixed price model is suitable for purchasing of a physical product or something that has fixed scope or feature. While Time & material model is suitable for purchasing of service or something without explicit feature during the contract negotiation stage. If you have a look at most of the corporation procurement process it is not difficult for you to find comprehensive and decent process for fixed price procurement which is for purchasing of a physical facility, a car or PCs. The problem comes along when corporations plan to purchase service such as consulting service or customized software. As they do not have a process that specialized service purchasing, they tended to use the existing one. So things started going completely wrong.

 

They just do not fit!

Think of that you plan to spend money on something which you have no idea what it is or you only know part of it. How could you decide how much you need pay for it. Decision should only be made with necessary concrete information you require. Clearly, there is no enough information for anyone to make a correct decision. Old software procurement model aligns with the old business model.

 

Low technology –> Business not change so much –> Fix scope/feature –> Fixed price model –> Waterfall software development model

 

I believe that you know how fast and unbelievable the technology and business grow. It is almost not possible to oversee and predict how your business look like in 24 months of time. So business requires a suitable model for software development service

 

High technology –> Business change very fast –> Scope can not be fixed or predicted –> Time & material model –> Agile, adaptive software development model

 

Change is inevitable

The world is not odd. Software development industry has grown from design and development of fixed feature product into customized enterprise application in order to provide better service and survive. So it is much more than just producing a physical product. It is service now. If you disagree, I will encourage you to give me one single example that there was no change of requirement in the development of any large scale enterprise application. I bet you can not. Requirement change is inevitable because business is changing. If your business does not change but others does, it is clear that you won’t be able to survive. Also there is no way to predict or imagine the change of requirement. So you need a more flexible and adaptive business model for this kind of procurement.

 

Solution

Probably you have already figure out the solution. Let me recap
  • Upgrade your corporation procurement guideline and process with Time & material model of service purchasing in it.
  • Develop or recruit professionals to manage Time & material project. It does require special expertise.
  • The key of applying this model is risk management and contractor performance management

 

Change it!

If you still use the old procurement model for service purchasing, you will definitely experience argument, displeasure and waste of investment. So why not change it?

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Nov 30 2008

Some thought of project change management

Published by xiaoming under Tech

I recently watched a BBC show called “Dream homes”, that basically talked about how to help people who had problems to decorate their awful house into a dream land within a limit budget. Normally, from the beginning, the house-owners and the show organizers came out a plan, say “budget 80 grand”. When the procurement and  engineering work started, with some changes happening, the budget always went up dramatically to double or even higher. Then they had to give up something in their original plan in order to cut down the cost. Along with the whole program, there were many changes, such as change of the engineering design, “shopping-list”, construction implementation. Sometimes, money were saved and sometimes lost by these changes. This show made me think of our software development projects that included lots of changes every release, every week even everyday. These changes might be initialized by business owners, end users, project managers, or development team. People in this show did not feel like being good at the change management that touched me off thinking about what good practices that we can use in project change management and how to use them.

Insight a traditional project change management approach, a change typically goes through at least 6-7 steps of a process from it is born to its end.

  1. Change initiation
  2. Change classification/Define
  3. Risk/Impact assessment
  4. Plan
  5. Change approval and notification
  6. Execution/Implementation/Test/Monitoring
  7. Change acceptance/record/closure

This process made sense to me theoretically, and I did went through several times of the whole process when I was an IT manager in a large organization. It certainly “worked”. However, I observed several phenomena that were either waste or dragged the whole thing to the opposite direction of the goal of the change. E.g.

  • People focused on a very detailed plan and it turned out none of the many times of execution actually went step by step following the plan.
  • Documentation maintenance was paid very much attention even than the actually the change itself, however two years later, no one actually went back to see any of those documents. I can tell the main reason behind the concreted documents was that people did not want to get into trouble if there were anything wrong concerned the change.

A process/plan driven management approach might caused the above problems. The underline reasons are that human-beings keen to protect themselves and achieve personal achievement firstly if you do not bind their performance with your organization’s value and achievement. However if people could be trained by value/goal driven thinking align with reactive/adaptive project management approach, those problems would be solved.

In a typical IT change project, however it is big or small, going through with the structure of the process is not a bad idea, meanwhile, put too much assumption or make the plan very much details could kill creativity and flexibility during the implementation of the change itself.

Software development project could be a bit different in change management. It is not easy to achieve the same understanding of cost-efficiency of each change, so it normally came to the situation, business stakeholders and development team went for slightly different direction during the implementation of a change. It might be worse, if there was change during the process of making a change. So, certainly it would be very inefficient to go through a whole process every time.

So what would be a good idea? When there was a change that was initialized, team can regard it as a task and put it into development task list, we can think it as a functional task, or defect or whatever it is easy for the team to understand. Then re-prioritize the task list and rank this new task (change). When team estimate the workload of this task, its impact on the existing system need to be considered. Sometimes, it might be just less costly if a change could be combined into some existing tasks that they have similar priority.

People who manage change plan should consider which option could put more business value into the software application and what the goal was to finally achieve. When people driven by value or goal, with a simple plan in hand, they could be very flexible during the implementation, so that the process and documentation just played a helper role rather commander.

Tips:

  • Sometimes, business stakeholders and development team could not easily have the same understanding the cost of a change. In this case, splitting the change into several tasks could make it easier to understand.
  • Use any chance such as meetings, daily catch up, project Wiki to communicate with the team about the changes that would be made and notify every sponsor and stakeholder.
  • IT need provide enough information for business to understand the cost and impact of a change and co-work to make a correct decision.
  • Make a change plan more goal-driven and not too detailed so that team can be more creative during the implementation.
  • Communicate more if it is possible, maybe development team can demonstrate a completed task that was not the complete change to business, so that team can check if they were going to a correct direction.
  • Risk and impact assessment is necessary however it does not need to be very formal or be written as documents.
  • The closure of a change should be able to be demonstrated in the real application.

Back to the beginning, if the house-owners could manage their changes in this way and well prioritize their task list and considering any change as one of task, their job might not be that painful, they might just get a fairly dream home.

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