Fixed Price Distributed Agile Projects

Fixed Price Distributed Agile Projects
Raja Bavani
MindTree Ltd., Pune-411057, India
raja_bavani@mindtree.com
Abstract: Agile Software Development and the breed of Agile Methodologies (XP, SCRUM,
DSDM, etc.) have gained popularity since 2001. Primarily founded as methodologies for software
projects executed at a single location, Agile Methodologies have started showing promising
results in multi-site projects. Agile Software Development focuses on early delivery of working
software to measure the progress of projects and to mitigate risks. It creates an environment that
responds to changes by means of being flexible and adaptive. It discourages creation of
extensive documents that do not add any value to the customer.
Distributed Agile Software Development and Testing is nothing but applying Agile Principles and
Practices to software projects executed by teams located across geographies. In this context,
service providers prefer Time & Material based pricing over Fixed Price model in order to avoid
the risk of cost overruns induced by project changes. On the other hand, in order to reduce
financial risks and to implement a fixed-scope on a mutually agreeable timeline or fixed-schedule,
customers prefer to execute projects on fixed-cost basis. This paper is based on our experience
in delivering a Fixed Price Distributed Agile project to one of our strategic customers. This paper
presents the challenges in executing Fixed Price contracts, and the approach and real time
course corrections we made to deliver this project. Besides, this paper discusses our Findings
along with the Best Practices and Lessons Learned across many Agile projects.

INTRODUCTION
In Outsourced Product Development & Testing arena, Agile [1] has been the mantra of success
for more than a decade. This trend is going to continue as the adoption of agile practices
continues to increase. This is due in part to companies who look to exploit the availability of
talent mix and associated cost-effectiveness in various geographies [4]. Executing multi-site
projects also leads to challenges due to factors such as less face-to-face communication, and a
cultural mix of teams that impedes team bonding.
The goal of agile teams is to deliver working software at frequent intervals, maintain sustainable
pace and respond to change. With all these factors, executing agile projects in Fixed Price model
poses challenges in terms of managing changes related to project scope, technology as well as
quality expectations [8]. On the other hand, projects are funded based on pre-approved budgets
and customers prefer to get projects done in fixed-cost. This paper, though it does not attempt to
address all the nuances of executing Fixed Price Distributed Agile projects, intends to present our
experience in terms of Best Practices, Lessons Learned as well as Findings gathered through
executing a Performance Testing project in Fixed Price model.

1. ABOUT THE PROJECT
We executed this project for one of the leaders in Software Product Engineering space. The
objective of this project was to a) conduct Performance Testing of one of the key products of our
customer under multiple hardware configurations, b) offer recommendations on optimal database
configurations, and c) submit a comprehensive performance test report. The core functionality of
this product involved enterprise wide security management across several products and
applications.

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We did not have any internal expertise in comprehending this requirement at full length and
breadth. However, our customer offered to provide us adequate support to help us understand
the product and wanted us to accomplish this objective in Fixed Price model in order to provide
the right solution to end users. The challenge in front of us was to understand the product as well
as project requirements and submit a Fixed Price proposal.

2. OUR APPROACH
Our Solution Architect and Performance Engineering Lead worked with our customer’s Subject
Matter Experts over several meetings and conference calls to understand the product
functionality and project requirements. This helped us derive the initial scope and identify
 the list of hardware configurations,
 product resources,
 the list of use cases,
 performance parameters, and
 tools.
The scope of this project included peak and steady state performance measurement and analysis
of parameters such as CPU usage, memory consumption, response time, database connections,
number of connections processed per unit time and number of interceptions processed per unit
time for a pre-determined set of transactions. Also, during our discussions our customer wanted
us to develop and deliver a Performance Testing framework that will include mechanisms for data
creation, load generation, data gathering and analysis, and reporting.
Executing such a project in Fixed Price model required a strong strategy and hence we decide to
propose a phased approach so that each phase can be executed in a Fixed Price model as
shown in Table I.
Phase
Phase I -Strategy and
Planning

Duration &Location
2 weeks,
Customer Site

Phase II - Execution
(Framework
Development, Test
Design, Test Execution,
Analysis and Reporting)
Phase III - Training &
Closure

22 weeks,
Distributed Locations

1 week,
Customer Site

Description
Product Demo, Hands-on Learning,
Discussions, Strategy Formulation, and
High Level Planning
11 iterations of 2 weeks each with daily
stand-ups and iteration reviews &
retrospectives

Training on Performance Testing Framework
and Project Closure

TABLE I PROPOSED APPROACH

We formed a steering committee that comprised of representatives from our organization as well
as our customer’s organization. This enabled us to mutually agree on the dependency factors
such as a) availability and stability of the product as well as the test environment, b) availability of
test data, c) remote access to test environment, d) involvement of Subject Matter Experts, and e)
support from IT staff. By studying the high level characteristics of this project our Solution
Architect came up with a phase wise Fixed Price proposal that can be refined with mutual
consent at the end of each phase. In order to arrive at a Fixed Price proposal we used
experience-based estimates using Wideband Delphi Technique for different phases.
After
multiple rounds of discussions with our customer we mutually agreed to submit a combined Fixed
Price quote for Phase II and Phase III at the end of the first phase.

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3. TEAM COMPOSITION
The team composed for this project consisted of a Technical Project Manager, 2 Performance
Test Automation Engineers, 1 Performance Test Engineer and 1 Database Expert. Besides, the
team included 2 Test Engineers who were Subject Matter Experts from the customer
organization. This project required engineers with niche skills and they were not available at a
single location. Hence, we formed a distributed team as shown in Fig. 1.

Figure1. Team Composition

4. PHASE I – STRATEGY AND PLANNING
The objective of this phase was to come up with a Performance Test Strategy and a high level
plan. All team members except the Database Expert had face-to-face discussions during this
phase in order to formulate a viable strategy. The Database Expert collaborated with our team
through conference calls and emails during this phase. By the end of this phase we could






refine the project scope,
validate 95% of the assumptions,
access risks and identify issues,
derive a high level plan of subsequent phases, and
identify infrastructure requirements.

We started this phase and ended it on schedule. We met all objectives of this phase and
delivered the Performance Test Strategy document. Successful distributed agile projects happen
because of collaborative teams that drive to define a methodology for themselves [4]. The
definition of such a methodology happens by means of open communication and minor
adjustments that make things work as expected [5]. More importantly, a methodology that works
for one distributed ecosystem may not work for another distributed ecosystem. This is because,
for any methodology, while the basic tenets remain intact, the implementation details vary across

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ecosystems [2]. With several years of experience in executing projects with distributed teams we
collaborated with our customer and put together a set of light-weight processes to execute this
project. The following sections in this paper discuss some of these processes we implemented
during subsequent phases.
5. PHASE II – EXECUTION
This phase included activities such as Framework Development, Test Design, Test Execution,
Analysis and Reporting. We collaborated with our customer in Iteration Planning and
implemented Daily Standup Meetings and Iteration Reviews and Retrospectives.
A. Daily Standup Meetings
In case of agile projects, collocated teams and face-to-face communication enable high
level of collaboration. Collocated teams can have face-to-face meetings and discussions
to iron out the base architecture, design guidelines and understand critical milestones.
On the other hand, in case of distributed agile projects setting up the base camp [9] is
very essential in order to put the right foot forward. We did this during Phase I by means
of involving all key team members in joint discussions to arrive at a viable strategy and
high level plan. In order to manage the iterative execution of subsequent phases, we
suggested daily standup meetings that are very similar to 15-minute daily meetings
suggested by Scrum [1]. Daily standup meetings helped us resolve issues in a timely
manner. Also, team members were able to understand the work progress and task
allocation of everyone in the team. This increased collaboration and mutual support
among distributed teams. Our customer was very supportive of agile processes [1] and
encouraged daily standup meetings. As the teams were distributed, we conducted daily
standup meetings over conference calls.
Daily Standup Meetings provided us several benefits. On project execution front these
meetings provided us an opportunity to have adequate clarity on task execution,
impediments, as well as stability of technical infrastructure, tools and key engineering
processes [3]. On people front these meetings provided us an opportunity for rapport
building and hence enabled efficiency in issue resolution and conflict management
throughout the project.
B. Iteration Planning
The decision to implement a phased approach motivated us to understand the project
scope in terms of use cases to be tested on a pre-defined set of environments. We
suggested Iteration Planning meetings at the start of iterations in order to prioritize and
select user stories and related tasks that can be accommodated in a time box of 2 weeks.
During the second iteration we came across severe challenges as the test environment
was not getting ready as expected. There were technical issues as well as operational
issues. Overall, Iteration Planning meetings proved to be an effective forum to mutually
agree on the list of preparatory activities that can be accomplished.
Our team completed 90% of all preparatory activities such as script writing, design and
development of test framework, etc. during the first three iterations. However the test
environment was not stable enough for our team to progress further. This is when we
collaboratively decided to spend the next iteration in stabilizing the test environment. We
deployed the entire team in validating the test environment and finding as many issues so
that the IT team resolves all issues and provides us a stable environment.
We implemented iteration reviews and retrospectives in order to review progress, collect
feedback and validate assumptions at regular intervals.

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C. Iteration Reviews and Retrospectives
We conducted a review meeting per iteration at our customer’s location. We invited all
stakeholders including representatives from senior management such as Sales Director
and Delivery Manager to these meetings. All our team members participated in these
meetings. We used Microsoft PowerPoint to present the status of our project along with
outstanding issues and risks.
Through these meetings we could facilitate collaborative discussions, understand the changes in
customer expectations and arrive at collective decision in order to accomplish project goals. We
discussed unresolved technical as well as operational issues in order to identify action plans for
timely resolution. Also we identified new risks and arrived at risk mitigation plans. Besides, in
some of these meetings we reemphasized the high level vision of the project to everyone in the
team.
6. PHASE III – TRAINING AND CLOSURE
The objective of this phase was to provide training on our Performance Testing framework to our
customer’s team members so that they gain confidence in using our framework and understand
the nuances of analyzing test results. This phase included two major activities – a) Knowledge
Transfer on the design and the code base of our framework, and b) Training on analyzing and
compiling test results in order to create test reports. We completed this phase with a schedule
overrun of 20% because of the issues related to the availability of participants.

7. CHALLENGES ENCOUNTERED
The challenges faced in this project were predominantly related to Phase II. These were
technical, operational and personnel challenges. This section discusses some of the critical
challenges we encountered in this project. Per our estimates, the net impact of these challenges
could have caused more than 70% of schedule and cost overruns. However we could minimize
schedule variance through customer collaboration and course correction discussed in the next
section.
A. Unstable Test Environment
According to our initial plan we had made an assumption that a stable test environment would
be made available by the end of the first iteration. However, when we started the second
iteration we faced several technical issues that indicated that the test environment was not
stable. We spent the second and third iterations to learn the problems and realized the need
for additional efforts to stabilize the test environment. Though we collaboratively decided to
spend the next iteration in stabilizing the test environment the overall impact was a schedule
slippage of more than 6 weeks.
B.

Unexpected Outages

In Performance Testing every test cycle consumes several hours of test runs. In our case we
had tests that required more than 24 hours of execution time. For this, we required network
connectivity as well as the test environment available all the time without any interruption.
However, we had few unexpected network as well as server outages that aborted some of
the tests. Subsequently, we had to repeat those tests by setting up the test bed and
executing them. This resulted in a negative impact on task completion. We collaborated with
our customer in running some of the tests over weekends with less manual intervention in

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order to minimize schedule overruns caused by such outages. However such measures did
not nullify the schedule slippage caused because of network and server outages.
C. New Builds
The objective of this project was to understand the performance characteristics of the product
under test and suggest optimal configuration parameters. To accomplish this objective, we
required a stable build. However, during test execution we came across critical defects that
needed to be fixed. Hence, we had to wait until a new build arrived with bug fixes. This
delayed our project further by two weeks.
D. Changes in Team Members
At the end of Phase I, we had to involve a new Database Expert from one of our facilities in
India as the Database Expert in United States had to be released because of critical reasons.
The newly inducted Database Expert in India was not collocated with the project team. Also,
two of our team members had planned vacations at the end of the project. As the project
underwent schedule slippage, we needed the team intact for additional weeks. However,
team members who had planned their wedding or other such personal events could not
change their vacation plans. In order to manage this situation we decided to introduce two
new team members. Eventually, because of such changes in team, we had to budget for
additional efforts in order to facilitate Knowledge Transfer to new team members.

8. IMPACT REVIEW AND COURSE CORRECTION
We had meetings with project team members to perform Root Cause Analysis [6, 7] and identified
root causes as well as preventive and corrective actions. Subsequently, we scheduled a special
review meeting at the end of the twelfth iteration with all stakeholders to review the overall impact
of some of these challenges. This meeting provided us a forum for constructive discussions
because of the following reasons.
a) All project team members as well as other stakeholders were aware of the project
happenings in detail.
b) All decision makers were technically savvy and appreciated the issues.
c) Due to the implementation of agile practices we did not have any last minute surprise.
Our customer had schedule pressure. Meanwhile, the project was facing both schedule and cost
overruns. We had multiple rounds of group discussions to identify various options for managing
such a tight situation in this Fixed Price project that started with fixed-scope, fixed-schedule and
fixed-cost. We narrowed down our discussions to select one of the following options.
1. Negotiate a change request to compensate for all delays and continue the project.
2. Reduce the scope by analyzing all pending requirements and optimize the cost of change
request.
3. Pause the project and restart it in Time & Material model.
Eventually, we decided on the second option. Our customer agreed to reduce the scope by
removing a set of redundant test cases as well as low-priority test cases with no impact on project
goals. This decision helped us reduce about 25% of the schedule slippage. Besides, the
challenges related to the stability of test environment and builds were considered by our customer
and we mutually agreed to raise a change request in order to balance the impact caused. This
created a win-win proposition to deliver this project.

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9. BEST PRACTICES
We identified three key best practices in this project. One of them was very effective in making a
practical proposal and the other two proved to be very useful in Project and Customer
Management. This section provides a brief description of these three best practices.
A. Phased Approach
Proposing a phased approach helped us understand the project well and take the next
steps. Without this, we would not have come up with refined estimates for this project.
Also, phased approach helped us demonstrate our experience and expertise during the
first phase in front to all stakeholders in a systematic manner for further budget
approvals.
B. Implementation of Agile Practices
Besides proposing an iterative approach for Phase II, we decided to introduce agile
practices that helped us respond to changes as well as collaborate with our customer.
Without agile practices we would not have gained enough confidence and trust in working
as a team. This facilitated constructive discussions with the customer when we wanted
to present project challenges and overall impact in order to seek course correction. Here
is a brief list of the practices we used:





An incremental approach based on short iterations (two week sprints) helped us
understand our team’s velocity.
Reviews and retrospectives helped us reflect on team performance and agree on
what changes we needed to make on a periodic basis.
Governance meetings to resolve impediments helped us seek timely support for
unsolved issues and in a timely manner.
We collaborated with our customer to reprioritize the product backlog and explore
ways to de-scope low priority user stories.

C. Transparency and Quantitative Management
We maintained transparency in the team by means of sharing project tasks, schedule,
issues, risks and queries. Also, we practiced quantitative management and reported
metrics such as Schedule Variance, Effort Variance in addition to Product Quality
Metrics.
With this approach we established a common understanding across
stakeholders on the overall status of this project. This increased the level of trust in the
team.
10. LESSONS LEARNED
At the end of this project we realized two critical factors that could have helped us in managing
this project better - a) a separate phase to validate the test environment and b) an additional
environment for bug verification. We derived two important lessons based on these factors.
This section provides a brief description of these two lessons.
A. Validate the Need for Additional Phases
The first lesson we learned in this project is about the need for additional phases. Initially, we did
not plan for ‘Environment Stabilization Phase’. We had made an assumption that the test
environment would be stable and available by the end of the first iteration of Phase II. However,
we had to spend efforts in stabilizing the environment and reprioritize our tasks. Performance
Testing projects have long test cycles, and long-running tests and hence they need stable

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environment. Besides, load simulations and stress tests require adequate infrastructure capacity
as well as reliability.
B. Validate the Need for Additional Environment
We came across several functional issues during the initial iterations. In order to debug these
issues we had not budgeted for a separate environment. We faced delays in getting servers on
need basis for debugging. These servers were not available on a permanent basis. In this
context, the second lesson we learned in this project is about the need for additional
environments. A debugging environment would have helped us parallelize debugging activities
and provided us some leverage to control schedule overrun.
11. FIXED PRICE AND DISTRIBUTED AGILE: FINDINGS
The need to execute Fixed Price projects prevails because customers prefer to get projects done
in fixed-schedule and fixed-cost. However, there are several factors that come into play while
making decisions to execute projects in Fixed Price model. Some of the key factors include
Requirement Stability, Maturity of Technology, Estimation Process, Project Management
Processes, Customer Collaboration and Proposed Approach.
Only 17% of projects are completed within expected budget and time. An agile approach delivers
more value by developing working software in time-boxed sprints based on customer priorities. It
does not guarantee fixed-scope will be delivered in fixed-time and costs. The larger the project,
the more likely it is to fail. Based on our experiences across dozens of agile projects, we have
documented many lessons learned from sprint retrospectives. The following are the key Findings
that can be of value to practitioners.
1)

Scope stability is required to execute Fixed Price Agile Project – unless you are willing
to accept variable scope for fixed budget. If you want fixed scope and fixed price, there
has to be adequate clarity on what is included in scope and what is not. If you do not
have clarity on scope, then you can only fix the budget or price, and then have to be
willing to accept change in the amount of scope delivered.
It is highly recommended to create a product backlog or list of things to do as the first
step. This step is necessary to understand and ask further questions which can help
project teams understand the project scope. For more details about our approach,
please read “Estimation and Planning.pptx”

2)

Provision for scope adjustment is as crucial as the need for scope stability. Software
projects succumb to several types of changes such as changes related to
requirements, technology, infrastructure, and people. In practice, executing a Fixed
Price engagement with fixed-scope, fixed-schedule and fixed-cost is attempted with
some form of contingency building in project schedule. Such contingency measures
need to be communicated to all stakeholders. This creates transparency and trust.
Besides, some provision for scope adjustment is required to handle situations related
to schedule slippage or cost overruns.

3)

In case of Fixed Price Agile Projects, doing multiple small projects is better than doing
a single big project. One way to accomplish this is to divide and conquer. This can be
implemented by means of phased approach.

4)

Fixed Price model seems to work better in agile ecosystems than in traditional
ecosystems. Agile ecosystems provide for a greater level of collaboration and
commitment. This creates mutual understanding and trust. Implementation of agile
practices was one of the driving factors that helped us complete this project
successfully.

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5)

Combining Fixed Price and Distributed Agile can bring in benefits in terms of providing
visibility and predictability at regular intervals. However, such a combination may not
yield productive results when it is used only to introduce new requirements during
project execution.

6)

Fixed Price projects require lot of transparency without which reviews and negotiations
will not provide win-win results. Planned reviews conducted in systematic manner
with project performance metrics and quality metrics establish transparency and
confidence.

7)

In order to execute projects of this nature, it is very necessary to have stakeholders
who are technically savvy and are capable of understanding and appreciating
technical issues. This means that the Governance Model of Fixed Price projects
need to have senior members who can understand and appreciate project happenings
in terms of progress, risks, as well as technical issues. Such senior members need to
have influencing and decision making skills in order to find practical resolution to
problems.

8)

Customer Experience Survey, an independent survey conducted every year by one of
the corporate functions of our organization, revealed high level of customer confidence
in our technical expertise, and management support in completing this project.

12. CONCLUSION
Fixed Price Distributed Agile projects are very challenging to conceptualize, strategize, plan and
execute. The number of research studies and experience reports available on this subject is very
limited. In business environments, the need for Fixed Price proposals to deliver software services
will continue to grow. The Best Practices, Lessons Learned and Findings shared in this paper are
based on our experience in a specific project. However they address common themes that are
applicable to software projects in general. Keeping in mind the time-to-market and budget
constraints as well as the benefits of iterative lifecycle models, practitioners need to choose the
right set of best practices that enable successful completion of Fixed Price projects.

REFERENCES
[1]
[2]
[3]
[4]
[5]
[6]
[7]
[8]
[9]

Alistair Cockburn, Jim Highsmith, Agile Software Development: The People Factor, Computer, November 2001. p.
131-133.
Amr Elssamadisy and Dr. Gregory Schalliol, “Recognizing and Responding to “Bad Smells” in Extreme
Programming,” ThoughtWorks, Inc., Chicago, IL 60661.
Barry Boehm, “Get Ready for Agile Methods with Care,” Computer, January 2002. p. 64-69.
Brain Hoang, Bobby Khatkar, Joseph Momoh, Willie Tu, “Distributed Development and Scaling of Agile Methods,”
unpublished.
Paul Hodgetts, “Refactoring the Development Process: Experiences with the Incremental Adoption of Agile
Practices,” Agile Logic, Inc., Proceedings of the 2004 Agile Development Conference.
David N Card, “Understanding Causal Systems,” CrossTalk - The Journal of Defense Software Engineer, Oct 2004.
p. 15-18.
David N Card, “Learning from our Mistakes with Defect Causal Analysis,” IEEE Software, Jan-Feb 2008. p. 58-63.
Pascal Van Cauwenberghe, Agile Fixed Price Projects, Part I &II, unpublished.
Raja Bavani, “Critical Success Factors in Distributed Agile for Outsourced Product Development”, CONSEG 09,
International Conference in Software Engineering, Dec 2009.
____________________________

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Fixed Price Distributed Agile Projects

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