adVANTAGE: A Fair Pricing Model for Agile Software Development Contracting

Contracting in Agile Software Projects: State of Art and How to Understand It

“…T&M contracts do not contain a complete specification of the system, and the project can be ended whenever the customer wants. The risk in T&M projects is carried by the customer; the supplier is paid fully for every hour, and therefore does not have an incentive to complete the project quickly [3]. The only meaningful incentive is high competition and the prospect of follow-up contracts [5].…”

“…adVANTAGE The 'adVANTAGE' pricing model combines elements of fixedprice and T&M contracting models [3]. In this contracting model, the software supplier is paid for their effort after each sprint.…”

“…Major challenges when implementing Agile methods in traditional software development organizations are caused by the necessity to adapt existing practices to fit the iterative nature of Agile projects in context [2]. Contracting is one of such domains of practice potentially affected by agile methods [3].…”

“…It can be challenging for a software supplier and customer to find a common ground of trust without prior collaborations. A good contract agreement is important for further relations [3]. Still, frequently we encounter (small) software companies that are unaware of existing contracting practices and the possibilities they offer.…”

“…Here, the high level of uncertainty in software projects, and the flexibility that is intended for the Agile approach conflict with the planning-driven nature of fixed-price contracts [3]. Therefore, the Agile contracting problem has gradually received more attention [4].…”