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Re: [XP] How do you charge a customer on XP projects?

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  • Ron Jeffries
    Hello, Joshua. On Sunday, November 1, 2009, at 7:06:49 AM, you ... I m not sure what books actually say how to charge customers but certainly in every
    Message 1 of 4 , Nov 1, 2009
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      Hello, Joshua. On Sunday, November 1, 2009, at 7:06:49 AM, you
      wrote:

      > As I have read on many XP books, with XP we actually charge customer
      > based on scope.

      I'm not sure what books actually say how to charge customers but
      certainly in every project, actual cost (if not charges) is
      proportional to scope.

      > But how does this differ from traditional project
      > management?

      As far as I can see, it differs in just about every possible way.
      Traditional project management generally seems to suggest up front
      planning and setting of price, date, and scope. XP does none of
      those things.

      > With traditional/waterfall project management we charge
      > customer based on fixed price, because everything is calculated and
      > estimated upfront.

      ... incorrectly calculated, generally. If you have the ability to
      calculate those things correctly, I'd say go ahead and do it and
      teach the rest of us. :)

      > So if we miss the deadline, it is the consultant's
      > responsibility.

      Traditional fixed price contracts do try to set up this
      relationship. It's not actually accurate, as the results of a
      contract belong to everyone involved.

      > Does this mean we can't or don't charge customer with
      > fixed price on XP? Does that mean we charge them with man/hours?

      It would be possible to charge a fixed price: We'll do what we can
      do for $50,000, and you the customer get to choose the stories.

      It would be possible to do the same with a fixed date: We'll work
      from now till New Years, at $50,000 a month, and you get to choose
      the stories.

      It is possible, certainly, to charge in terms of person hours, and
      let the customer decide when to stop.

      > Is there any detailed resources on how we charge the customer on
      > XP/Agile projects? Any guidance and insights on this topic would be
      > very helpful.

      I can't think offhand of anything substantial written on the subject
      ... perhaps others will have some pointers.

      Ron Jeffries
      www.XProgramming.com
      www.xprogramming.com/blog
      To follow the path:
      Look to the master; Follow the master; Walk with the master;
      See through the master; Become the master. -- Modern Zen Poem
    • Steven Gordon
      No matter what process is being used, what it ultimately comes down to is that there is /always/ a cost to the customer for transferring the risk of a project
      Message 2 of 4 , Nov 1, 2009
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        No matter what process is being used, what it ultimately comes down to is
        that there is /always/ a cost to the customer for transferring the risk of a
        project to somebody else. No free lunch.

        A contractor who has to eat all cost overruns has to compensate themselves
        for taking that extra risk by various tactics, including:
        - charging more,
        - charging exorbitantly for changes,
        - cutting on quality in ways that the customer will only discover after
        accepting delivery,

        Even if a contractor is naive or desperate enough to not take extra
        compensation to be able to cover any costs overruns and litigation out of
        their own profits, then they risk going out of business during the project,
        which transfers the risk right back to customer.

        Where the difference between processes does factor in is that the customer
        cannot really know if they are getting their money's worth until software is
        being delivered. Processes that deliver working software every 2 weeks
        provides the time-and-material customer a much better idea of whether they
        are getting what they paid for than a process that first delivers working
        software after several months.


        On Sun, Nov 1, 2009 at 5:06 AM, Joshua Partogi <joshua.partogi@...>wrote:

        >
        >
        > Dear all,
        >
        > As I have read on many XP books, with XP we actually charge customer
        > based on scope. But how does this differ from traditional project
        > management? With traditional/waterfall project management we charge
        > customer based on fixed price, because everything is calculated and
        > estimated upfront. So if we miss the deadline, it is the consultant's
        > responsibility. Does this mean we can't or don't charge customer with
        > fixed price on XP? Does that mean we charge them with man/hours?
        >
        > Is there any detailed resources on how we charge the customer on
        > XP/Agile projects? Any guidance and insights on this topic would be
        > very helpful.
        >
        > Kind regards.
        >
        > --
        > Certified Scrum Master
        > http://blog.scrum8.com | http://jobs.scrum8.com |
        > http://twitter.com/scrum8
        >
        >
        >


        [Non-text portions of this message have been removed]
      • Niklas Bjornerstedt
        There is a lot of interesting stuff about contracts for agile projects on the net. The problem is that it is fragmented, no one has collected this into a more
        Message 3 of 4 , Nov 2, 2009
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          There is a lot of interesting stuff about contracts for agile projects on the net. The problem is that it is fragmented, no one has collected this into a more comprehensive overview. Here is one interesting paper and slide set from this years Agile2009 conference:

          http://www.bestbrains.dk/dansk.aspx/Artikler

          /Niklas
          www.leanway.no

          --- In extremeprogramming@yahoogroups.com, Ron Jeffries <ronjeffries@...> wrote:
          >
          > Hello, Joshua. On Sunday, November 1, 2009, at 7:06:49 AM, you
          > wrote:
          >
          > > As I have read on many XP books, with XP we actually charge customer
          > > based on scope.
          >
          > I'm not sure what books actually say how to charge customers but
          > certainly in every project, actual cost (if not charges) is
          > proportional to scope.
          >
          > > But how does this differ from traditional project
          > > management?
          >
          > As far as I can see, it differs in just about every possible way.
          > Traditional project management generally seems to suggest up front
          > planning and setting of price, date, and scope. XP does none of
          > those things.
          >
          > > With traditional/waterfall project management we charge
          > > customer based on fixed price, because everything is calculated and
          > > estimated upfront.
          >
          > ... incorrectly calculated, generally. If you have the ability to
          > calculate those things correctly, I'd say go ahead and do it and
          > teach the rest of us. :)
          >
          > > So if we miss the deadline, it is the consultant's
          > > responsibility.
          >
          > Traditional fixed price contracts do try to set up this
          > relationship. It's not actually accurate, as the results of a
          > contract belong to everyone involved.
          >
          > > Does this mean we can't or don't charge customer with
          > > fixed price on XP? Does that mean we charge them with man/hours?
          >
          > It would be possible to charge a fixed price: We'll do what we can
          > do for $50,000, and you the customer get to choose the stories.
          >
          > It would be possible to do the same with a fixed date: We'll work
          > from now till New Years, at $50,000 a month, and you get to choose
          > the stories.
          >
          > It is possible, certainly, to charge in terms of person hours, and
          > let the customer decide when to stop.
          >
          > > Is there any detailed resources on how we charge the customer on
          > > XP/Agile projects? Any guidance and insights on this topic would be
          > > very helpful.
          >
          > I can't think offhand of anything substantial written on the subject
          > ... perhaps others will have some pointers.
          >
          > Ron Jeffries
          > www.XProgramming.com
          > www.xprogramming.com/blog
          > To follow the path:
          > Look to the master; Follow the master; Walk with the master;
          > See through the master; Become the master. -- Modern Zen Poem
          >
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