Why contracting doesn’t work?
by Antti Akonniemi
For the most part of my career as consultant I’ve been doing traditional contracting work. There are times when it has worked perfectly and times when it hasn’t. I’ve always been interested how to do project work “right”. Scrum and other agile methods (if done right) tackle most of the problems. But for the contract/outsourcing part there is much to be done, especially on business and contract level.
I think the main reasons behind why it is so difficult to do properly are:
- customer wants to get the most profit out of the contract as possible
- contractor wants to get the most profit out of the contract as possible
Although the above reasons sound similar, they are very far away from each other. There are bunch of other reasons too. Such as features are defined already in the contract and so on. All these reasons cause decreases in agility and do not offer the best value for the customer.
How to do it better?
Partnership through equity compensation or profit sharing. This way both parties (customer and contractor) have common goal – making profit. We at Kisko Labs have been trying this out with two projects. This has been very exciting and we consider our experiment as succesful. Most important findings for us and our customers were:
- increased trust
- increased flexibility
- increased focus on core business
- spirit of co-operation
- low capital requirements
It’s not for everyone, but at least for the projects we chose for testing this it worked very well! Cultural change is big and it really seems more natural way of working.
Antti,
Really happy to see Kisko has the courage to take the road less traveled and started experiencing with different business models that have the possible to create 100 x value and make the Finnish startup scenen yet a bit more dynamic place.
At times of uncertainty and gloom many turn to cutting risk and experimenting less and only when the crisis hits big they are willing to turn to new ways of working. Yet, it is these very times that the new leaders emerge. The leaders of tomorrow are those who embrace the risk and are flexible in experimenting what works early enough. I would not be surprised if Kisko emerges as one of them then the tide turns after a couple of years.
Ville, Thanks for the positive feedback! I’m really anxious to see a) how people will react to this and b) can we really change the industry. Let’s see! :)
I agree that contracting is PITA, but you’re forgetting value. People or sides of contract value things differently. Value is perceived, there is no universal or static value for anything.
If you do a custom website or a service for a client, it’s probably more valueable to the client than its to you(else the investment is bad for the client). Client valuation is based on the needs and how it can help achieving goals, and you mostly value it by used resources. Even both sides are trying to get the best profit out of a contract, it doesn’t mean that goals are in conflict since the base valuation differs.
Anyway, Kisko’s model is still intresting and might be better since you both are trying to get closer to the market value, which is probably the value that matters. Hopefully this will lead to greater, or atleast working products and less to some branded monolithic portals which only real use and goal is to display ads.