The Risks of Contracting for Agile Software Development Services

The current popularity of Agile has led to it being the go-to approach for many software development contractors. While Agile can in some circumstances significantly decrease the amount of time required to develop software solutions, it is important for organizations to understand the potential risks of contracting for such services.

25 November 2024

Agile software development methodologies have gained widespread popularity in recent years. Organizations of all different sizes and across various industries routinely rely on Agile software approaches to create and refine their most critical business systems. There are good reasons for Agile’s current popularity. When properly applied to the right type of project, Agile can dramatically reduce the amount of time it takes to create software that delivers real value to users. However, Agile also has its shortcomings, and many of these become particularly evident when organizations contract with external entities to help develop software solutions.

Many organizations do not have the internal IT expertise required to develop complex software. Consequently, contracting with an external entity is often the only way for such organizations to get software developed. Given the current popularity of Agile software development methodologies, it is not surprising that software development contractors often recommend such approaches to their clients, and there are some benefits to using such methodologies. The iterative nature of Agile allows system requirements to be developed in parallel with the execution of development work, which allows software development contractors to start work on a project sooner than is often possible when more traditional development methodologies like waterfall are employed. This, in turn, can sometimes lead to dramatic reductions in the overall time it takes to develop software.

While under some circumstances Agile can significantly speed up a contracted software development effort, under other circumstances it can bring about negative results for the contracting organization, typically in the form of unexpectedly long project durations, high development costs, and poor software quality. Interestingly, these potential negatives of Agile stem from the same thing that produces its biggest benefits – namely, its iterative nature.

As was discussed above, the iterative nature of Agile makes it possible for organizations to start work on contracted software development efforts without all of the requirements for the final software solution being known. While in some instances this can speed up a software development effort, it can also result in organizations signing contracts for the development of software products that are not well defined. Under such circumstances, it can be difficult to control the development timeline, budget, and final product quality.

When the full scope of a software development effort is not known when an organization signs a contract for an external entity to develop a product for them using an Agile methodology, it is typically difficult, if not impossible, to ensure the contracted level of effort is appropriate to produce the desired final result. Couple this with the tendency of some organizations to underestimate how much effort is required to develop software, and the result is that all too often Agile software development efforts require much more time and money to complete than was initially contracted. If the contracting organization has additional time and money to get the software completed, this is not too big of an issue. But many organizations do not have extra time and money, and this sometimes results in software quality being reduced in order to meet the originally contracted timeline and budget.

While contracting with an external entity for Agile development of software can speed up product delivery, it is important for organizations to fully understand the risks of contracting for such services. Since many Agile software development efforts start without all system requirements being defined, organizations that enter into contracts for Agile software development services often do so without the full scope of the effort being fully understood. This makes it very difficult to accurately determine the timeline and budget for the contracted engagement, which in turn can result in a development effort requiring more time and effort than initially estimated. In the best cases, this leads an organization to simply spending more time and money finalizing the completion of a piece of software. In the worst case, it leads to software quality being cut to meet contractually obligated timelines and budgets that were created without the full understanding of a project’s scope.