Can agile improve supplier management?

I attended the Unicom “Next Generation Testing Conference” this week and there was lots of good discussion on the difference between Agile and Waterfall.

Afterwards (isn’t it always afterwards!) I thought of something I wished I’d raised at the time, so I thought I’d write a blog by way of follow up. Now I don’t do blogs, although I’ve been meaning to for ages. So this is a new, and hopefully pleasant, experience for me.

I’ve always been concerned about how to contract with a supplier in an agile way. Supplier management is a specific area of interest for me. I’ve listened to many presentations and case studies on this, but frankly haven’t been convinced yet. However, I’ve had one of those light bulb moments. We spend so much time talking about how to improve the delivery and predictability of systems and yet our industry has a bunch of suppliers whose business depends upon us not getting requirements right!

This isn’t their fault though as the purchasing process most companies go through encourages and rewards this behaviour. In a competitive bidding process where price is sensitive, all bidders are seeking to give a keen price for their interpretation of the requirements, knowing that requirements are typically inconsistent and complete. This allows them to bid low, maybe at cost or even lower, and then make their profit on the re-work. I’d always thought re-work was around 30% but Tom Gilb gave figures that show it can be much higher than that, so that’s a good profit incentive isn’t it.

So, here we all are, seeking to reduce spend putting pressure on daily rates, etc. We’re looking at the wrong dimension here! There is a much bigger prize!

Can we reduce the cost of purchasing, reduce the cost of re-work and meet our goals of predictable system delivery. Now, (and some of you will be thinking finally!) I’m convinced agile can help achieve this, but is any customer out there enlightened enough to realise this? Or is it more important to them to maintaining the status quo and avoid change?