Benefits of Outcome Based Engagements
by Gary Montgomery, on Jun 25, 2019 9:07:28 AM
Agenor Technology have a long history of working in partnership with clients to deliver Outcome Based projects, also sometimes known as Managed Services, Outsourced Projects or Fixed Price. This approach has proved beneficial to both Agenor and our Clients from a delivery, financial and control perspective. We observe that more and more Clients are transitioning away from the traditional Time and Materials model to have a greater focus on Outcome Based delivery, and investment in the Risk: Reward approach that this provides.
This blog post offers an overview of the Outcome Based approach, and the ways in which Agenor utilises it within Client engagements.
How is Outcome Based Different to Time and Materials?
In a Time and Materials engagement, a vendor provides identified and named resources to a Client and is paid for the time spent on the engagement, usually measured in days and hours. In this model the Client is asked to manage those resources and approve the time that they spend on the account, usually for the previous month, and then the associated invoice is submitted and paid. This model has a number of positive points, i.e. the Client is being asked to pay specifically for the effort expended and has visibility of that. This does however require the Client to have at least a basic understanding of what the resources have been doing, usually taking the form of the Client having to put someone in charge of the project i.e. Programme Manager, Project Manager.
In an Outcome Based model, the Client agrees the price for an Outcome, and Agenor provide all the required resources to deliver the project outcome that the Client is looking to achieve, reducing the dependency on the Client resources wherever possible. This doesn’t however mean that Agenor can do everything independently. Dependencies still exist on the Client internal teams and functions to work in partnership in relation to certain Technical or Process activities being undertaken by the Client. For example, it is down to the Client to define what standards and policies should be adhered to, while certain functions such as Technical Access and Permissions will always be managed by the client.
What are the benefits of Outcome Based?
There are a number of benefits associated with an Outcome Based engagement. These can be summarised as follows:
Is Outcome Based always the right answer?
The answer is "not always". For a successful Outcome Based delivery, the following features must be in place:
- A stable delivery environment which does not see regular changes in project priorities or scope
- A client willing from a trust and cultural perspective to invest in the relationship with Agenor by divesting certain rights and responsibilities in relation to project delivery
- Contractual agreements which are detailed enough to cover both parties, but generic enough to still provide flexibility
So where the above features do not exist it can be difficult to attach well defined and achievable outcomes.
How should Outcome Based contracts be structured?
The key thing is not to create Outcome Based contracts that hamper either party. Flexibility is required on both sides in order for the best outcomes to be achieved. If there is a particular activity within a project that is causing problems, it serves no purpose for either side to entrench into an “It’s their fault!!!” position. Give and take from both sides is what makes successful delivery.
Contracts needs to be clearly articulated with what the Client will provide and what Agenor will provide, with identifiable dependencies documented and adhered to.
Examples of this would be:
- Where the Client insists on project deliverables being approved at a specific project forum, Agenor needs to ensure preparation and readiness for that forum, and the Client needs to ensure the forum is established, ran and attended.
- Where the timelines for delivery include certain Service Level Agreements, i.e. it will take 5 days for a Change Record to be approved, the underlying process needs to support that timeline.
- Where the Client needs to provide specific resources to assist with delivery, these resources must be provided in the required timeline.
How are Outcome Based engagements managed?
During all Outcome Based engagements, Agenor allocate a Client Delivery Manager (CDM). The CDM is tasked with overseeing the engagement from a Client relationship and financial perspective. The CDM is not in place to take part in project delivery, that is the role of the delivery team working on the outcome.
The CDM will define the terms of the engagement at the beginning and will then work with both the Client and the Agenor delivery teams to regularly monitor progress associated with the delivery outcomes.
An example of how this is managed is shown below: