We are big believers in an iterative model for vendor engagements. It’s a novel concept for some organizations. To determine if the approach is right for you, familiarize yourself with the potential risks and rewards for both the client and the vendor.
The risks on the client side are mostly tied to the disruptive nature of the engagement model. It requires project sponsors, stakeholders, legal, procurement, and the project team to think differently. If they don’t adapt to the model, a number of issues can occur, including:
- Lack of discipline around prioritization, which can be detrimental to the scope and thus the timeline and cost.
- Patchy participation from key decision makers, which can result in poor prioritization and thus misappropriation of time and resources.
Moreover, it will be tempting for partnerships to revert to the traditional engagement model after a working relationship has been established with a vendor through a few productive iterations. This is a trap. If the iterative model is working, stick to it.
There are abundant rewards for a client organization that adopts this model. The key to the rewards stems from tighter control and vendor vulnerability. Rewards include:
- Lower cost as you only pay for the most critical deliverables designated at the time of assignment.
- Increased flexibility, since any project parameter – including scope, timeline, resources, expected benefits, etc. – can be effectively adjusted at any time. In addition, the project can be cancelled, go on hold, or get de-prioritized any time.
- Greater control, since there is very little, if any, dependency on the vendor.
Clearly, the iterative engagement model increases vendor risks. In fact, the model is the most effective “risk with the vendor” approach. The client can fire a vendor at the end of a current iteration without legal repercussions.
Here are the risks the vendor faces:
- Revenue backlog is limited to a very short commitment from a client.
- Resources tied to the project can be benched with little to no notice.
- Scope can change from cycle to cycle.
- Administrative costs can add up for vendors that don’t embrace the model in their business operations.
There are plenty of rewards for vendors that play their cards right, including:
- Quicker processing time for shorter client engagements.
- Payment processing is a breeze as clients consume predictable deliverables at the end of each cycle.
- An immediate feedback loop on quality of deliverables.
- Loyal, satisfied clients.
As with anything in business and life, “There are lots of risks, but without risks, there’s no reward.” (Brock Lesnar)