There is one simple procurement action—a statement, actually—that I guarantee will totally transform your entire IT organization.  In fact, it may even dramatically transform the customers of IT: the business units.  This procurement action will drive discipline into your IT processes, the business units’ development of business requirements, your SDLC, your project management, your coding, and your testing.  Not only that, it will ultimately save your organization money and time.

The mere utterance of this simple, one-sentence procurement action by a CEO, CIO, CFO, or COO will have far-reaching ripple effects that rapidly drive efficiency and effectiveness into all areas of IT software development and delivery.

Imagine a typical IT organization hamstrung by the business…  Ever-growing IT budget and staff.  Bloated numbers of contractors.  Contractors managing contractors.  Business units slow to develop business requirements, and when they do, the requirements change because they weren’t well thought-out to begin with.  Project managers who spend all of their time manipulating project plans and “re-estimating” rather than getting the job done.  Slipping dates.  Daily changes in priorities.

It’s out of control.

To deal with that rather than to deal with that, things with colorful names like “waterfall,” “cascade,” and “agile” were invented.  Yawn.

How much would you pay to hire consultants to transform all of that?  Hundreds of thousands?  And wouldn’t that just be another worthless exercise which would go nowhere?

Wouldn’t it be great if there was some simple silver bullet?  Something that ratcheted back those double-digit year-over-year IT budget increases?  Something that flattened the proliferation of contractors?  Something that got the business units really engaged and partnering to develop solid, stable business requirements?  Something that got project managers managing deliverables actually being delivered?  Something that didn’t require daily changes in dates and priorities?  Something that drove control and discipline?

Well, here’s your silver bullet in the form of a simple procurement action.  If you’re a CEO, CIO, CFO, or CCO, this is all you have to say...

“From now on, I want at least 50% of all IT professional services engagements to be firm-fixed-price.”

Think about it.

The basic elements of a firm-fixed-price (FFP) contract are specific and detailed requirements, results-based (not resource-based), “all-in” payments based on deliverables, and the contract not subject to any adjustment on the basis of the vendor's cost experience in performance.

Think of going to FFP contracts as an intervention and rehab for your IT organization and business units.  At first, it’s a shock.  “No, I’m sorry, we’re not going to enable you any longer.  We’re not going to give you any more money to feed your addiction to things like agile.”  It’s tough.  You have to be real.  You have to be honest with yourself and your counterparts in the business units.  You have to make tough choices.  And, you have to stay the course to get well.

The transformation will begin immediately.  Of course, at first, staff will try to argue that FFP contracts will cost more or take more time.  (Actually, statistics show otherwise.)  They’ll try to creatively force T&M, level of effort, or cost-reimbursable contracts to appear as FFP types.  They’ll try to redefine what FFP really means.  Don't put up with that, hold fast, and the transformation will grow and will spread.

IT will be forced to re-evaluate its capabilities and the mix of its capabilities...  “Hmmm, to get better requirements, maybe we should re-allocate some of our staff to help the business units develop requirements.  Maybe we should have more project managers and SMEs on staff, have less coders, and contract out more development.  Maybe we should dump all of the staff augmentation firms and independent contractors that we (mis)manage and hire a true software development vendor.”

The business units will be held accountable.  They will slowly wean themselves from the addiction of being able to change requirements and priorities on a moment’s notice.  They will slowly learn to develop solid and stable requirements.  They will slowly take responsibility for testing.  But, they will do those things.

“From now on, I want at least 50% of all IT professional services engagements to be firm-fixed-price.”

That's all you have to say.