Selling agile: target-cost contracts

Agile software development makes a lot of sense to software developers, but selling it to business people can be a tricky task, particularly in a consulting situation. While people appreciate the benefits of Agile, forming a contractual agreement that embraces change is difficult. Target-cost contracts have been suggested as a solution to structuring agile projects; but do they work? This experience report describes how we have successfully used target-cost contracting with a recent startup company. This approach improved our client relationship by ensuring that the contractual agreement empowers the development team and the client to work collaboratively to deliver software that meets the client's real needs while reducing the complexity and scope where possible. We believe these experiences will add value to teams working in both a formal consulting environment as well as in an internal development department.