BONUS: Consulting is Different—How Consulting Contracts Work Against Agile Development | Jakob Wolman, Wilko Nienhaus

BONUS: Consulting is Different—How Consulting Contracts Work Against Agile Development, With Jakob Wolman and Wilko Nienhaus In this BONUS episode, we explore the critical differences between building software as a consultant versus inside a product company. Jakob Wolman contributed an insightful article to the Global Agile Summit book examining how third-party software development operates under entirely different constraints than in-house product development. Joined by Wilko Nienhaus, CTO of Vaimo, a consulting company in Estonia , we dive into ownership dynamics, misaligned incentives, contracting challenges, and the business pressures that shape consulting—along with practical stories from the field about what really works. The Cobbler's Shoes Problem "I come back to the office from this workshop, and suddenly, with these eyes on looking for improvements in process, I just suddenly am hit by this revelation of why things are so slow here? Why are we working so inefficiently?" Jakob describes the striking paradox many consultancies face: they excel at helping clients improve their processes while their own internal operations remain inefficient. This "shoemaker's children" phenomenon reflects a fundamental challenge in consulting—the difficulty of investing in your own improvements when all energy flows toward billable client work. Digital agencies often have outdated or poorly implemented websites despite building sophisticated solutions for others, illustrating how consultancies struggle to apply their own expertise internally. Misaligned Incentives Create Antagonistic Dynamics "It's almost as if the clients are actually paying us to be slow, because our incentive is to spend more time on achieving what the client wants, because we get paid by the hour." The incentive structures in consulting create inherent conflicts that don't exist in product companies. Consultants typically bill by the hour, creating a perverse incentive to spend more time rather than deliver efficiently. Meanwhile, clients pursue business outcomes and want results as quickly and cheaply as possible. This fundamental misalignment leads to: Clients adopting a procurement mindset, treating software development like ordering from a catalog A "wall" between stakeholders and development teams that's even stronger than in product companies Antagonistic relationships where scope changes feel like financial traps rather than necessary learning Contracting processes that reinforce waterfall thinking even when both parties claim to want agility Wilko emphasizes that contracting has a huge impact on these dynamics, and companies must deliberately change their engagement models to break free from these patterns. The Budgeting Trap and Specification Overload "Because of this budgeting process where you now need to motivate what this budget does, or you need to spend that budget, you essentially create this necessity to define everything." Consulting projects often suffer from the same problem that plagued waterfall development: annual budgeting cycles that force stakeholders to cram everything into a single specification. When there's only one chance per year to secure funding, everyone stuffs the requirements document with every conceivable feature, leading to: Massive specifications that attempt to predict all needs upfront Endless discovery meetings and documentation that add cost without improving outcomes Developers working from outdated assumptions with delayed feedback Clients who don't really know what they want but feel pressured to specify everything Jakob points out the frustration that "we've already fixed this problem" in product development through iterative approaches, yet it keeps reappearing in consulting because of the separation between entities. Ownership and Quality in Consulting Environments "Skilled engineers will be frustrated if they're not allowed to do a proper job. People that have spent a lot of time in an environment where they're never allowed to do a proper job, or maybe even punished for doing a proper job, they will have given up, and not care." The difference in ownership between product and consulting development profoundly affects how engineers think about quality, technical debt, and long-term design. In product companies, developers know they'll maintain their code, creating natural incentives for quality. In consulting, the transient nature of engagements can erode quality standards. Key challenges include: Engineers knowing they won't return to the codebase, reducing long-term thinking Clients who lack technical expertise dictating approaches they don't understand Pressure to complete fixed-scope contracts regardless of quality trade-offs The role of estimates in forcing teams to "just complete this thing" even when learning suggests changes Wilko notes that teams controlled by clients versus teams managed as stable units by the consultancy show markedly different levels of ownership and engagement. Engi