Ben Carey, who was key to introducing Agile development to NuSoft (before we were NuSoft), has a great post about Agile and the issues it presents in the sales process.

He says the problem is how the sales team sells and how the client expects to be sold to. The solution, therefore, is education. Your sales team needs to be re-educated to sell in an agile world, and clients need to gain an understanding of the benefits of an agile process.

Of course, to "teach" clients about this, you need to build trust with them so they know that they are getting more value than a BDUF project. That's Big Design Up Front, by the way.

Building trust with new clients is tough - especially when (in their eyes) they are being asked to sign on to a project that they don't know when it'll be delivered or how much it will cost. That's a scary prospect. So what do you need to do? You need customer testimonials - other customers who've seen the benefits of an agile project and can relay those to new clients. There's nothing like an existing client selling your services for you! It's much more impactful than you telling them that they're going to get software that's delivered faster and cheaper and has the exact feature set you want.

From what I've seen thus far, clients tend to be happier once they get into agile projects - they know where everything is at - budget, features, etc. - how things are progressing, and how fast they are progressing (velocity!). Also, at the end, if things are going over budget, they know why and they aren't usually blindsided by the news. They can see where things are going as the project progresses, and they can make the decision to spend more if they want to - and they're more informed about what's going on. And since the priority is on building the important features first, they can also decide not to spend more knowing they got the main features they wanted.

Again, in a very long winded way, it's all about education! Once you have that, it seems pretty obvious what model you want to use.