Abstract. Many large and distributed companies run agile projects in development environments that are inconsistent with the original agile ideas. Problems that result from these inconsistencies can affect the productivity of development projects and the timeliness of releases. To be effective in such contexts, the agile ideas need to be adapted. We take an inductive approach for reaching this aim by basing the design of the development process on observations of how context, practices, challenges, and impacts interact. This paper reports the results of an interview study of five agile development projects in an environment that was unfavorable for agile principles. Grounded theory was used to identify the challenges of these projects and how these challenges affected productivity and delays according to the involved project roles. Productivity and delay-influencing factors were discovered that related to requirements creation and use, collaboration, knowledge management, and the application domain. The practitioners' explanations about the factors' impacts are, on one hand, a rich empirical source for avoiding and mitigating productivity and delay problems and, on the other hand, a good starting point for further research on flexible large-scale development.