It’s budget season. The economy is in the tank. You know budget cuts are are on their way. How do you make sure your team and projects survive? Prove that agile increases value. That’s exactly the message Richard Leavitt and Michael Mah presented this morning. But, to get your executives to keep your team and your funding, they don’t really need to understand agile per se, they need to understand the financial value of agile. That’s what they understand and care about. The numbers. So Richard and Michael gave the numbers and explained how to talk to the C-level when trying to show the advantages of agile development practices.
The main question: What are the documented financial returns of agile? Here are the 3 main financial impacts that your executives will understand:
IMPACT #1: Higher, faster ROI
It is rarely possible for traditional projects to return investments within a year. Executives are unwilling to fund projects with long ROI. Agile shows immediate ROI. Based on data from their study, Richard showed that traditional projects show about a 33% ROI after a year. The big risk in traditional projects: We never really know how we’re doing because we haven’t delivered anything at the beginning. The big question: When are we going to deliver? These projects self-fund only at the end of the project when they deliver…maybe.
Show how agile is different: Agile releases value immediately and incrementally. This has a dramatic effect on the ROI case. With agile, self-funding hits very early in the project and profitability hits very quickly. Overall, agile shows a 12X ROI versus only 33% on traditional projects. So, agile has a much higher ROI than traditional projects. Agile uses less income and hits profitability almost immediately. Your execs should like that!
IMPACT #2: Build less, deliver more
Waterfall projects cost 2X what they need to because we’re building wasted functionality. We’ve all seen the Chaos Report and we know the numbers very well by now. The main Chaos Report number to know: 64% of features developed in traditional projects are rarely or ever used. Additionally, there is are 35%higher maintenance costs for life, as well as lower performance. This leads to wasted opportunity costs and key value is delayed.
To demonstrate the increases in the productivity of agile teams using Scrum, Richard showed details from Jeff Sutherland’s IEEE Paper Magic Potion for Code Warriors. The study showed that the company Systematic Software Engineering went from CMMI Level 1 to CMMI Level 5 and showed a 31% decrease in effort by the efficiencies they gained. Next, the team moved to Scrum. By going to Scrum, they reduced effort by 65% compared to their effort at CMMI Level 1. The effort figure includes total work, rework and project focus. Overall, Scrum showed a 50% cut in rework, 80% cut in cost, and a 40% cut in defects. This translated into a 100% increase in productivity. As a result, they now double their price for clients who require a phased approach.
Agile productivity gains let you do more with less. Large companies and their execs want specific metrics, not survey results to prove the impact of a process. QSMA and Michael Mah have the metrics. They have a benchmarked comparison of 29 Agile projects from very large companies like CNET, Accuro Healthcare, HomeAway, Moody’s, and BMC Software. They compared these agile projects to a database of historic data from traditional projects that QSM had studied.
To provide the best index of productivity, QSMA uses this equation: Productivity Index = Size/(Time*Effort), where Size= the number stories, lines of code, and defects, Time=Calendar months, and Effort=Person-months.
To illustrate the benefits, Michael showed stats from BMC Software. BMC delivered in 5.25 months what comparable traditional teams and projects delivered in 1 year with 1/4 of the defects of traditional project teams.
Overall, the 29 projects QSMA studied showed that compared to traditional teams, agile teams have 37% faster time to market. Short iterations and feedback loops in agile are the source of this benefit. Agile teams also showed 16% productivity gains over traditional teams. That means that agile teams are doing more with less. And with 1/4 of the expected defects. Despite shortening schedules by more than 50%, defects remained steady, about 1/4 of what was expected compared to trad projects.
So, if your execs are putting your agile team under pressure, give them a few of these facts and help them understand the value of agile.