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Slides from my session at Jazoon 2011 about the business case for Agile. Can You Calculate the Advantage of Agile Methods?
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Business-Case for AgileCan You Calculate the Advantage of Agile Methods?
Andreas Ebbert-Karroum
codecentric AG
2
AGENDA
> Introduction
> Financial Consideration
> Non-Financial Consideration
What Is a Business Case?
BUSINESS CASE: FINANCIAL CONSIDERATIONS
Measuring Financial Consequences
Return on Investment (ROI) // Kapitalrendite
> Measuring how much of your invested „money“ you get back in return.
Net-Present-Value (NPV) // Kapitalwert
> Sum of all revenues and payments including interests.
Break-even-Point // Gewinnschwelle
> Point in time when accumulated costs and revenue are equally large.
Example Case – New Car-Insurance Inventory
Ricola Insurance creates new Car-Insurance Inventory
Project duration: 12 months
Project costs: 5.000.000 SFR
Earnings after launch:200.000 SFR each month
Project lifespan: 5 years
Agile As In Scrum
Relevant for financial
consideration
> Iterative and incremental
development (Sprints)
> Prioritized requirements
(Backlog)
Agile As In Scrum
Not considered with potential positive impact
> Higher team productivity (intrinsic motivation, self-organisation, …)
> Reaction to changes
> Including new ideas
> Stop project in time (all features implemented; cancel project)
Possibly neutral through automation
> Frequent migration & deployment
Not considered with potential negative impact
> Impeded productivity through frequent releases (for users)
> More trainings
> Higher operating costs through running systems in parallel
BUSINESS CASE: PURE WATERFALL
Business Case: Pure Waterfall
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
1 13 25 37 49cash
flo
w
months
Break-even-Point: 37 months
Return on Investment (ROI): 92%
Net-Present-Value (NPV): 2.477.399 SFR
BUSINESS CASE: RELEASE EVERY 6 MONTHS
Business Case: Release every 6 months
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
1 13 25 37 49cash
flo
w
months
Break-even-Point: 33 months
Return on Investment (ROI): 104%
Net-Present-Value (NPV): 3.033.000 SFR
BUSINESS CASE: RELEASE EVERY 3 MONTHS
Business Case: Release every 3 months
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
8.000.000 €
1 13 25 37 49
cash
flo
w
months
Break-even-Point: 32 months
Return on Investment (ROI): 110%
Net-Present-Value (NPV): 3.315.000 SFR
BUSINESS CASE: RELEASE EVERY MONTH
Business Case: Release every Monat
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
8.000.000 €
1 13 25 37 49
cash
flo
w
months
Break-even-Point: 31 months
Return on Investment (ROI): 114%
Net-Present-Value (NPV): 3.504.000 SFR
Business Case: Release every 3 months –prioritized requirements
Business Case: Release every 3 months –prioritized requirements
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
8.000.000 €
1 13 25 37 49
cash
flo
w
months
Break-even-Point: 29 months
Return on Investment (ROI): 123%
Net-Present-Value (NPV): 3.932.000 SFR
Business Case: Release every month – prioritized requirements
Business Case: Release every Monat – prioritized requirements
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
8.000.000 €
1 13 25 37 49
cash
flo
w
months
Break-even-Point: 27 months
Return on Investment (ROI): 128%
Net-Present-Value (NPV): 4.175.000 SFR
ARE WE ALWAYS HITTING THE GOAL?
How successful are software projects?
32% 44%
24%
The Chaos Report 2009
Succesful
Challanged
Failed
BUSINESS CASE: WATERFALL WITH FOUR MONTHS DELAY
Business Case: Waterfall with four months delay
-8.000.000 €
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
1 13 25 37 49
cash
flo
w
months
Break-even-Point: 49 months
Return on Investment (ROI): 43%
Net-Present-Value (NPV) 278.000 SFR
BUSINESS CASE: RELEASE EVERY 3 MONTHS, PRIORITIZED, 4 MONTHS DELAY
Business Case: Release every 3 months, prioritized, 4 months delay
-8.000.000 €
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
1 13 25 37 49
cash
flo
w
months
Break-even-Point: 38 months
Return on Investment (ROI): 86 %
Net-Present-Value (NPV): 2.277.000 SFR
BUSINESS CASE: RELEASE EVERY MONTH, PRIORITIZED, 4 MONTHS DELAY
Business Case: Release every month, priorisiert, prioritized, 4 months delay
-8.000.000 €
-6.000.000 €
-4.000.000 €
-2.000.000 €
- €
2.000.000 €
4.000.000 €
6.000.000 €
1 13 25 37 49
cash
flo
w
months
Break-even-Point: 37months
Return on Investment (ROI): 91%
Net-Present-Value (NPV): 2.519.000 SFR
BUSINESS CASE: NON FINANCIAL CONSIDERATIONS
Time to Market
Faster market entrance with interative, incremental development
First Mover
> Be the first on the market
with a new product
Fast Follower
> React quickly, when your
competitors launch a new
product
Window of Opportunity
t
Functionality
Minimal marketable functionality
waterfall
iterative,
incremental
Δt until product
can be launched
Complete functionality of release
Less non-valuable results
Working software every
month
Continuous customer
feedback
Intensive communication
instead of specification
High quality with lasting effect
Definition of Done
Maintenance starts after
2nd iteration
Automating Test,
Integration and
Deployment
0%10%20%30%40%50%60%70%80%90%
100%
Unstrukturiertes System
Strukturiertes Sytem
Andreas Ebbert-Karroum www.codecentric.de
codecentric AG, Düsseldorf
andreas.ebbert-karroum@codecentric.de
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