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