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Business Case for Agile

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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 Agile

  1. 1. Business-Case for AgileCan You Calculate the Advantage of Agile Methods?Andreas Ebbert-Karroumcodecentric AG
  2. 2. AGENDA> Introduction> Financial Consideration> Non-Financial Consideration 2
  3. 3. What Is a Business Case?
  4. 4. BUSINESS CASE: FINANCIALCONSIDERATIONS
  5. 5. Measuring Financial ConsequencesReturn 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.
  6. 6. Example Case – New Car-Insurance InventoryRicola Insurance creates new Car-Insurance InventoryProject duration:12 monthsProject costs:5.000.000 SFREarnings after launch:200.000 SFR each monthProject lifespan:5 years
  7. 7. Agile As In ScrumRelevant for financialconsideration> Iterative and incremental development (Sprints)> Prioritized requirements (Backlog)
  8. 8. Agile As In ScrumNot 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 & deploymentNot considered with potential negative impact> Impeded productivity through frequent releases (for users)> More trainings> Higher operating costs through running systems in parallel
  9. 9. BUSINESS CASE:PURE WATERFALL
  10. 10. Business Case: Pure Waterfall 6.000.000 € 4.000.000 € 2.000.000 € cash flow -€ 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € monthsBreak-even-Point: 37 monthsReturn on Investment (ROI): 92%Net-Present-Value (NPV): 2.477.399 SFR
  11. 11. BUSINESS CASE:RELEASE EVERY 6 MONTHS
  12. 12. Business Case: Release every 6 months 6.000.000 € 4.000.000 € 2.000.000 € cash flow -€ 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € monthsBreak-even-Point: 33 monthsReturn on Investment (ROI): 104%Net-Present-Value (NPV): 3.033.000 SFR
  13. 13. BUSINESS CASE:RELEASE EVERY 3 MONTHS
  14. 14. Business Case: Release every 3 months 8.000.000 € 6.000.000 € 4.000.000 € 2.000.000 € cash flow -€ 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € monthsBreak-even-Point: 32 monthsReturn on Investment (ROI): 110%Net-Present-Value (NPV): 3.315.000 SFR
  15. 15. BUSINESS CASE:RELEASE EVERY MONTH
  16. 16. Business Case: Release every Monat 8.000.000 € 6.000.000 € 4.000.000 € 2.000.000 € cash flow -€ 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € monthsBreak-even-Point: 31 monthsReturn on Investment (ROI): 114%Net-Present-Value (NPV): 3.504.000 SFR
  17. 17. Business Case: Release every 3 months –prioritized requirements
  18. 18. Business Case: Release every 3 months –prioritized requirements 8.000.000 € 6.000.000 € 4.000.000 € 2.000.000 € cash flow -€ 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € monthsBreak-even-Point: 29 monthsReturn on Investment (ROI): 123%Net-Present-Value (NPV): 3.932.000 SFR
  19. 19. Business Case: Release every month – prioritizedrequirements
  20. 20. Business Case: Release every Monat – prioritizedrequirements 8.000.000 € 6.000.000 € 4.000.000 € 2.000.000 € cash flow -€ 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € monthsBreak-even-Point: 27 monthsReturn on Investment (ROI): 128%Net-Present-Value (NPV): 4.175.000 SFR
  21. 21. ARE WE ALWAYSHITTING THE GOAL?
  22. 22. How successful are software projects? The Chaos Report 2009 32% 44% Succesful Challanged 24% Failed
  23. 23. BUSINESS CASE: WATERFALLWITH FOUR MONTHS DELAY
  24. 24. Business Case:Waterfall with four months delay 6.000.000 € 4.000.000 € 2.000.000 € -€ cash flow 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € -8.000.000 € monthsBreak-even-Point: 49 monthsReturn on Investment (ROI): 43%Net-Present-Value (NPV) 278.000 SFR
  25. 25. BUSINESS CASE:RELEASE EVERY 3 MONTHS,PRIORITIZED, 4 MONTHS DELAY
  26. 26. Business Case: Release every 3 months,prioritized, 4 months delay 6.000.000 € 4.000.000 € 2.000.000 € -€ cash flow 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € -8.000.000 € monthsBreak-even-Point: 38 monthsReturn on Investment (ROI): 86 %Net-Present-Value (NPV): 2.277.000 SFR
  27. 27. BUSINESS CASE:RELEASE EVERY MONTH,PRIORITIZED, 4 MONTHS DELAY
  28. 28. Business Case: Release every month, priorisiert,prioritized, 4 months delay 6.000.000 € 4.000.000 € 2.000.000 € -€ cash flow 1 13 25 37 49 -2.000.000 € -4.000.000 € -6.000.000 € -8.000.000 € monthsBreak-even-Point: 37monthsReturn on Investment (ROI): 91%Net-Present-Value (NPV): 2.519.000 SFR
  29. 29. BUSINESS CASE: NONFINANCIAL CONSIDERATIONS
  30. 30. Time to Market
  31. 31. Faster market entrance with interative,incremental development FunctionalityFirst Mover Window of Opportunity> Be the first on the market with a new product Complete functionality of releaseFast Follower Minimal marketable functionality> React quickly, when your Δt until product can be launched competitors launch a new iterative, product incremental waterfall t
  32. 32. Less non-valuable resultsWorking software everymonthContinuous customerfeedbackIntensive communicationinstead of specification
  33. 33. High quality with lasting effectDefinition of Done 100% 90% 80% 70% 60% 50% 40%Maintenance starts after 30% 20% 10%2nd iteration 0%Automating Test,Integration andDeployment Unstrukturiertes System Strukturiertes Sytem
  34. 34. Andreas Ebbert-Karroum www.codecentric.decodecentric AG, Düsseldorf andreas.ebbert-karroum@codecentric.de

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