Business Value of
Agile MethodsUsing ROI & Real OptionsDr. David F. Rico, PMP, CSEP, ACP, CSM, SAFe
Twitter: @dr_david_f_ricoWebsite: http://www.davidfrico.com
LinkedIn: http://www.linkedin.com/in/davidfricoAgile Capabilities: http://davidfrico.com/rico-capability-agile.pdf
Agile Resources: http://www.davidfrico.com/daves-agile-resources.htmAgile Cheat Sheet: http://davidfrico.com/key-agile-theories-ideas-and-principles.pdf
Author Background
� Gov’t contractor with 32+ years of IT experience� B.S. Comp. Sci., M.S. Soft. Eng., & D.M. Info. Sys.� Large gov’t projects in U.S., Far/Mid-East, & Europe
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�Career systems & software engineering methodologistCareer systems & software engineering methodologistCareer systems & software engineering methodologistCareer systems & software engineering methodologist� Lean-Agile, Six Sigma, CMMI, ISO 9001, DoD 5000� NASA, USAF, Navy, Army, DISA, & DARPA projects� Published seven books & numerous journal articles� Intn’l keynote speaker, 130+ talks to 12,000 people� Specializes in metrics, models, & cost engineering� Cloud Computing, SOA, Web Services, FOSS, etc.� Adjunct at five Washington, DC-area universities
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Today’s Whirlwind Environment
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•Overruns•Attrition•Escalation•Runaways•Cancellation
GlobalCompetition
DemandingCustomers
OrganizationDownsizing
SystemComplexity
TechnologyChange
VagueRequirements
Work LifeImbalance
•Inefficiency•High O&M•Lower DoQ•Vulnerable•N-M Breach
ReducedIT Budgets
81 MonthCycle Times
RedundantData Centers
Lack ofInteroperability
PoorIT Security
OverburdeningLegacy Systems
ObsoleteTechnology & Skills
Pine, B. J. (1993). Mass customization: The new frontier in business competition. Boston, MA: Harvard Business School Press.
Pontius, R. W. (2012). Acquisition of IT: Improving efficiency and effectiveness in IT acquisition in the DoD. Second Annual
AFEI/NDIA Conference on Agile in DoD, Springfield, VA, USA.
Traditional Projects
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� Big projects result in poor quality and scope changes� Productivity declines with long queues/wait times� Large projects are unsuccessful or canceled
Jones, C. (1991). Applied software measurement: Assuring productivity and quality. New York, NY: McGraw-Hill.
Size vs. Quality
DEFECTS
0.00
3.20
6.40
9.60
12.80
16.00
0 2 6 25 100 400
SIZE
Size vs. Productivity
PRODUCTIVITY
0.00
1.00
2.00
3.00
4.00
5.00
0 2 6 25 100 400
SIZE
Size vs. Change
CHANGE
0%
8%
16%
24%
32%
40%
0 2 6 25 100 400
SIZE
Size vs. SuccessSUCCESS
0%
12%
24%
36%
48%
60%
0 2 6 25 100 400
SIZE
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Global Project Failures
5
Standish Group. (2010). Chaos summary 2010. Boston, MA: Author.
Sessions, R. (2009). The IT complexity crisis: Danger and opportunity. Houston, TX: Object Watch.
� Challenged and failed projects hover at 67%� Big projects fail more often, which is 5% to 10%� Of $1.7T spent on IT projects, over $858B were lost
16% 53% 31%
27% 33% 40%
26% 46% 28%
28% 49% 23%
34% 51% 15%
29% 53% 18%
35% 46% 19%
32% 44% 24%
33% 41% 26%
0% 20% 40% 60% 80% 100%
1994
1996
1998
2000
2002
2004
2006
2008
2010
Year
Successful Challenged Failed
$0.0
$0.4
$0.7
$1.1
$1.4
$1.8
2002 2003 2004 2005 2006 2007 2008 2009 2010
Trillions (US Dollars)
Expenditures Failed Investments
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Requirements Defects & Waste
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Sheldon, F. T. et al. (1992). Reliability measurement: From theory to practice. IEEE Software, 9(4), 13-20
Johnson, J. (2002). ROI: It's your job. Extreme Programming 2002 Conference, Alghero, Sardinia, Italy.
� Requirements defects are #1 reason projects fail� Traditional projects specify too many requirements� More than 65% of requirements are never used at all
Other 7%
Requirements
47%
Design
28%
Implementation
18%
Defects
Always 7%
Often 13%
Sometimes
16%
Rarely
19%
Never
45%
Waste
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What is Agility?
� A-gil-i-ty (ə-'ji-lə-tē) Property consisting of quickness, lightness, and ease of movement; To be very nimble
� The ability to create and respond to changerespond to changerespond to changerespond to change in order to profit in a turbulent global business environment
� The ability to quickly reprioritizequickly reprioritizequickly reprioritizequickly reprioritize use of resources when requirements, technology, and knowledge shift
� A very fast responsefast responsefast responsefast response to sudden market changes and emerging threats by intensive customer interactioncustomer interactioncustomer interactioncustomer interaction
� Use of evolutionaryevolutionaryevolutionaryevolutionary, incrementalincrementalincrementalincremental, and iterativeiterativeiterativeiterative delivery to converge on an optimal customer solution
� Maximizing BUSINESS VALUEBUSINESS VALUEBUSINESS VALUEBUSINESS VALUE with right sized, just-enough, and just-in-time processes and documentation
Highsmith, J. A. (2002). Agile software development ecosystems. Boston, MA: Addison-Wesley.
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What are Agile Methods?
8
� People-centric way to create innovative solutions� Product-centric alternative to documents/process� Market-centric model to maximize business value
Agile Manifesto. (2001). Manifesto for agile software development. Retrieved September 3, 2008, from http://www.agilemanifesto.org
Rico, D. F., Sayani, H. H., & Sone, S. (2009). The business value of agile software methods. Ft. Lauderdale, FL: J. Ross Publishing.
Rico, D. F. (2012). Agile conceptual model. Retrieved February 6, 2012, from http://davidfrico.com/agile-concept-model-1.pdf
Customer Collaboration
Working Systems & Software
Individuals & Interactions
Responding to Change
valuedmore than
valuedmore than
valuedmore than
valuedmore than
Contracts
Documentation
Processes
Project Plans
• Frequent comm.• Close proximity• Regular meetings
• Multiple comm. channels• Frequent feedback• Relationship strength
• Leadership• Boundaries• Empowerment
• Competence• Structure• Manageability/Motivation
• Clear objectives• Small/feasible scope• Acceptance criteria
• Timeboxed iterations• Valid operational results• Regular cadence/intervals
• Org. flexibility• Mgt. flexibility• Process flexibility
• System flexibility• Technology flexibility• Infrastructure flexibility
• Contract compliance• Contract deliverables• Contract change orders
• Lifecycle compliance• Process Maturity Level• Regulatory compliance
• Document deliveries• Document comments• Document compliance
• Cost Compliance• Scope Compliance• Schedule Compliance
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Courage
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Network
Computer
Operating System
Middleware
Applications
APIs
GUI
How Agile Works
� Agile requirements implemented in slices vs. layers� User needs with higher business value are done first� Reduces cost & risk while increasing business success
9Shore, J. (2011). Evolutionary design illustrated. Norwegian Developers Conference, Oslo, Norway.
Agile Traditional1 2 3• Faster
• Early ROI
• Lower Costs
• Fewer Defects
• Manageable Risk
• Better Performance
• Smaller Attack Surface
Late •
No Value •
Cost Overruns •
Very Poor Quality •
Uncontrollable Risk •
Slowest Performance •
More Security Incidents •Seven Wastes
1. Rework2. Motion3. Waiting4. Inventory5. Transportation6. Overprocessing7. Overproduction
MINIMIZES MAXIMIZES
• JIT, Just-enough architecture• Early, in-process system V&V• Fast continuous improvement• Scalable to systems of systems• Maximizes successful outcomes
• Myth of perfect architecture• Late big-bang integration tests• Year long improvement cycles• Breaks down on large projects• Undermines business success
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Capability/MMF #1
●Feature 1
●Feature 2
●Feature 3
●Feature 4
●Feature 5
●Feature 6
●Feature 7
Capability/MMF #2
●Feature 8
●Feature 9
●Feature 10
●Feature 11
●Feature 12
●Feature 13
●Feature 14
Capability/MMF #3
●Feature 15
●Feature 16
●Feature 17
●Feature 18
●Feature 19
●Feature 20
●Feature 21
Capability/MMF #4
●Feature 22
●Feature 23
●Feature 24
●Feature 25
●Feature 26
●Feature 27
●Feature 28
Capability/MMF #5
●Feature 29
●Feature 30
●Feature 31
●Feature 32
●Feature 33
●Feature 34
●Feature 35
Capability/MMF #6
●Feature 36
●Feature 37
●Feature 38
●Feature 39
●Feature 40
●Feature 41
●Feature 42
Capability/MMF #7
●Feature 43
●Feature 44
●Feature 45
●Feature 46
●Feature 47
●Feature 48
●Feature 49
1
2 3
4
5 6
7
8 9
10
11 12
13
14 15
16
17 18
19
20 21
Evolving “Unified/Integrated” Enterprise Data Model
“Disparate” LEGACY SYSTEM DATABASES (AND DATA MODELS)
ETL
A A
B C
D E F
G H I J K
A
B C
D E F
A
B C
D E
A
B C
D
A
B C
A
B
“Legacy” MS SQL Server Stovepipes “Inter-Departmental” Linux Blade/Oracle/Java/WebSphere Server
“Leased” DWA/HPC/Cloud Services
Sprint 1 Sprint 2 Sprint 3 Sprint 4 Sprint 5 Sprint 6 Sprint 7
Release
Release
Release
Release
ETL ETL ETL ETL ETL ETL
Bente, S., Bombosch, U., & Langade, S. (2012). Collaborative enterprise architecture: Enriching EA with lean, agile, and enterprise 2.0 practices. Waltham, MA: Elsevier.
Agile Development In-the-Large“Incremental Business Value”
(for example, assume 25 user stories per feature, 175 user stories per capability/MMF, and 1,225 user stories total)
� Organize needs into capabilities, features, and stories� Prioritize features, group releases, and initiate sprints� Develop minimum set of features with highest value����
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Agile Performance MeasurementWork (
Sto
ry,
Poin
t, T
ask)or Effort (
Week, D
ay,
Hour)
Time Unit (Roadmap, Release, Iteration, Month, Week, Day, Hour, etc.)
Burndown
Work (
Sto
ry,
Poin
t, T
ask)or Effort (
Week, D
ay,
Hour)
Time Unit (Roadmap, Release, Iteration, Month, Week, Day, Hour, etc.)
Cumulative Flow
Work (
Sto
ry,
Poin
t, T
ask)or Effort (
Week, D
ay,
Hour)
Time Unit (Roadmap, Release, Iteration, Month, Week, Day, Hour, etc.)
Earned Value Management - EVMCPI
SPI
PPC
APC
Work (
Sto
ry,
Poin
t, T
ask)or Effort (
Week, D
ay,
Hour)
Time Unit (Roadmap, Release, Iteration, Month, Week, Day, Hour, etc.)
Earned Business Value - EBV
Agile Cost of Quality (CoQ)
� Agile testing is 10x better than code inspections� Agile testing is 100x better than traditional testing� Agile testing is done earlier “and” 1,000x more often
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Rico, D. F. (2012). The Cost of Quality (CoQ) for Agile vs. Traditional Project Management. Fairfax, VA: Gantthead.Com.
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Agile Cost & Benefit Analysis
� Costs based on avg. productivity and quality� Productivity ranged from 4.7 to 5.9 LOC an hour� Costs were $588,202 and benefits were $3,930,631
13Rico, D. F., Sayani, H. H., & Sone, S. (2009). The business value of agile software methods: Maximizing ROI with just-in-time processes and documentation.
Ft. Lauderdale, FL: J. Ross Publishing.
d1 = [ln(Benefits ÷ Costs) + (Rate + 0.5 × Risk2) × Years] ÷ Risk × √ Years, d2 = d1 − Risk × √ Years
∑ =
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1i
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Benefits of Agile Methods
� Analysis of 23 agile vs. 7,500 traditional projects� Agile projects are 54% better than traditional ones� Agile has lower costs (61%) and fewer defects (93%)
Mah, M. (2008). Measuring agile in the enterprise: Proceedings of the Agile 2008 Conference, Toronto, Canada.
Project Cost in Millions $
0.75
1.50
2.25
3.00
2.8
1.1
Before Agile
After Agile
61%LowerCost
Total Staffing
18
11
Before Agile
After Agile
39%LessStaff
5
10
15
20
Delivery Time in Months
5
10
15
20
18
13.5
Before Agile
After Agile
24%Faster
Cumulative Defects
625
1250
1875
2500
2270
381
Before Agile
After Agile
93%LessDefects
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Agile vs. Traditional Success
� Traditional projects succeed at 50% industry avg.� Traditional projects are challenged 20% more often� Agile projects succeed 3x more and fail 3x less often
Standish Group. (2012). Chaos manifesto. Boston, MA: Author.
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Agile Traditional
Success
42%
Failed
9%
Challenged
49%
Success
14%
Failed
29%
Challenged
57%
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Hoque, F., et al. (2007). Business technology convergence. The role of business technology convergence in innovation
and adaptability and its effect on financial performance. Stamford, CT: BTM Institute.16
� Study of 15 agile vs. non-agile Fortune 500 firms� Based on models to measure organizational agility� Agile firms out perform non agile firms by up to 36%
Benefits of Organizational Agility
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Agile Adoption
17Holler, R. (2015). Ninth annual state of agile survey: State of agile development. Atlanta, GA: VersionOne.
� VersionOne found 94% using agile methods today� Most are using Scrum with several key XP practices� Lean-Kanban is a rising practice with a 31% adoption
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Continuous
Integration
●
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●
●
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●
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Agile Proliferation
Scrum Alliance. (2013). Scrum certification statistics. Retrieved April 28, 2015, from http://www.scrumalliance.org
Taft, D. K. (2012). Agile developers needed: Demand outpaces supply. Foster City, CA: eWeek. 18
� Number of CSMs have doubled to 400,000 in 4 years� 558,918 agile jobs for only 121,876 qualified people� 4.59 jobs available for every agile candidate (5:1)����
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Projected
Projected
* PMI-PMPs grew from 552,977 to 625,346 in 2014 (i.e., added 72,369)
Agile in Government
Suhy, S. (2014). Has the U.S. government moved to agile without telling anyone? Retrieved April 24, 2015, from http://agileingov.com
Porter, M. E., & Schwab, K. (2008). The global competitiveness report: 2008 to 2009. Geneva, Switzerland: World Economic Forum. 19
� U.S. gov’t agile jobs grew by 13,000% from 2006-2013� Adoption is higher in U.S. DoD than Civilian Agencies� GDP of countries with high adoption rates is greater����
High
Low
Low HighAGILITY
COMPETITIVENESS
GOVERNMENT AGILE JOB GROWTH
PERCENTAGE
13,000%
0
2006 2013YEARS
GOVERNMENT COMPETITIVENESS
Agile Industry Case Studies
� 84% of worldwide IT projects use agile methods� Includes regulated industries, i.e., DoD, FDA, etc.� Agile now used for safety critical systems, FBI, etc.
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Industry
ShrinkWrapped
Electronic
Commerce
Health
Care
Law
Enforcement
Org
• 20 teams• 140 people• 5 countries
Size
• 15 teams• 90 people• Collocated
• 4 teams• 20 people• Collocated
• 10 teams• 50 people• Collocated
• 3 teams• 12 people• Collocated
U.S.
DoD
Primavera
Stratcom
FBI
FDA
Project
Primavera
Adwords
SKIweb
Sentinel
m2000
Purpose
Project
Management
Advertising
Knowledge
Management
Case File
Workflow
Blood
Analysis
• 1,838 User Stories• 6,250 Function Points• 500,000 Lines of Code
Metrics
• 26,809 User Stories• 91,146 Function Points• 7,291,666 Lines of Code
• 1,659 User Stories• 5,640 Function Points• 451,235 Lines of Code
• 3,947 User Stories• 13,419 Function Points• 1,073,529 Lines of Code
• 390 User Stories• 1,324 Function Points• 105,958 Lines of Code
Rico, D. F. (2010). Lean and agile project management: For large programs and projects. Proceedings of the First International Conference on Lean
Enterprise Software and Systems, Helsinki, Finland, 37-43.
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� Assembla went from 2 to 45 releases every month� 15K Google developers run 120 million tests per day� 30K+ Amazon developers deliver 8,600 releases a day
21Singleton, A. (2014). Unblock: A guide to the new continuous agile. Needham, MA: Assembla, Inc.
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62x Faster
U.S. DoD
IT Project
3,645x Faster
U.S. DoD
IT Project
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Continuous Delivery (with DEVOPS)
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� Hewlett-Packard is a major user of CI, CD, & DevOps� 400 engineers developed 10 million LOC in 4 years� Major gains in testing, deployment, & innovation
Gruver, G., Young, M. & Fulghum, P. (2013). A practical approach to large-scale agile development. Upper Saddle River, NJ: Pearson Education.
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TYPE METRIC MANUAL DEVOPS MAJOR GAINS
CYCLE TIME
IMPROVEMENTS
Build Time 40 Hours 3 Hours 13 x
No. Builds 1-2 per Day 10-15 per Day 8 x
Feedback 1 per Day 100 per Day 100 x
Regression Testing 240 Hours 24 Hours 10 x
DEVELOPMENT
COST EFFORT
DISTRIBUTION
Integration 10% 2% 5 x
Planning 20% 5% 4 x
Porting 25% 15% 2 x
Support 25% 5% 5 x
Testing 15% 5% 3 x
Innovation 5% 40% 8 x
Cont. Delivery (Hewlett-Packard)
Conclusion
� Agile methods DON’T mean deliver it now & fix it later� Lightweight, yet disciplined approach to development� Reduced cost, risk, & waste while improving quality
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Rico, D. F. (2012). What’s really happening in agile methods: Its principles revisited? Retrieved June 6, 2012, from http://davidfrico.com/agile-principles.pdf
Rico, D. F. (2012). The promises and pitfalls of agile methods. Retrieved February 6, 2013 from, http://davidfrico.com/agile-pros-cons.pdf
Rico, D. F. (2012). How do lean & agile intersect? Retrieved February 6, 2013, from http://davidfrico.com/agile-concept-model-3.pdf
What How Result
Flexibility Use lightweight, yet disciplined processes and artifacts Low work-in-process
Customer Involve customers early and often throughout development Early feedback
Prioritize Identify highest-priority, value-adding business needs Focus resources
Descope Descope complex programs by an order of magnitude Simplify problem
Decompose Divide the remaining scope into smaller batches Manageable pieces
Iterate Implement pieces one at a time over long periods of time Diffuse risk
Leanness Architect and design the system one iteration at a time JIT waste-free design
Swarm Implement each component in small cross-functional teams Knowledge transfer
Collaborate Use frequent informal communications as often as possible Efficient data transfer
Test Early Incrementally test each component as it is developed Early verification
Test Often Perform system-level regression testing every few minutes Early validation
Adapt Frequently identify optimal process and product solutions Improve performance
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Books on ROI of SW Methods
� Guides to software methods for business leaders� Communicates the business value of IT approaches� Rosetta stones to unlocking ROI of software methods
� http://davidfrico.com/agile-book.htm (Description)� http://davidfrico.com/roi-book.htm (Description)
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Dave’s Professional Capabilities
25
Software
Quality
Mgt.
Technical
Project
Mgt.
Software
Development
Methods
Organization
Change
Systems
Engineering
Cost
Estimating
Government
Contracting
Government
Acquisitions
Lean
Kanban
Big Data,
Cloud, NoSQL
Workflow
Automation
Metrics,
Models, & SPC
Six
Sigma
BPR, IDEF0,
& DoDAF
DoD 5000,TRA, & SRA
PSP, TSP, &Code Reviews
CMMI &ISO 9001
Innovation
Management
Statistics, CFA,EFA, & SEM
ResearchMethods
EvolutionaryDesign
Valuation— Cost-Benefit Analysis, B/CR, ROI, NPV, BEP, Real Options, etc.
Lean-Agile— Scrum, SAFe, Continuous Integration & Delivery, DevOps, etc.
STRENGTHS – Data Mining •••• Gathering & Reporting Performance Data •••• Strategic Planning •••• Executive & Manage-
ment Briefs •••• Brownbags & Webinars •••• White Papers •••• Tiger-Teams •••• Short-Fuse Tasking •••• Audits & Reviews •••• Etc.
● Action-oriented. Do first (talk about it later).
● Data-mining/analysis. Collect facts (then report findings).
● Simplification. Communicating complex ideas (in simple terms).
● Git-r-done. Prefer short, high-priority tasks (vs. long bureaucratic projects).
● Team player. Consensus-oriented collaboration (vs. top-down autocratic control).
PMP, CSEP,ACP, CSM,& SAFE
32 YEARSIN IT
INDUSTRY