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Business Value of Agile Methods: Using ROI & Real Options

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David Rico
David Rico

The document provides background on agile methods and their business value compared to traditional project management approaches. It discusses how agile methods can help address issues like cost overruns, defects, and project failures seen in many traditional projects. The document summarizes research showing that agile projects have significantly better outcomes in terms of costs, quality, and success rates compared to traditional approaches.

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Business Value of Agile Methods Using ROI & Real Options Dr. David F. Rico, PMP, ACP, CSM Twitter: @dr_david_f_rico Website: http://www.davidfrico.com LinkedIn: http://www.linkedin.com/in/davidfrico Facebook: http://www.facebook.com/profile.php?id=1540017424 Dave’s Agile Articles: http://davidfrico.com/agile-message.doc
Author Background  DoD contractor with 30+ 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 2  Published six books & numerous journal articles  Adjunct at George Wash, UMBC, UMUC, Argosy  Agile Program Management & Lean Development  Specializes in metrics, models, & cost engineering  Six Sigma, CMMI, ISO 9001, DoDAF, & DoD 5000  Cloud Computing, SOA, Web Services, FOSS, etc.
Today’s Whirlwind Environment 3 Overruns Attrition Escalation Runaways Cancellation Global Competition Demanding Customers Organization Downsizing System Complexity Technology Change Vague Requirements Work Life Imbalance Inefficiency High O&M Lower DoQ Vulnerable N-M Breach Reduced IT Budgets 81 Month Cycle Times Redundant Data Centers Lack of Interoperability Poor IT Security Overburdening Legacy Systems Obsolete Technology & 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 4  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 DefectDensity 0.00 3.20 6.40 9.60 12.80 16.00 0 2 6 25 100 400 Lines of Code (Thousands) Size vs. Productivity CodeProductionRate 0.00 1.00 2.00 3.00 4.00 5.00 0 2 6 25 100 400 Lines of Code (Thousands) Size vs. Requirements Growth Percentage 0% 8% 16% 24% 32% 40% 0 2 6 25 100 400 Lines of Code (Thousands) Size vs. Success Percentage 0% 12% 24% 36% 48% 60% 0 2 6 25 100 400 Lines of Code (Thousands)
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(USDollars) Expenditures Failed Investments
Requirements Defects & Waste 6 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
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 change in order to profit in a turbulent global business environment  The ability to quickly reprioritize use of resources when requirements, technology, and knowledge shift  A very fast response to sudden market changes and emerging threats by intensive customer interaction  Use of evolutionary, incremental, and iterative delivery to converge on an optimal customer solution  Maximizing BUSINESS 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. 7  
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 Software Individuals & Interactions Responding to Change valued more than valued more than valued more than valued more 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    
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 Traditional 1 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.Rework 2.Motion 3.Waiting 4.Inventory 5.Transportation 6.Overprocessing 7.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
Thousands of Tests Continuously Executed No More Late Big Bang Integration Agile Development Model  User needs designed & developed one-at-a-time  Changes automatically detected, built, and tested  System fully tested and deployed as changes occur 10Humble, J., & Farley, D. (2011). Continuous delivery. Boston, MA: Pearson Education. Duvall, P., Matyas, S., & Glover, A. (2006). Continuous integration. Boston, MA: Addison-Wesley. Build Integration Server Version Control Server Build Scripts UsesWatches Build Status ProvidesDeveloper A Developer B Developer C Commits Changes Commits Changes Commits Changes Builds Database Analysis Testing Reporting Documentation Deployment Early, Automated, Fast, Efficient, & Repeatable Constant Readiness State & CM Control Lean, Waste Free, Low WIP, No Deadlocked Test Queues Rapidly & Successfully Dev. Complex Systems
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 11 Rico, D. F. (2012). The Cost of Quality (CoQ) for Agile vs. Traditional Project Management. Fairfax, VA: Gantthead.Com.
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 12 Rico, 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   5 1i
Studies of Agile Methods  Dozens of surveys of agile methods since 2003  100s of Agile and CMMI case studies documented  Agile productivity, quality, and cost better than CMMI 13 Rico, D. F. (2008). What is the return-on-investment of agile methods? Retrieved February 3, 2009, from http://davidfrico.com/rico08a.pdf Rico, D. F. (2008). What is the ROI of agile vs. traditional methods? TickIT International, 10(4), 9-18.
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% Lower Cost Total Staffing 18 11 Before Agile After Agile 39% Less Staff 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% Less Defects 14    
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. 15 Agile Traditional Success 42% Failed 9% Challenged 49% Success 14% Failed 29% Challenged 57%
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
Agile Enterprise Delivery Model Beck, K., & Fowler, M. (2001). Planning extreme programming. Upper Saddle River, NJ: Addison-Wesley. Highsmith, J. A. (2010). Agile project management: Creating innovative products. Boston, MA: Pearson Education. Larman, C., & Vodde, B. (2010). Practices for scaling lean and agile development. Boston, MA: Addison-Wesley. Leffingwell, D. (2011). Agile software requirements: Lean requirements practices for teams, programs, and the enterprise. Boston, MA: Pearson Education.  Begins with a high-level product vision/architecture  Continues with needs development/release planning  Includes agile delivery teams to realize business value 17   
Agile Adoption 18House, D. (2012). Sixth annual state of agile survey: State of agile development. Atlanta, GA: VersionOne.  VersionOne found 80% using agile methods today  Most are using Scrum with several key XP practices  Lean-Kanban is a rising practice with a 24% adoption   Continuous Integration ● ● ● ● ● ● ● ● ● ● ● ● 
Agile Proliferation Scrum Alliance. (2012). Scrum certification statistics. Retrieved February 6, 2013, from http://www.scrumalliance.org/resource_download/2505 Taft, D. K. (2012). Agile developers needed: Demand outpaces supply. Foster City, CA: eWeek. 19  Number of CSMs have doubled to 200,000 in 2 years  558,918 agile jobs for only 121,876 qualified people  4.59 jobs available for every agile candidate (5:1)  
Agile Industry Case Studies  80% of worldwide IT projects use agile methods  Includes regulated industries, i.e., DoD, FDA, etc.  Agile now used for safety critical systems, FBI, etc. 20 Industry Shrink Wrapped 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 Google 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.      
 Structure, reward, decision, staffing, leadership, etc.  Top-down, individualism, regulation, compliance, etc.  Focus on reforming acquisition & procurement system 21 Type/Kind Common DoD Agile Perceptions Discipline Reality with Respect to Agile Methods Scalability Domain Management Requirements Architecture Quality Inspections Security Undisciplined Cowboy Coding Only Applies Small Projects Only for Protoperational Systems Flexible Scope/Can't Use EVM Doesn't Use Requirements Spaghetti Code from Iterations No Documents/Unmaintainable High CoQ from No Inspections Vulnerabilities from Hacking  Rigorous process, plans, requirements, QA, CM, testing, documents etc.  Used by 100, 500, 1,000, 10,000+ person person projects & organizations  Used in DoD, medical devices, avionics, autos, electronics, etc.  Lightweight EVM model is used with its release planning methodology  Always begins with valuable, well-defined, & prioritized requirements  Begins with lean architecture or create waste-free emergent design  Electronic plans, requirements, designs, tests, manuals, documents, etc.  One or two orders of magnitude more inspections & tests performed  Security practices result in smaller attack surface & fewer vulnerabilities Rico, 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.         Perceptions of Agile Methods
Agile World View  “Agility” has many dimensions other than IT  It ranges from leadership to technological agility  The focus of this brief is program management agility   Agile Leaders Agile Organization Change Agile Acquisition & Contracting Agile Strategic Planning Agile Capability Analysis Agile Program Management Agile Tech. Agile Information Systems Agile Tools Agile Processes & Practices Agile Systems Development Agile Project Management 22
Agile Leadership Theories 23  Numerous theories of agile leadership have emerged  Many have to do with delegation and empowerment  Leaders have major roles in visioning and enabling Augustine (2005) Pink (2009) Denning (2010) Poppendieck (2010) Appelo (2011) Organic Teams Guiding Vision Transparency Light Touch Simple Rules Improvement Autonomy Alignment Transparency Purpose Mastery Improvement Self Organizing Communication Transparency Iterative Value Delight Clients Improvement Talented Teams Alignment Systems View Reliability Excellence Improvement Empowerment Alignment Motivation Scaling Competency Improvement Augustine, S. (2005). Managing agile projects. Upper Saddle River, NJ: Pearson Education. Pink, D. H. (2009). Drive: The surprising truth about what motivates us. New York, NY: Penguin Books. Poppendieck, M, & Poppendieck, T. (2010). Leading lean software development: Results are not the point. Boston, MA: Pearson Education. Anderson, D. J. (2010). Kanban: Successful evolutionary change for your technology business. Sequim, WA: Blue Hole Press. Appelo, J. (2011). Management 3.0: Leading agile developers and developing agile leaders. Boston, MA: Pearson Education.
Agile Recap  Agile methods DON’T mean deliver it now & fix it later  Lightweight, yet disciplined approach to development  Reduced cost, risk, & waste while improving quality 24 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                
Conclusion 25  Agility is the evolution of management thought  Confluence of traditional and non-traditional ideas  Improve performance by over an order of magnitude “The world of traditional methods belongs to yesterday” “Don’t waste your time using traditional methods on 21st century projects” Agile methods are …        Systems development approaches New product development approaches Expertly designed to be fast and efficient Intentionally lean and free of waste (muda) Systematic highly-disciplined approaches Capable of producing high quality systems Right-sized, just-enough, and just-in-time tools  Scalable to large, complex mission-critical systems  Designed to maximize business value for customers Wysocki, R.F. (2010). Adaptive project framework: Managing complexity in the face of uncertainty. Boston, MA: Pearson Education.  
Books on ROI of SW Methods  Guides to software methods for business leaders  Communicates business value of software methods  Rosetta stones to unlocking ROI of software methods  http://davidfrico.com/agile-book.htm (Description)  http://davidfrico.com/roi-book.htm (Description) 26

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Business Value of Agile Methods: Using ROI & Real Options

  • 1. Business Value of Agile Methods Using ROI & Real Options Dr. David F. Rico, PMP, ACP, CSM Twitter: @dr_david_f_rico Website: http://www.davidfrico.com LinkedIn: http://www.linkedin.com/in/davidfrico Facebook: http://www.facebook.com/profile.php?id=1540017424 Dave’s Agile Articles: http://davidfrico.com/agile-message.doc
  • 2. Author Background  DoD contractor with 30+ 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 2  Published six books & numerous journal articles  Adjunct at George Wash, UMBC, UMUC, Argosy  Agile Program Management & Lean Development  Specializes in metrics, models, & cost engineering  Six Sigma, CMMI, ISO 9001, DoDAF, & DoD 5000  Cloud Computing, SOA, Web Services, FOSS, etc.
  • 3. Today’s Whirlwind Environment 3 Overruns Attrition Escalation Runaways Cancellation Global Competition Demanding Customers Organization Downsizing System Complexity Technology Change Vague Requirements Work Life Imbalance Inefficiency High O&M Lower DoQ Vulnerable N-M Breach Reduced IT Budgets 81 Month Cycle Times Redundant Data Centers Lack of Interoperability Poor IT Security Overburdening Legacy Systems Obsolete Technology & 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.
  • 4. Traditional Projects 4  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 DefectDensity 0.00 3.20 6.40 9.60 12.80 16.00 0 2 6 25 100 400 Lines of Code (Thousands) Size vs. Productivity CodeProductionRate 0.00 1.00 2.00 3.00 4.00 5.00 0 2 6 25 100 400 Lines of Code (Thousands) Size vs. Requirements Growth Percentage 0% 8% 16% 24% 32% 40% 0 2 6 25 100 400 Lines of Code (Thousands) Size vs. Success Percentage 0% 12% 24% 36% 48% 60% 0 2 6 25 100 400 Lines of Code (Thousands)
  • 5. 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(USDollars) Expenditures Failed Investments
  • 6. Requirements Defects & Waste 6 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
  • 7. 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 change in order to profit in a turbulent global business environment  The ability to quickly reprioritize use of resources when requirements, technology, and knowledge shift  A very fast response to sudden market changes and emerging threats by intensive customer interaction  Use of evolutionary, incremental, and iterative delivery to converge on an optimal customer solution  Maximizing BUSINESS 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. 7  
  • 8. 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 Software Individuals & Interactions Responding to Change valued more than valued more than valued more than valued more 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    
  • 9. 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 Traditional 1 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.Rework 2.Motion 3.Waiting 4.Inventory 5.Transportation 6.Overprocessing 7.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
  • 10. Thousands of Tests Continuously Executed No More Late Big Bang Integration Agile Development Model  User needs designed & developed one-at-a-time  Changes automatically detected, built, and tested  System fully tested and deployed as changes occur 10Humble, J., & Farley, D. (2011). Continuous delivery. Boston, MA: Pearson Education. Duvall, P., Matyas, S., & Glover, A. (2006). Continuous integration. Boston, MA: Addison-Wesley. Build Integration Server Version Control Server Build Scripts UsesWatches Build Status ProvidesDeveloper A Developer B Developer C Commits Changes Commits Changes Commits Changes Builds Database Analysis Testing Reporting Documentation Deployment Early, Automated, Fast, Efficient, & Repeatable Constant Readiness State & CM Control Lean, Waste Free, Low WIP, No Deadlocked Test Queues Rapidly & Successfully Dev. Complex Systems
  • 11. 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 11 Rico, D. F. (2012). The Cost of Quality (CoQ) for Agile vs. Traditional Project Management. Fairfax, VA: Gantthead.Com.
  • 12. 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 12 Rico, 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   5 1i
  • 13. Studies of Agile Methods  Dozens of surveys of agile methods since 2003  100s of Agile and CMMI case studies documented  Agile productivity, quality, and cost better than CMMI 13 Rico, D. F. (2008). What is the return-on-investment of agile methods? Retrieved February 3, 2009, from http://davidfrico.com/rico08a.pdf Rico, D. F. (2008). What is the ROI of agile vs. traditional methods? TickIT International, 10(4), 9-18.
  • 14. 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% Lower Cost Total Staffing 18 11 Before Agile After Agile 39% Less Staff 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% Less Defects 14    
  • 15. 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. 15 Agile Traditional Success 42% Failed 9% Challenged 49% Success 14% Failed 29% Challenged 57%
  • 16. 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
  • 17. Agile Enterprise Delivery Model Beck, K., & Fowler, M. (2001). Planning extreme programming. Upper Saddle River, NJ: Addison-Wesley. Highsmith, J. A. (2010). Agile project management: Creating innovative products. Boston, MA: Pearson Education. Larman, C., & Vodde, B. (2010). Practices for scaling lean and agile development. Boston, MA: Addison-Wesley. Leffingwell, D. (2011). Agile software requirements: Lean requirements practices for teams, programs, and the enterprise. Boston, MA: Pearson Education.  Begins with a high-level product vision/architecture  Continues with needs development/release planning  Includes agile delivery teams to realize business value 17   
  • 18. Agile Adoption 18House, D. (2012). Sixth annual state of agile survey: State of agile development. Atlanta, GA: VersionOne.  VersionOne found 80% using agile methods today  Most are using Scrum with several key XP practices  Lean-Kanban is a rising practice with a 24% adoption   Continuous Integration ● ● ● ● ● ● ● ● ● ● ● ● 
  • 19. Agile Proliferation Scrum Alliance. (2012). Scrum certification statistics. Retrieved February 6, 2013, from http://www.scrumalliance.org/resource_download/2505 Taft, D. K. (2012). Agile developers needed: Demand outpaces supply. Foster City, CA: eWeek. 19  Number of CSMs have doubled to 200,000 in 2 years  558,918 agile jobs for only 121,876 qualified people  4.59 jobs available for every agile candidate (5:1)  
  • 20. Agile Industry Case Studies  80% of worldwide IT projects use agile methods  Includes regulated industries, i.e., DoD, FDA, etc.  Agile now used for safety critical systems, FBI, etc. 20 Industry Shrink Wrapped 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 Google 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.      
  • 21.  Structure, reward, decision, staffing, leadership, etc.  Top-down, individualism, regulation, compliance, etc.  Focus on reforming acquisition & procurement system 21 Type/Kind Common DoD Agile Perceptions Discipline Reality with Respect to Agile Methods Scalability Domain Management Requirements Architecture Quality Inspections Security Undisciplined Cowboy Coding Only Applies Small Projects Only for Protoperational Systems Flexible Scope/Can't Use EVM Doesn't Use Requirements Spaghetti Code from Iterations No Documents/Unmaintainable High CoQ from No Inspections Vulnerabilities from Hacking  Rigorous process, plans, requirements, QA, CM, testing, documents etc.  Used by 100, 500, 1,000, 10,000+ person person projects & organizations  Used in DoD, medical devices, avionics, autos, electronics, etc.  Lightweight EVM model is used with its release planning methodology  Always begins with valuable, well-defined, & prioritized requirements  Begins with lean architecture or create waste-free emergent design  Electronic plans, requirements, designs, tests, manuals, documents, etc.  One or two orders of magnitude more inspections & tests performed  Security practices result in smaller attack surface & fewer vulnerabilities Rico, 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.         Perceptions of Agile Methods
  • 22. Agile World View  “Agility” has many dimensions other than IT  It ranges from leadership to technological agility  The focus of this brief is program management agility   Agile Leaders Agile Organization Change Agile Acquisition & Contracting Agile Strategic Planning Agile Capability Analysis Agile Program Management Agile Tech. Agile Information Systems Agile Tools Agile Processes & Practices Agile Systems Development Agile Project Management 22
  • 23. Agile Leadership Theories 23  Numerous theories of agile leadership have emerged  Many have to do with delegation and empowerment  Leaders have major roles in visioning and enabling Augustine (2005) Pink (2009) Denning (2010) Poppendieck (2010) Appelo (2011) Organic Teams Guiding Vision Transparency Light Touch Simple Rules Improvement Autonomy Alignment Transparency Purpose Mastery Improvement Self Organizing Communication Transparency Iterative Value Delight Clients Improvement Talented Teams Alignment Systems View Reliability Excellence Improvement Empowerment Alignment Motivation Scaling Competency Improvement Augustine, S. (2005). Managing agile projects. Upper Saddle River, NJ: Pearson Education. Pink, D. H. (2009). Drive: The surprising truth about what motivates us. New York, NY: Penguin Books. Poppendieck, M, & Poppendieck, T. (2010). Leading lean software development: Results are not the point. Boston, MA: Pearson Education. Anderson, D. J. (2010). Kanban: Successful evolutionary change for your technology business. Sequim, WA: Blue Hole Press. Appelo, J. (2011). Management 3.0: Leading agile developers and developing agile leaders. Boston, MA: Pearson Education.
  • 24. Agile Recap  Agile methods DON’T mean deliver it now & fix it later  Lightweight, yet disciplined approach to development  Reduced cost, risk, & waste while improving quality 24 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                
  • 25. Conclusion 25  Agility is the evolution of management thought  Confluence of traditional and non-traditional ideas  Improve performance by over an order of magnitude “The world of traditional methods belongs to yesterday” “Don’t waste your time using traditional methods on 21st century projects” Agile methods are …        Systems development approaches New product development approaches Expertly designed to be fast and efficient Intentionally lean and free of waste (muda) Systematic highly-disciplined approaches Capable of producing high quality systems Right-sized, just-enough, and just-in-time tools  Scalable to large, complex mission-critical systems  Designed to maximize business value for customers Wysocki, R.F. (2010). Adaptive project framework: Managing complexity in the face of uncertainty. Boston, MA: Pearson Education.  
  • 26. Books on ROI of SW Methods  Guides to software methods for business leaders  Communicates business value of software methods  Rosetta stones to unlocking ROI of software methods  http://davidfrico.com/agile-book.htm (Description)  http://davidfrico.com/roi-book.htm (Description) 26