Translating Points to Dollars

Translating Point to Dollars Portfolio Management with AgileEVM Brent Barton

Brent Barton - AgileEVM Inc.President, AgileEVM Inc.More than 15 years software development in many roles asboth employee and consultant for organizations from smallstart ups to multinational corporationsFormer CTO, Development Manager, PMO Manager, AgileCoach, Mentor, Certiﬁed Scrum Trainer, ScrumMaster, ProductOwnerActively involved in Agile Rollouts from small Productcompanies to very large IT organizations www.AgileEVM.comScrum Articles Email: brent@agileevm.com “AgileEVM – Earned Value Management in Scrum Projects”, IEEE Web: http://www.agileevm.com 2006 Blog: http://www.gettingagile.com Follow me on Twitter: @brentbarton @agileevm “Manage Project Portfolios More Effectively by Including Software Debt in the Decision Process”, Cutter Journal 2010 “Implementing a Professional Services Organization Using Type C Scrum”, IEEE “Establishing and Maintaining Top to Bottom Transparency Using the Meta-Scrum”, AgileJournal “All-Out Organizational Scrum as an Innovation Value Chain”, IEEE

In the next hour...• Describe Project Portfolio Management• Why Agile challenges business• Compare Earned Value Management (EVM)• Introduce AgileEVM• Show how AgileEVM translates Points to Dollars• Analyze a Portfolio• Q&A

Project Portfolio Management

Project Portfolio Deﬁned A portfolio is a collection of projects or programs and other work that are grouped together to facilitate effective management ofthat work to meet strategic business objectives. source: PMI The Standard for Portfolio Management — Second Edition

Project Portfolio Management Business Value• We want to measure outcomes, not outputs Time • YES: Business Value • Less Important: Completed Projects

Effective ProjectPortfolio Management• Prioritization to maximize Business Value• Effective delivery to minimize costs• Re-allocation of resources when costs are too high or the beneﬁt is too low source: Cutter Journal

Agile...from a business point of view

Strengths of Agile• Assertion of quality by self-organizing teams• Adaptive Planning

Weaknesses of Agile• Cost management is (mostly) missing• Uses abstract measures • Relative points • “Ideal” days • Velocity These create business challenges

Earl, you can’t compare velocity of one team with another! Estimates are relative and team speciﬁc... Can’t I just know when we can Time to go... Uh oh,release and how much it will cost? It depends... Agile is a pain in the @$$! Maybe it’s Geoff...

Agile partially supportsPortfolio Management• Prioritize to maximize ✓ Agile Business Value• Effectively deliver to ✓ Agile minimize costs• Re-allocate resources when costs are too high or the beneﬁt is too low

Earned ValueManagement (EVM)

Earned Value Over EAC Total Allocated Budget Budget Estimate at Complete Management Reserve PMB Project Management Baseline Projected Slippage$ Planned Value Actual Cost (PV) (AC) (EV) Earned Value Time Time Completion Now Date

EVM Performance Indicators Cost Performance Index (CPI=EV/AC) CPI < 1 CPI = 1 CPI > 1 Under Budget On Budget Over Budget Schedule Performance Index (SPI=EV/PV) SPI < 1 SPI = 1 SPI > 1Ahead of Schedule On Schedule Behind Schedule

Strengths of EVM• Integrates cost and schedule management• Forecasts in ﬁnancial units based on units used for actual cost• Decades of use• Part of PMBOK (ANSI/PMI 99-001-2008)• Part of EVMS (ANSI/EIA-748-B-2007)• Mathematical Rigor

Weaknesses of Traditional EVM• Expects everything fully deﬁned up front Ugh!• No assertion of quality• Claiming value is earned on intermediate work products• Poor results on software projects using waterfall

Agile Addresses EVM’s Root Cause Issues• Self directed work teams are in a position to ensure and assert level of quality• Do not claim value earned based on intermediate work products

Agile + EVM• Prioritize to maximize ✓ Agile Business Value• Effectively deliver to ✓ Agile minimize costs• Re-allocate resources when costs are too high or ✓EVM the beneﬁt is too low• We want to measure + ✓ Agile outcomes, not outputs ✓EVM

AgileEVM Background• Rigorously established foundation *• Key Assumption: The ratio of (story points accepted) (total story points in a release) is a good measure of Actual Percent Complete * http://ieeexplore.ieee.org/xpl/freeabs_all.jsp?arnumber=1667558

Incorporates ANSI standard equations• PV = PPC * BAC• EV = APC * BAC• CV = EV - AC• SV = EV - PV• CPI= EV/AC• SPI = EV/PV• ETC = 1/CPI * (BAC – EV)• EAC = AC + ETC source: PMI: The Practice Standard for Earned Value Management

Translating Points to Dollars• Agile often uses relative measures for estimating • Story Points • Ideal Time (not to be confused with actual time)• Velocity is used to forecast schedule * http://ieeexplore.ieee.org/xpl/freeabs_all.jsp?arnumber=1667558

Translating Points to Dollars AgileEVM roots proved mathematically that forecasts based on average velocity is identically equal to the EVM forecast standard Estimate At Complete (EAC)• Forecasts based on average velocity • abstract units like points or ideal days• Forecasts based on Estimate At Complete (EAC) • ﬁnancial units (dollars) * * http://ieeexplore.ieee.org/xpl/freeabs_all.jsp?arnumber=1667558

AgileEVM extends thisrigor into the Portfolio• Fundamental unit is the Release• Value milestones and production releases• Units of money rolls up, points and velocity don’t• Forecasts provide ranges based on various indicators

Translating Points to Dollars

by Brent Barton on Feb 26, 2011

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Translating Points to Dollars — Presentation Transcript