Translating Points to Dollars


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This presentation is from a presentation on November 19, 2010. The agenda is:
1. Describe Project Portfolio Management
2. Why Agile challenges business
3. Compare Earned Value Management (EVM)
4. Introduce AgileEVM
5. Show how AgileEVM translates Points to Dollars
6. Analyze a Portfolio

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Translating Points to Dollars

  1. 1. Translating Point to Dollars Portfolio Management with AgileEVM Brent Barton
  2. 2. 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: “AgileEVM – Earned Value Management in Scrum Projects”, IEEE Web: 2006 Blog: 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
  3. 3. 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
  4. 4. Project Portfolio Management
  5. 5. 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
  6. 6. Project Portfolio Management Business Value• We want to measure outcomes, not outputs Time • YES: Business Value • Less Important: Completed Projects
  7. 7. 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
  8. 8. Agile...from a business point of view
  9. 9. Strengths of Agile• Assertion of quality by self-organizing teams• Adaptive Planning
  10. 10. Weaknesses of Agile• Cost management is (mostly) missing• Uses abstract measures • Relative points • “Ideal” days • Velocity These create business challenges
  11. 11. 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...
  12. 12. 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
  13. 13. Earned ValueManagement (EVM)
  14. 14. 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
  15. 15. 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
  16. 16. 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
  17. 17. 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
  18. 18. 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
  19. 19. 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
  20. 20. 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 *
  21. 21. 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
  22. 22. 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 *
  23. 23. 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) * *
  24. 24. 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
  25. 25. Demo
  26. 26. Q&A