We go to conferences & get excited about things that could revolutionize our development & change our organization! Then, we go home...and hit the wall. If you've ever asked yourself, "This stuff is cool, but HOW CAN I GET MY COMPANY TO DO IT??!", this is the session for you. Learn from an experienced software developer (who also happens to have an MBA) how to make your case to leadership.

1. This stuff is cool, but…
HOW CAN I GET MY COMPANY TO DO IT?
Businessing the S*** out of Transformative Development!
Mark Heckler
Principal Technologist/Developer Advocate
Pivotal Software, Inc.
www.thehecklers.org
mark@thehecklers.org
@MkHeck
@MkHeck

2. @MkHeck
Who am I?
• Author
• Speaker
• DEVELOPER
• Seeker of a better way
• MBA

3. @MkHeck
Presenting in English for Your Safety

4. @MkHeck
The Goal

5. @MkHeck
Disclaimers
• I’m human
• Measurements require assumptions…
• …but those will be clearly stated and quantified
• Estimate benefits conservatively, costs liberally
• Feel free to adjust sensibly for your circumstances
• USE YOUR POWER RESPONSIBLY

6. @MkHeck @GeeCON
What’s on the agenda?

7. @MkHeck
What’s on the agenda?
• Payback
• Net Present Value (NPV)
• Quantification
• Based upon (solid, well-reasoned, calculated) assumptions
• Several steps to get there, but don’t worry!

8. @MkHeck
Payback: Formula
Cost of Project
Annual Cash Inflow (or Savings)
= Payback Period

9. @MkHeck
Payback: Example
$500,000 (costs)
$200,000/year (new income)
= 2.5 years

10. @MkHeck
Payback: Explanation
• Shorter payback period generally better
• Longer payback means more uncertainty, greater risk
• Prefer < 3 years payback period
• Payback < 1 year == essential project

11. @MkHeck
Payback: Drawbacks
• No consideration of total value
• 3 year payback, no further value after year 5, lifetime value: $250,000
• 5 year payback, ongoing value, lifetime value: $1,000,000
• Which would you choose?
• No consideration of time value of money
• Good measure, but incomplete

12. @MkHeck
Net Present Value (NPV): Formula
Net Period Cash Flow
(1+R)T
= NPV∑
where R is the Rate of Return
and T is the number of time periods

13. @MkHeck
Net Present Value (NPV): Example 1
$1,000,000
(1+0.05)5
= $783,526∑
where R is the Rate of Return
and T is the number of time periods

14. @MkHeck
Net Present Value (NPV): Example 2
= $622,179
$200,000
(1+0.05)2
$400,000
(1+0.05)3
$100,000
(1+0.05)1
++
$181,406 $345,535$95,238

15. @MkHeck
Inputs & Associated Challenges
• Quantifying qualitative measures
• How would this initiative:
• affect your organization’s/group’s/team’s work?
• impact your tech stack?
• contribute to recruitment/retention?
• affect the business?

16. @MkHeck
Putting Numbers with It: Pros & Cons
• Pros
• Critical analysis yields better understanding of inputs, impacts
• Can provide more objective and compelling justification for initiative
• Cons
• Can be very time-consuming
• No automatic conversion between qualitative & quantitative measures

17. @MkHeck
Putting Numbers with It: Caveats
• Time is a constraint
• Assumptions form basis of conclusions
• Bad assumptions -> Inaccurate conclusions
• Good assumptions -> (In?)accurate conclusions
• Document assumptions meticulously
• Be open to discussion, refinement

18. Let’s run through it
(Optional<Suit>)

19. Microservices
Assemble to make
“more than meets the eye”

20. @MkHeck
Notes about Microservice Architectures
• “Return on Investment (ROI) is driven by accelerated realization of
benefits rather than overall business transformation.”
• Reduced maintenance costs?
• Increased business opportunities through new APIs?
• Selective scaling of only high-demand microservices reduces costs
• Investment includes upskilling/coaching/mentoring

21. @MkHeck
Expectations
• Small batch sizes, small teams: Microservices
• Bounded contexts
• API-based contracts for interactions
• More functionality delivered to market (or internal end-users) sooner
• Building the right product (tight dev loop == tight feedback loop)

22. @MkHeck
Expectations
• Microservices (continued)
• Improved quality; small mods vs. major overhauls
• Improved end-user satisfaction
• Small, frequent releases expose & help resolve process issues “in the
small”
• When releases are tiny, well-planned & -choreographed events, they
can happen at will

23. Monoliths
That’s one big app!

24. @MkHeck
Assumptions: monoliths
• Average cadence of releases of key monolithic apps: 1x/year*
• 10 months of development before “code freeze”
• 1 month of integration testing, bug fixes
• 1 month of UAT (confirmations, course corrections, logging “new”
requirements)
*optimistic in many cases

25. Microservices
Assemble to make
“more than meets the eye”

26. @MkHeck
Assumptions: microservices
• Average cadence of microservices releases: 7200x/DAY*
• If your company is 1/1000th (0.1%) as effective as Amazon, that’s still
> 7 releases/day…over 2500 releases/year!
• 14 new microservices in first year
• Each of your Y1 microservices averages a release every other day
*Amazon: 1 every 11.6s in 2011 - YMMV!

27. @MkHeck
Assumptions: microservices
• How much more functionality can be delivered more quickly, more
accurately?
• If you can approach zero with missed requirements, missed
opportunities, missed expectations…how much is that worth?
• If users can have needed functionality MONTHS or YEARS sooner, what is
that worth to your company?

28. @MkHeck
Quantification
• Volatile functionality
• Sales drivers
• Product development/engineering
• Focus upon producing key abilities, define interfaces in monolith
• Average time to get interface APIs “live”: 6 months
• Average business size: $500m annual revenue
• Impact of high-demand projects implemented via microservices: $1m/microservice

29. @MkHeck
Quantification
• Costs
• Upskilling required for relevant tech teams
• Ramp-up - offset by avoidance of contextualization issues
• Other things that may smooth/speed path omitted*
• Platform costs and interface development
• Foregone revenue from monolith implementation**
*would increase costs and resultant cash flows
**assumes some functionality would be implemented otherwise in monolith
($1m)
($2m)
($5m)

30. @MkHeck
Totals, Year 1
New revenues, year 1 $14m
Expenses
Upskilling ($1m)
Platform costs ($1m)
Interfaces ($1m)
Opportunity costs ($5m)
Y1 NET GAIN/LOSS FROM ADOPTION $6m

31. @MkHeck
6.86 months
Annual Cash Inflow (or Savings)14,000,000
Cost of Project8,000,000
Payback: Microservices
= Payback Period
APPROVED!

32. Not so fast…

33. @MkHeck
Totals, Year 1
New revenues, year 1 $14m
Expenses
Upskilling ($1m)
Platform costs ($1m)
Interfaces ($1m)
Opportunity costs ($5m)
Y1 NET GAIN/LOSS FROM ADOPTION $6m

34. @MkHeck
Y2 Assumptions
• Double number of microservices added in Y2 vs. Y1
• 14 new in Y1 + 28 new in Y2 = 42 new microservices @EOY2
• Estimate slightly reduced impact, may be overly pessimistic
• 28 * $750k = $21m $14m + $21m = $35m “new” revenue
• Assume linear ability to expand monolith, may be overly optimistic
• $10m worth of functionality could be implemented in monolith

35. @MkHeck
Totals, Year 2
New revenues, year 2 $35m
Expenses
Upskilling ($1m)
Platform costs ($2m)
Interfaces ($1m)
Opportunity costs ($10m)
Y2 NET GAIN/LOSS FROM ADOPTION $21m

36. @MkHeck
Y3 Assumptions
• Double number of microservices added in Y3 vs. Y2
• 42 @EOY2 + 56 new in Y3 = 98 new microservices @EOY3
• Estimate further reduced impact, may be overly pessimistic
• 56 * $500k = $28m $35m + $28m = $63m “new” revenue
• Assume linear ability to expand monolith, may be overly optimistic
• $15m worth of functionality could be implemented in monolith

37. @MkHeck
Totals, Year 3
New revenues, year 3 $63m
Costs
Upskilling ($1m)
Platform costs ($6m)
Interfaces ($1m)
Opportunity costs ($15m)
Y3 NET GAIN/LOSS FROM ADOPTION $40m

38. @MkHeck
NPV: Microservices
= $61,086,277
$21m
(1+0.05)2
$40m
(1+0.05)3
$6m
(1+0.05)1
++
$19,954,649 $35,417,342$5,714,286
APPROVED!

39. @MkHeck
Factors Revisited
• Quantifying qualitative measures
• How would this initiative:
• affect your organization’s/group’s/team’s work?
• impact your tech stack?
• contribute to recruitment/retention?
• affect the business?

40. This is not the enemy!

41. @MkHeck
This is Not the Enemy!They are your Allies

42. @MkHeck

43. @MkHeck
Thank You for Participating!
Keep the conversation going:
• @MkHeck
• mark@thehecklers.org