translating points to dollars
DESCRIPTION
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 AgileEVM5. Show how AgileEVM translates Points to Dollars6. Analyze a PortfolioTRANSCRIPT
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Translating Point to Dollars
Portfolio Management with AgileEVM
Brent Barton
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Brent Barton - AgileEVM Inc.President, AgileEVM Inc.
More than 15 years software development in many roles as both employee and consultant for organizations from small start ups to multinational corporations
Former CTO, Development Manager, PMO Manager, Agile Coach, Mentor, Certified Scrum Trainer, ScrumMaster, Product Owner
Actively involved in Agile Rollouts from small Product companies to very large IT organizations
Scrum Articles
“AgileEVM – Earned Value Management in Scrum Projects”, IEEE 2006
“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
www.AgileEVM.com Email: [email protected]
Web: http://www.agileevm.comBlog: http://www.gettingagile.com
Follow me on Twitter: @brentbarton @agileevm
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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
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Project Portfolio Management
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Project Portfolio Defined
A portfolio is a collection of projects or programs and other work that are grouped
together to facilitate effective management of that work to meet strategic business objectives.
source: PMI The Standard for Portfolio Management — Second Edition
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• We want to measureoutcomes, not outputs
• YES: Business Value
• Less Important: Completed Projects
Project Portfolio Management
Time
BusinessValue
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Effective Project Portfolio 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
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Agile...from a business point
of view
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Strengths of Agile
• Assertion of quality by self-organizing teams
• Adaptive Planning
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Weaknesses of Agile
• Cost management is (mostly) missing
• Uses abstract measures
• Relative points
• “Ideal” days
• Velocity
These create business challenges
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Uh oh, Time to go...
Maybe it’s Geoff...
Can’t I just know when we can release and how much it will cost?
Earl, you can’t compare velocity of one team with another! Estimates
are relative and team specific...
It depends...
Agile is a pain in the @$$!
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Agile partially supports Portfolio Management• Prioritize to maximize
Business Value
• Effectively deliver to minimize costs
• Re-allocate resources when costs are too high or the benefit is too low
✓ Agile
✓ Agile
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Earned Value Management (EVM)
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Proj
ecte
d Sl
ippa
ge
Management Reserve
Earned Value
(PV)
Total Allocated Budget
TimeNow
CompletionDate
$PMB
EAC
Time
Over Budget
Planned Value
(AC)Actual Cost
Project Management Baseline
Estimate at Complete
(EV)Earned Value
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EVM Performance Indicators
CPI < 1 CPI = 1 CPI > 1
Under Budget On Budget Over Budget
SPI < 1 SPI = 1 SPI > 1
Ahead of Schedule On Schedule Behind Schedule
Cost Performance Index (CPI=EV/AC)
Schedule Performance Index (SPI=EV/PV)
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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
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Weaknesses of Traditional EVM
• Expects everythingfully defined up front
• No assertion of quality
• Claiming value is earned on intermediate work products
• Poor results on softwareprojects using waterfall
Ugh!
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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
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✓ Agile
Agile + EVM• Prioritize to maximize
Business Value
• Effectively deliver to minimize costs
• Re-allocate resources when costs are too high or the benefit is too low
• We want to measureoutcomes, not outputs
✓ Agile
✓EVM✓ Agile
✓EVM
+
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AgileEVM Background
• Rigorously established foundation *
• Key Assumption: The ratio of
is a good measure of Actual Percent Complete
(story points accepted)(total story points in a release)
* http://ieeexplore.ieee.org/xpl/freeabs_all.jsp?arnumber=1667558
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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
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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
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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
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AgileEVM extends this rigor 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
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Demo
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Q&A