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 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

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 of that work to meet strategic business objectives.

source: PMI The Standard for Portfolio Management — Second Edition

• We want to measureoutcomes, not outputs

• YES: Business Value

• Less Important: Completed Projects

Project Portfolio Management

Time

BusinessValue

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

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

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 @$$!

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

Earned Value Management (EVM)

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

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)

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 everythingfully defined up front

• No assertion of quality

• Claiming value is earned on intermediate work products

• Poor results on softwareprojects using waterfall

Ugh!

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

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

+

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

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


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) *


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