Posts Tagged ‘ROI’

Is your Executive Team Committed to Agile Adoption?

April 20th, 2010 by Bob DeMaria

We recently produced a webinar here at AccuRev, co-sponsored by Rally Software, about the Top 10 Factors for a Successful Agile Implementation.  #10 on that list was the Executive Commitment.  We all know that having an executive team committed to the success of a project of any kind is important, but in the Agile world it is even more critical.  Adopting Agile as a new methodology is a major shift in the way of thinking of how your business is being run, for the better.

As Agile adoption starts to take hold in your organization it can follow two different paths – from a motivated development team on up, or from an executive edict on down.  Either way you have decided to make a move toward Agile adoption, one of the very first hurdles you will encounter is executive buy-in.  Many changes are in store for your organization and to insure success you’re going to need to have that executive commitment.

First and foremost, let’s make sure the executive team has complete sponsorship of the Pilot project. While I will discuss selecting a Pilot team in a future blog post, you need to make sure that management is behind this launch. Management needs to be completely committed and willing to smooth any resistance that you may run up against as that pilot process starts to take off and Agile practices start to take hold.

Next is the area of trust and respect.  The people taking part in the transition need to do their best. There’re going to be a lot of changes happening within in the organization: the way people think, the way people function, the way teams interact.  Management really needs to be committed in changing to Agile development, and while there are going to be some pains and adjustments necessary, management will trust and respect that people on development teams are making the best choices for the organization.

Trust and respect is important due to the fact that Agile practices cause a major shift in the ways of thinking.  You’ve probably heard mention of the cultural change that Agile is going to impart on your organization. Executives need to be aware of a major shift in the way people think and the way people do business.

To expand on that just a little bit, it is necessary to ensure that the entire organization supports the transition to Agile development.  I’m not talking about just the development teams; we need to make sure that management understands that it’s going to impact the customers, and for the better. Agile is going to make the organization more productive, more effective, and more efficient, but it is going to cause changes and growing pains as we move towards that process.

One other area that I wanted to bring up briefly, is that going Agile does require an investment.  So management needs to understand there will be upfront investments in transitioning to Agile development and in turn, reaping the benefits of Agile.  That being said, rate of return on your investment can be very swift.  I’m tempted to say “will” be very swift, but obviously it’s going to depend on the successfulness of the project.

To understand some of those returns is to really understand the business benefits and value as well as making sure executives understand those as well, because there is a lot of value to the organization by adopting Agile. It’s not just making better, faster developers, obviously.  We’re talking about faster time to market.  Because we’re developing and shipping smaller increments of high-priority code we’re able to get that code to market much more quickly. That is obviously going to mean increased revenues by being able to hit the market need more quickly and get EXACTLY what the customer wants out the door. We’re going to be able to achieve an increase in revenue based on those features and those enhancements that are going out the door.

All of this because of the way the Agile development process is done and the way testing is baked-in and moved closer to the development cycle.

So all of those features that are getting to market quicker while increasing our revenues are going to be higher quality, as well.  Overall that’s going to greatly increase customer satisfaction as to the type and the software features they’re actually seeing based upon our Agile development.

Now that the executives are on board… how about we take a look at picking the Pilot?

Persuading Your CFO to Buy in a Recession

May 6th, 2009 by pdreifus

If you are having trouble convincing your CFO to spend money on capital expenditures in this challenging environment, you are not alone.  Forecasters are projecting a significant decrease in capital spending for 2009, which is making buying new software and hardware very difficult to get approved by senior finance executives.

So how does a software development manager convince a CFO to spend money on new software and equipment?  CFO’s are seeking ways to increase the efficiency of how organizations deploy resources as well as how to control costs.  So focus on the Return on Investment (ROI), or net cost savings from the increased efficiencies, when you try to convince your CFO to approve a purchase.

The following is an example in which a company is determining whether to hire a new engineer or buy new software and hardware for the team whose productivity needs to increase 20%:

Assumptions

  • Cost of software and hardware to be acquired – $50,000
  • Size of team – 5 engineers
  • Increased productivity from acquisition – 20%
  • Average fully loaded cost of an engineer – $125,000

Cost Benefit or ROI

Based on the assumptions above, if the team were to increase its productivity by 20% without purchasing new software or hardware, they would need to add one engineer (20% x 5 engineers) at a fully loaded annual cost of $125,000.  Accordingly, if it is expected that the workload of the team is going to increase by 20%, it becomes an easy decision: spend $50,000 on new software and hardware instead of hiring a new engineer at a cost of $125,000, for a net cost savings of $75,000.

The typical CFO is also likely to question whether demands on the QA team will really increase and when the timing for the purchase of new equipment has to be made.  When this question comes up, and it will, you can now argue that if demand actually stays the same or decreases, you will be in a position where you can reduce headcount by 20% (a savings of $125,000) without losing any capacity.  This is the beauty of focusing on the efficiencies created from deploying new software and hardware

Summary

Engineering budgets are dominated by personnel costs.  If you focus on the efficiencies that will be created from deploying new software and hardware and tie it to either being able to cut headcount or not having to hire new staff, you will almost always be able to convince your CFO to open up the purse strings!

About The Author

Peter Dreifus was invited to contribute to our Distinguished Lecturer Series because of his experience as a CFO and COO managing finance and operations at software and technology companies.  Mr. Dreifus is a CPA with over 20 years experience and has held a variety of senior finance positions at Escher Group, Ltd.,  Sequence Design, Inc., Avery Dennison Corporation and the accounting, tax and consulting firm Deloitte.