Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Implementing Scrum as a Cost Saving Measure Microsoft Corporation / Fullsix Portugal Lisboa, Portugal May 2009
About Mitch Lacey • Mitch Lacey – 13+ years of program and project management experience – Microsoft Program Manager 2001‐2006 • Released large backend core services for Windows Live & MSN • Worked as Agile Coach, onboarding teams to Scrum and Agile principles and practices – Project Management Professional (PMP) – Certified Scrum Trainer (CST)
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
[email protected] for re‐use permission.
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Copyright 2007‐2009 Mitch Lacey.
The Scrum Framework
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
The Pareto Principle • 80% of product value comes from 20% of the features • 60% of features delivered in successful projects are rarely used • Continually ask what incremental value a new feature will deliver y over another
5 Confidential Material
Agile versus Traditional
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Question on Contracts
• How are your contracts done today?
Copyright 2007‐2009 Mitch Lacey.
Contract & Project Types
Fixed‐‐Date Projects Fixed
Fixed‐‐Scope Projects Fixed
Fixed Everything Projects
Fixed‐‐Cost Projects Fixed
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Cone of Uncertainty Project Schedule
• Initial Order of Magnitude
1.6x
+75% to ‐25%
1.25x 1.15x
• Budgetary
1.10x x
+25% to ‐10%
0.9x 0.85x
• Definitive
0.8x
+10% t 5% +10% to ‐5% 0.6x Initial Product Definition
Approved Product Definition
Requirements Specification
Product Design Specification
Detailed Design Specification
Accepted Software
Copyright 2007‐2009 Mitch Lacey.
Release Plan Inputs: Velocity • A useful long‐term measure of the average amount of work completed per sprint • Not useful for predicting how much work will be completed in each sprint
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Fixed Date Projects How Much Can I Get by ? • Determine how many sprints you have • Estimate velocity as a range • Multiply low velocity × number of sprints – Count off that many points ‐ These are “Will Have” items
• Multiply high velocity × number of sprints – Count off that many more points Count off that many more points ‐ These are These are “Might Might Have items Have items”
Copyright 2007‐2009 Mitch Lacey.
Fixed‐date Planning Example Desired release date
30 June
Today’s Date
1 January
Number of sprints
6 (monthly)
Will have
6×15 Might have 6×20
Low velocity
15
High velocity
20
Won’t have
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
[email protected] for re‐use permission.
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Fixed Date Projects If you write a contract for just the will haves:
• You won’t likely win the contract y • But you’ll probably make money if
Will have Will have
you do 6×15
If you write a contract that includes the might haves: • You will likely win the contract • But probably not make money on it
Might have 6×20
It’s a risk issue Where do you want to be?
Won’t have Copyright 2007‐2009 Mitch Lacey.
Fixed Scope Projects When Will All of This Be Done? • Sum all the backlog items the customer needs • Estimate velocity as a range • Divide total story points by high velocity – This is the shortest number of sprints it could take
• Divide total story points by low velocity – This is the This is the “most” most sprints it could take sprints it could take
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
[email protected] for re‐use permission.
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Fixed Scope Planning Example Total story points desired Low velocity Hi h l it High velocity
120 15 20
120÷20=
120÷15=
Copyright 2007‐2009 Mitch Lacey.
Fixed Scope Projects If you write a contract for the short duration:
• You’ll likely win the contract Y ’ll lik l i h • But may not make any money
It’s a risk issue
If you write a contract for the long duration: • You probably won’t win the contract • But will make money
Where do you want to be? Copyright 2007‐2009 Mitch Lacey.
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Ranges • Notice in both cases we had a range • For a fixed date project, use a scope range: – “By that date you’ll have all of these features and some of these.”
• For a fixed‐scope project, use a date range: – “It will take us between 5 and 8 sprints to deliver all of those features.”
Copyright 2007‐2009 Mitch Lacey.
Fixed Everything Projects You’re Screwed! • Customer sends request for proposal (RFP) to vendors • All work is of equal importance. Assume budget total is €1m All ki f li A b d l i €1 • Vendors will submit bids close to €1m – Vendor selected based on bid – contract signed – First day of project: changes to original bid, which are expensive
• Project ends up over original budget due to € spent in changes • After work is accepted, there is still more to do – bugs and f functionality changes i li h – Functionality that is not completed or not useful
• Project end cost €2m or more and project is late
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Benefit of Fixed Everything Contracts
Copyright 2007‐2009 Mitch Lacey.
Capitalizing on Scrum – Change the Model • We are incented to produce our projects late – As described earlier, we make money through change orders – Results in functionality users do not want or will use
• Culture drives this behavior by incenting the “Fixed Everything” model – Assumes we can know everything up front – Assumes we predict the behavior of a complex system – Assumes software is not a creative process
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Change the Model: Give Change At No Cost Build our plan (blue dots) Execute the work (green dots) Features Prioritized by Business Value
Identify new work (orange dot) Identify new work (orange dot) Remove a lower priority item (red item)
Time Source: Jeff Sutherland, Money for Nothing and Change for Free, Presented at Agile 2008 Copyright 2007‐2009 Mitch Lacey.
Implementing Change for No Cost • Build a contract based on Scrum • Allow customers to add any new item they want – They must remove an item of equal weight in order to add
• Product Owner prioritizes the Product Backlog every Sprint • Customer fails to do this: Contract reverts back to time and materials with change order procedures (new boat) • This results in – Changes in priorities are free if total contract work is not changed g p g – New features may be added for free at Sprint boundaries if low priority items of equal work are removed from contract
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Customer Requirements • • • •
Features are prioritized by business value Implemented in order of business value Customers (and users) are involved ( ) Customers work with the Product Owner to produce and maintain a quality Product Backlog
Copyright 2007‐2009 Mitch Lacey.
Change for Free Financial Incentives Identify ROI cutoff Continue Working Continue Working Features Prioritized by Business Value Re‐evaluate remaining work
ROI Cutoff
Scrap remaining work Time Source: Jeff Sutherland, Money for Nothing and Change for Free, Presented at Agile 2008 Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Financial Incentives – What This Means
Features Prioritized by Business Value
Customer keeps 80% of remaining funds
Vendor keeps 20% of remaining funds ROI Cutoff
Project ships early
Time
Excess “crap” not built
Source: Jeff Sutherland, Money for Nothing and Change for Free, Presented at Agile 2008 Copyright 2007‐2009 Mitch Lacey.
Financial Incentives – End at Any Time • Build the contract using Scrum • Customer and team agree on estimates for all work items • Customer determines cost/benefit cutoff / – Implementing the next feature costs more than its value
• Customer can terminate contract at any time for 20% of remaining contract value • Vendor assumes risk of late delivery of mutually agreed work • Contract reverts to time and materials if above conditions not met
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
[email protected] for re‐use permission.
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Example of a €1m Project • Feature Cost: able to ship at 50% feature implementation: €500,000 – 50% of €1m = €500,000
• Additional price to Vendor: €100,000 – 20% of €500,000 = €100,000
• Total Project Cost = €600,000 • Money back to customer = €400,000 • Assume 10% net profit margin on features built: €50,000 • Add 20% cost savings of €100,000 for early termination Add 20% cost savings of €100,000 for early termination • Total project net €150,000 – 25% net profit margin
Copyright 2007‐2009 Mitch Lacey.
Setup • Ask if they have been burned in the past • Determine the amount of time they have for involvement • Communicate that fixed everything… y g – Makes you (the vendor/team/etc) own ALL the risk and this has a cost – Does not build trust – Often results in the wrong thing being built
• Be warned: if customers want promises and guarantees – aka fixed everything ‐ this will likely not work
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
[email protected] for re‐use permission.
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Implementation 1. 2. 3. 4. 5.
Build a product backlog Estimate it based on velocity Show what they will get and might not get y g g g Offer the ability to have unlimited change Offer the ability to end the project early
Copyright 2007‐2009 Mitch Lacey.
Rules 1. Customer involvement allows us to tune the system to the latest known business value; 2. Any requirement that hasn’t already been worked on can be swapped out for another of equal value; 3. Priority of requirements can be changed by customer; 4. Customer may request additional releases at any time at prevailing time and material fees; 5. Customer may terminate contract early if value has been satisfied for 20% of remaining unbilled contract value
Source: Jeff Sutherland, Money for Nothing and Change for Free, Presented at Agile 2008 Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
[email protected] for re‐use permission.
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Scrum as a Cost Saving Measure, Microsoft Corporation, Lisbon Portugal
20 May 2009
Comparison of 20 Projects with 1000 Function Points Size in Function Points Size in Java Code Statements Monthly burdened cost Work hours per month Project staff Project effort (months) Project effort (hours) Project schedule (months) Project cost Function Points per Month Work hours per function point LOC per month Function point assignment scope LOC assignment scope C t Cost per function point f ti i t Cost per LOC Defect potential Defect potential per function point Defect removal efficiency Delivered defects High‐severity defects
Agile 1,000 50,000 $7,500 132 5 66 8,712 14 $495,000 15.15 8.71 758 200 10,000 $495 $495 $9.90 4,250 4.25 90% 425 128
CMM 1,000 50,000 $7,500 132 7 115 15,180 19 $862,500 8.67 15.18 435 143 7,143 $863 $863 $17.25 4,500 4.5 95% 225 68
Difference 0 0 0 0 2 49 6,486 5 $367,500 ‐6.46 6.47 ‐323 ‐57 ‐2,857 $368 $368 $7.35 250 0.25 0.50% ‐200 ‐60
Source: http://www.stsc.hill.af.mil/crosstalk/2008/02/0802Jones.html Copyright 2007‐2009 Mitch Lacey.
Scrum Resources • Local Resources – http://www.scrumpt.com – local scrum user group –
[email protected] – Scrumpt yahoo group (www.yahoogroups.com) yahoo group (www yahoogroups com)
• ScrumDevelopment Yahoo Group – http://www.yahoogroups.com
• My Website: http://www.mitchlacey.com • Mountain Goat Software – http://www.mountaingoatsoftware.com/scrum
• Scrum Alliance Scrum Alliance – http://www.scrumalliance.org
• Agile Project Management with Scrum, 2004 • The Enterprise and Scrum, 2007 – Ken Schwaber, Microsoft Press
Copyright 2007‐2009 Mitch Lacey.
Copyright 2009 Mitch Lacey. email
[email protected] for re‐use permission.
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