© Scaled Agile, Inc. 1© Scaled Agile, Inc.

Why Traditional IT Project

Cost Accounting and Agile

Development Don’t Match️

Dean Leffingwell

Creator of SAFe

And Co-founder of Scaled Agile, Inc.

© Scaled Agile, Inc. 2

Traditional approaches to IT Cost accounting for application development

don’t work when enterprises transition to scaled Agile development. In

this tutorial, Dean Leffingwell will provide tips for moving to a Lean

Budget paradigm— one that decreases the overhead and thrashing of

traditional project cost accounting, while still providing the governance

enterprises need to assure that application development and

maintenance investments align with strategy.

Abstract

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You

are

here

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Todays topic

A SAFe Portfolio consists of a set of Value Streams

Portfolio budgets are allocated to these Value Streams

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First, let’s talk about

the problem

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A project requires collaboration of cost centers,

assignment of people, budget, and schedule. It takes

multiple budgets to build a single project budget.

Result:

Slow, complex budgeting process

Leads to utilization-based planning and execution

Low program throughput

Move the people to the work

Anatomy of cost-center budgeting

Traditional project-based, cost-center budgeting creates overhead and

friction, lowers velocity.

. . .

. . .

CC 1 CC 3

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Org

aniz

ation

Project effort

estimate

ProjectProject cost

estimate $

$ $ $ $

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But this approach lacks flexibility

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Result:

Wait for new budget approval; increase Cost of Delay

Costly variance analysis; blame game; threatens transparency

Resource scramble and reassignments

What/who do we blame?

Technology challenge?

Change in scope?

The team?

Does it matter?

But the problem gets worse

When overruns happen, project accounting and re-budgeting increases

Cost of Delay and impacts culture.

Planned:

Actual:

Project

Project

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Agile approaches

development very

differently

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Value doesn’t follow silos

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Build cross-functional Agile Teams

Optimized for communication and delivery of value

Deliver value every two weeks

Three roles: Scrum Master,

Product Owner, and

Development Team

▸ Agile teams are cross-functional, self-organizing entities that can define,

build and test, and where applicable deploy, increments of value

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Teams of Teams create Agile Release Trains (ARTs)

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Solution: Fund value

streams not projects

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Understand the enterprise value streams

A Value Stream is the sequence of steps used to deliver value to the customer

It includes the whole sequence ‒ concept or customer order ‒ to delivery of value

and/or receipt of cash

It contains the people who do the work, the systems, and the flow of information

and materials

Agile Release Trains contain the people who do the work

Understand

needs

Build

solutionsDeployUnderstand

needs

Build

solutionsDeploy

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Long-lived ARTs realize value streams

Virtual organizations of 5 – 12 teams (50 – 125+ individuals)

Synchronized on a common cadence, a Program Increment (PI)

Aligned to a common mission via a single Program Backlog

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Funding value streams is a leaner approach

Funding value streams provides for full control of spend, with:

No costly and delay-inducing project cost variance analyses

No resource reassignments

No blame game for project overruns

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Result: Controlled costs with increased flexibility

ART budgets and resources are unaffected by Feature cost overruns or

changing priorities.

Planned:

Actual:

Feature 1

Feature 1

Keep people working on the right

Feature for the right reasons.

Feature 2

Feature 2

Delay this

Feature as

necessary.

Pro

gra

m In

cre

me

nt

Pro

gra

m In

cre

me

nt

Fixed cost per PI

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And Apply Lean

Governance

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Maintain the Guardrails

Four guardrails provide the governance over spend

Apply investment horizons

Continuous Business

Owner engagement

Approve Epic initiatives

Utilize capacity allocation

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Manage investments by horizons of growth

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Are you investing the right amounts?

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Bring visibility to the work with the Portfolio Kanban

Portfolio

BacklogImplementing DoneFunnel Review Analyzing

Approved Lean business case and hypothesis

Implement additional Features

Continue until WSJFdetermines otherwise

Pivot

Evaluate MVP

Build MVP

Persevere

Lean Startup Cycle

Stop work

Epic Hypothesis

Statement

Refine

understanding

Calculate WSJF

WIP limited

New business

opportunities

Cost savings

Marketplace

changes

Mergers and

acquisitions

Problems with

existing solutions

All big ideas are

welcome here! Solution

alternatives

Refine WSJF

Cost estimate

Identify MVP

Lean business

case

WIP limited

Go/ no-go decision

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Approve Epic initiatives

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Continuous Business Owner engagement

The money is allocated, but it

has not been spent!

Business owner engagement

assures it is spent on the right

things

Routine and periodic

program backlog prioritization

with Business Owners is key

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Manage solution health with capacity allocation

System and Solution

Architect/Engineer

(Design Authority)

Product and Solution

Management

(Content Authority)

Program

Backlog

New Features

Enablers

Tech Debt and Maintenance

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Q&A