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[XP] Re: 5th Variable? Is ROI independent of the other 4?

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  • jeffgrigg63132
    ... Yes; it probably is just a difference of perspective. I m not saying that you can t do anything to change the ROI of your project. Quite the contrary...
    Message 1 of 9 , Oct 4, 2002
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      --- Jeff Grigg said:
      > > I'm saying that ROI is a derived value that depends
      > > *entirely* on the more fundamental variables (be there
      > > 4 of them, or some other number). Far from being
      > > independent, I say that you can't change ROI without
      > > changing one of the more fundamental variables.

      > > As I see it, ROI is a "bottom line" figure -- something you can
      > > measure and wish for, but not something you can directly manage.

      > > The "other 4" are inputs are things you can manage or change --
      > > to produce the desired resulting change in ROI.

      --- "Bryan Dollery" <Bryan.Dollery@C...> wrote:
      > Could the same thing be argued about say Cost - can cost be
      > controlled purely through manipulating the other three
      > variables? I think so - and this doesn't seem to have been
      > a qualifying factor for it.

      > I think that this may just be a question of perspective. If
      > you want to manipulate ROI, then it *is* possible.


      Yes; it probably is just a difference of perspective.

      I'm not saying that you can't do anything to change the ROI of your
      project. Quite the contrary... All you have to do is reduce cost,
      improve productivity, deliver value to the business sooner, or take
      any other action that will change any of the "inputs to the equation."

      Return on Investment (ROI) = business value returned (discounted by
      inflation, for time) -divided-by- investment (also discounted by time)
      _ _ _

      I tend to say that you can control these three variables on a project:
      1. resources (cost)
      2. time / schedule
      3. delivered functionality

      (I don't talk about quality, because I insist that quality is not
      negotiable. In some ways, quality is variable #4.)

      If you want more or less of any of these 3 (or 4) variables, you can
      do so with an impact on one or more of the other variables. In a
      well run project, you should, in theory, be able to fix (render
      unchangeable) all the variables but one, but the last variable, at
      best, will be just an estimate.

      (In a many projects, all 4 variables are out of control!)
      _ _ _

      So, getting back to ROI...
      #3, delivered functionality is the return
      #1, resources/cost is the investment
      both of these are adjusted by #2 - time
      and influenced by quality.
      _ _ _

      How does XP address this?

      A: All good news, in my opinion:

      All iterative methods return value sooner, rather than later. This
      reduction in time to delivery reduces the inflation discount on both
      the business value and the investment in resources. Shorter
      iterations are better.

      All sensible iterative methods deliver high value business functions
      first. That is, they should be based on some kind of prioritizing
      scheme. XP breaks user requirements down into very small stories,
      making it possible to do only the most highly valued functionality
      first. Delivering highly valued business functionality first is good
      for ROI.

      High developer productivity enables one to produce more value for the
      investment. This directly addresses the ROI issue of value for
      investment. XP improves developer productivity.

      XP teams shouldn't fear ROI. XP is good for ROI.
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