11760RE: [scrumdevelopment] Re: Project Capitalization
- Mar 2, 2006
I think the thing that what is missing for capitalization of a project from this approach is Value. The focus of this tracking effort is on expense, but we don't develop features and stories to spend money. If a project is funded, it should have a business case, and a model that outlines how revenue and profits will be generated, or in the case of regulatory, costs (fines, litigation, etc.). Models you can use are well understood by accountants, they include Net Present Value (NPV), Internal Rate of Return (IRR), Return on Investment (ROI), etc. The valuations of the project determine the capital required.
A traditional project approach is that after the budget is allocated, the project, its expenses, drivers, and team become completely disassociated from the Value - everything becomes a cost, and treated equivalently. This is a problem, because it removes the primary motivation for doing the project(s) from the view of the team, middle management, supporting services, etc.
An Agile project should include transparency from the business case to the product backlog and the features that are to be developed. In this way the team knows the Value of the work they are doing in every iteration. This also motivates the team and product owner to find ways to get the first release into production early so the features can begin generating Value for the business. For example, if four planned releases of features account for 60%, 25%, 10%, and 5% of the business value, then this should be reflected in the accounting. The team should then ask: is it possible to release features that deliver 30% of the business value into production at an earlier time?
Whether you capitalize Scrum (or PM) as overhead or R&D is debatable, I would argue that you can't have R&D without PM functions, and if that person is 100% dedicated to development projects, then they are in the Capitalization/R&D bucket.
The main thing we now need to do is get away from the cost based mantra of IT, and start measuring output of Agile teams by value generated. This will force more rigour on the business case and planning process, and give program managers a much more effective tool to manage priorities from multiple projects.cheers,Robin Dymond
From: firstname.lastname@example.org [mailto:email@example.com] On Behalf Of Sherri Dotson
Sent: Friday, February 03, 2006 9:03 AM
Subject: Re: [scrumdevelopment] Re: Project Capitalization
This is great information and it will be great to
exchange dialogue on your experiences again. : ).
We must talk soon.
--- pborsella <pborsella@...> wrote:
> --- Inscrumdevelopment@yahoogroups.com,
> "aliciayanik0724"<aliciayanik0724@y...> wrote:
> >been asked and answered before,
> > I'm sure this has
> but a quick searchturn up enough information for me. I'm
> > didn't
> looking tounderstand
> > how other organizations, while using Scrum,gather
> the data(and pass an audit).
> > to capitalize projects
> >had to do is agree that
> Alicia...the first thing we
> we needed toaccounting purposes.
> record our time purely for
> This is an importantbecause we don't want time
> and sensitive matter,
> tracking to be usedof productivity. Next, we worked
> as an indication
> with our Financedepartment to understand which activities qualify
> for capitaland
> which do not. So, for example, "development" woulda capital
> activity, but "project management" might notqualify.
>Scrum? This is the
> What does "project management" have to do with
> Finance category that we used to account forthe
> daily Scrum. 15the team x
> minutes a day x the number of folks on
> multiple capitalof time needs to be
> projects adds up! This amount
> recorded so Financecapped and how much doesn't.
> knows how much gets
> Remember, "projectan example of a non-capital
> management" is
> activity...your Financehave others.
> dept. may
> So where do you record this? We don't want
> interfere with themaintenance, so we
> logging of "what's left" burndown
> keep the Financeburndown. This of course
> time separate from the
> meant that we neededtime-tracking tool. Once you know which
> activities don'tqualify,
> you can then ensure that the time spent on thoseactivities get
> recorded and submitted to Finance.trying to explain in a few paragraphs what took
> many hours todevise. You'll need to spend some time evaluating
> the best way todo
> what you're asking without violating Scrumprinciples.
> I hope this helps
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