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RE: [scrumdevelopment]RIO of Scrum

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  • Mary Poppendieck
    Thanks for this Jeff! Mary Poppendieck www.poppendieck.com 952-934-7998 Author of: Lean Software Development: An Agile Toolkit Date: Sun, 23 Jan 2005 01:37:33
    Message 1 of 1 , Jan 23, 2005
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      Thanks for this Jeff!

      Mary Poppendieck
      www.poppendieck.com
      952-934-7998
      Author of: Lean Software Development: An Agile Toolkit

      Date: Sun, 23 Jan 2005 01:37:33 -0000
      From: "Jeff Sutherland" <jeff.sutherland@...>
      Subject: ROI for Scrum


      Lots of people what to know what the ROI is on Scrum. Let's give them one.

      Here is an approach to laying out an ROI for Scrum. I've toned it down
      a little because the real ROI for properly implementing Scrum is too
      big to be believable to people living in the land of the Waterfall
      where projects are always on time even when developers know they are late.

      First, get the best available independent consulting group to get
      concrete baseline data on all development teams. Determine function
      points already available in every product in all product lines, and
      determine the net deliverable incremental function points per
      developer per month.

      I know developers don't like function points but ROI is for bean
      counters and they will like them.

      Any company who hasn't done this level of analysis has either no data
      or very poor data on productivity. Of course that is most companies.

      Insert Scrum company wide and get real data on incremental function
      points per developer per months for a few years. Then you have some
      real data to base an ROI on. This was done at IDX for a team that grew
      to 567 developers during the period 1996-2000. Not all of them had
      fully implemented Scrum as we had a bunch of COBOL programmers on a
      multi-million line clinical system that were somewhat impervious to
      change (but they saw the handwriting on the wall).

      I'm laying out the stats as follows:

      1. Industry baseline is 3 function points per month for typical
      commercial software. That is actually what it was when I got to IDX.

      2. 10% of teams got to 20 function points per month.

      3. 5% of teams failed (actually I don't think it was this high).
      Industry standard team failure stats are 31% and they fail a lot later.

      4. 80% of teams got to 6 function points with Scrum.

      5. Assume 30% of the teams move to Scrum level the first year.

      I leave the math as an exercise for the reader. The net gain in
      productivity is 173% the first year. Let's say you have a 60 person
      development team and you pay an average of $100K per month per
      developer fully burdened. You probably are already doing outsourcing
      to meet this number.

      So the 60 person team used to deliver $6M of industry standard
      software. At the end of the first year they have delivered $10.4M work
      of industry standard software for a gain of $4.4M.

      I think we should budget Scrum implementation for a 1000% ROI. This
      will be substantially higher than any other item on the CFO's list,
      even PatientKeeper's product which gets 400% ROI for healthcare
      institutions, probably the highest in the healthcare business.

      Take 10% of $4.4M or $440,000 and spend that on implementing Scrum the
      first year for a 60 person team. That ought to be enough to get it going.

      I think this is what Ken means when he talks about Extreme Business Value.

      Jeff Sutherland
      CTO, PatientKeeper Inc.
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