RE: [scrumdevelopment]RIO of Scrum
- View SourceThanks for this Jeff!
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.
CTO, PatientKeeper Inc.