Financial Planning for Agile Environments
Agile teams need to quantify delivered value and understand team efficiency. Agile finance practices support these required capabilities.
Agile development has become the norm for most development shops. It delivers quick pivots based on end-user feedback and allows more flexible dev resourcing.
This flexibility causes issues for finance professionals accustomed to fixed budgets for fixed periods.
Here are the most important points to consider when adopting Agile finance practices to create flexible financial plans.
Agile finance demands Agile budgeting
Agile budgets are broken down by product. Within each product, Agile teams have autonomy and flexibility to adjust the value they deliver each sprint. Specific deliverables may change from the original plan, but the overall product budget often stays the same. This is a good news/bad news scenario: flexibility supports customer requirements (good) while laying bare the financial risk of going over budget (bad).
Agile needs analysis and planning tools from IT Finance but not permission
IT Budget allocations are not made at a per feature or per sprint, but at the overall product portfolio level. Each product gets budget allocation driven by CIO and business unit priorities. Within that allocation, Agile teams need the autonomy to adjust the sprint-by-sprint payload.
Teams aren’t looking to corporate IT for permission to spend on Agile. They need financial analysis and planning tools to quantify value and understand team efficiency. Healthy Agile teams have the best line of sight into the value they deliver—they don’t need finance groups to tell them what’s valuable.
Corporate/IT Finance should proffer tools to quantify the value of Agile, especially relative to cost across teams and products to understand the productivity of Agile investments.
Review at each Agile release
Modifying a budget based only on documentation and dev team requests goes against the instincts of most financial professionals. The fiduciary responsibilities of waterfall projects have an endpoint—the completion of the project. But products never “end.” In Agile development, informed IT managers always know the ongoing value of releases.
Financial and organizational benefits to Agile budgeting.
Agile development needs a forecast cadence
Unlike Waterfall development, where project budgets are set up-front and only altered by scope-creep (or regression), Agile finance practices must support the incremental decision-making of changing market conditions and customer feedback.
Agile budgeting must be as nimble as the Agile development process: no monolithic annual budget kept as a piece of governance, no commits locked through the next financial year.
A forecast cadence, monthly or quarterly, provides the flexibility to serve changes to strategy (e.g., accelerate innovation in some Products, eliminate/de-invest in others).
Coordination with stakeholders
Product owners must be credible with both IT and the business. That’s a specialized skill set in short supply. Either hire outside for these capabilities or retool the skill set of existing developers (which takes time, energy, and funding).
Adopt the culture, not just the taxonomy, of Agile. A dedicated team does not inherently deliver the benefits of Agile any more than simply having a work schedule of two-week sprints.
The benefits of Agile flow from soliciting and integrating customer input on an ongoing basis. An Agile budgeting approach, where Agile Teams and IT Finance share a common view of Product investments and forecasting pivots, coordinates stakeholders.
Financial planning for agile environments: the case for a purpose-built solution
Organizations are incrementally adopting Agile while still delivering Waterfall projects. There is a need for a single source of truth for Agile and waterfall that prioritizes portfolio investments, manages spend, and tracks value.
IT Finance, and Agile teams need a financial planning and performance analysis solution that leverages activity data from Project Portfolio Management (PPM), Application Lifecycle Management (ALM) and Financial Management systems. Stakeholders must plan the optimal mix of portfolio investments, continuously understand value delivery, and shift resources between Agile products and waterfall projects.
Apptio for Agile & Projects
Unlike PPM and ALM tools, Apptio’s Agile & Projects helps quantify the business value of project & product development through a combined financial and work performance review, inclusive of productivity, quality and labor measures, the cost of product functionality, and the impact of build and run spend on the total IT budget. With Apptio for Agile & Projects:
- Plan & analyze demand vs. capacity using portfolio targets and resource cut-lines.
- Allocate labor and funding to projects and products continuously.
- Track & manage delivery, quality, project, and product value metrics.
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