Good practice within finance is to have a framework around Finance management.
The following model ‘Pillars of IT Finance’ can be used to ensure we have a robust framework wrapper. There are elements within this framework that support Agile led delivery
1) Cost capture & structure optimisation
A typical agile delivery model will only capture squad resource costs, however there are other considerations when working in an agile delivery model such as:
- Hardware / Licences
- Web Hosting
- Consumables (Laptops, PC, Monitors)
Having this level of detail can paint a more accurate picture of the total IT costs
2) Budget & Forecasting
A large benefit of having a delivery squad model is that it is typically easier to predict the annual change costs for an organisation.
- 1 squad = £1 million per year
- An organisation might typically have 5-10 squads, therefore we can predict next year’s change budget will be circa £5-10 million
This model also allows for easier monthly reported of predicative costs. We know the cost of a squad per day, per month, per year.
3) Performance Metrics
Capturing and reporting ROI is a vital aspect to support Agile led delivery. Calculating business value, the return on investment, which is typically carried out after a VMOST session is fundamental to ensuring that the right change initiatives are invested in.
As opposed to a project based approach where Time and Cost are variable, Agile led delivery would fix both variables Time (1 Squad for 12 months) and Cost (£1 Million) then we can purely focus upon the Features and the ROI that those features will bring.
4) Project Financial Management
Have appropriate controls around your investments and regular reviews with the business units. A frequent review meeting can be held periodically to ensure everyone is happy with the ROI and expected return for each feature or delivery.
- Is there a long term programme of benefits realisation?
- Are costs monitored through the delivery cycle?
Strong business case submitted ahead of investment decisions with tangible benefits
In summary, we have found that financing agile delivery requires less administration time since we can predict the cost of a delivery squad over a long period of time. In waterfall the hefty change control process and timesheeting activities can take a significant amount of time and overhead to facilitate. In addition, by committing to resources for a longer period of time, there will be opportunity to negotiate costs and rate card reductions with any third parties.
The key is that finance and delivery work in partnership to maintain simple but robust models with regular touch points in an iterative fashion to ensure business value and ROI is delivered.