Business Value of Agile Software Methods
Maximizing ROI with Just-in-Time Processes and Documentation

by Dr. David F. Rico, Dr. Hasan H. Sayani, and Dr. Saya Sone
(With foreward by Dr. Jeffrey V. Sutherland)

Hardcover, 6x9, 224 Pages, ISBN: 1-604270-31-4, September 2009

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About the Book: [Top of Page]

Whether to continue using traditional methods such as systems and software engineering standards or to use a relatively new family of software development processes known as Agile methods is one of most prevalent questions within the information technology field today. Since each family of methods has its strengths and weaknesses, the question being raised by a growing number of executives and practitioners is: Which family of methods provides the greater business value and return on investment (ROI)? Whereas traditional methods have been in use for many decades, Agile methods are still a new phenomenon and, until now, very little literature has existed on how to quantify the business value of Agile methods in economic terms, such as ROI and net present value (NPV).

Using cost of quality, total cost of ownership, and total life cycle cost parameters, The Business Value of Agile Software Methods offers a comprehensive methodology and introduces the industry’s initial top-down parametric models for quantifying the costs and benefits of using Agile methods to create innovative software products. Based on real-world data, it illustrates the first simple-to-use parametric models of Real Options for estimating the business value of Agile methods since the inception of the Nobel prize-winning Black-Scholes formulas. Numerous examples on how to estimate the costs, benefits, ROI, NPV, and real options of the major types of Agile methods and practices such as Scrum, Extreme Programming, Pair Programming, and Test-Driven Development are also included. In addition, this reference provides the first comprehensive compilation of cost and benefit data on Agile methods from an analysis of hundreds of research studies.

The Business Value of Agile Software Methods shatters key myths and misconceptions surrounding the modern-day phenomenon of Agile methods for creating software products. It provides a complete business value comparison between traditional and Agile methods. The keys to maximizing the business value of any method are low costs and high benefits and the business value of Agile methods, when compared to traditional methods, proves to be very impressive. Agile methods are a new model of project management that can be used to improve the success, business value, and ROI of high-risk and highly complex IT projects in today’s dynamic, turbulent, and highly uncertain marketplace. If you are an executive, manager, scholar, student, consultant or practitioner currently on the fence, you need to read this book as soon as possible!

Key Features: [Top of Page]

Free Downloads: [Top of Page]

WAV Offers free downloadable detailed ROI models for Scrum, Extreme Programming, Pair Programming, Test-Driven Development, and Agile Methods and spreadsheets with metrics and models for costs, benefits, benefit/cost ratio, breakeven point, net present value, return on investment, and features real options: Click Here to Get Free ROI Spreadsheet Models from the Web Added Value™ Download Resource Center.

About the Authors: [Top of Page]

Dr. David F. Rico has been a technical leader in support of NASA, DARPA, DISA, SPAWAR, USAF, AFMC, NAVAIR, CECOM, and MICOM for over 25 years. He has led, managed, or participated in over 20 organization change initiatives using agile methods, Lean Six Sigma, ISO 9001, CMMI®, SW-CMM®, Enterprise Architecture, Baldrige, and DoD 5000. He specializes in IT investment analysis, IT project management, and IT-enabled change. He has been an international keynote speaker, published numerous articles, and written or contributed to six textbooks. He holds a BS in computer science, MS in software engineering, and a DM in information systems. He’s also a certified PMP and CSM. Click Here to Visit the Author’s ROI Website

Dr. Hasan H. Sayani has been in industry and academia for over 40 years. His interests are in information systems, information systems development, life cycle methods and tools, and semantic database management systems. He taught at the University of Maryland–College Park in the Information Systems Management program. He cofounded a firm that built systems for various commercial and governmental organizations. He has participated in various professional and standardization organizations (including IEEE, ACM, CASE, ANS, CODASYL, DoD, CALS). He holds a BS, MS, and PhD from the University of Michigan.

Dr. Saya Sone has worked for multiple Fortune 500 companies, such as CSC, BT, and AOL. She has led numerous data center design, software development, marketing, and customer support projects. She managed a corporate-wide rollout of agile methods and Scrum at a major U.S. electronic commerce firm. Her field of specialty is agile project management. She holds an MA in project management and a DBA in information systems. She is also a certified project management professional, as well as a certified Scrum practitioner.

Book Reviews: [Top of Page]

Agile by the numbers. For years I've gotten questions from people to show them the proof that agile works. Well, this book is definitely a step in the right direction towards answering that question. Based on information from hundreds of projects the book works through the costs and benefits of agile throughout the entire life cycle.

Disciplined agile teams measure their effectiveness, or lack thereof I suppose, and then act on those measures to improve their approach. This book also provides insight into what to measure on agile project teams.

If you're thinking about agile or about improving your existing agile approach, this book should prove to be a valuable asset.

—Scott Ambler, Chief Methodologist/Agile Expert for IBM Rational

Agile methods are highly-disciplined. This reference shows that agile methods are based on systematic values, principles, and discipline; and, more importantly, it demonstrates that agile methods are right-sized, just-enough, just-in-time approaches for maximizing the business value of new product development.

—Dr. Jeffrey V. Sutherland, Co-Creator of Scrum, CEO, Scrum, Inc.

Comprehensive and rigorous reference to agile. If you've longed for a comprehensive and rigorous reference that supports agile methods -- here it is, at last! This is a work that stands out from the crop because if its comprehensive treatment of agile: management, engineering, documentation, with special references to the military and government domains. There's also a comparative study of agile methods along with surveys, metrics, and other financial analysis that will impress your inner actuary. Dr. Rico, Dr. Sayani, and Dr. Sone bring their considerable academic prowess to bear on some of the most persistent objections to agile. In particular, those looking to build a bullet proof case for agile methods based on solid data and comprehensive research and analysis will find this an invaluable work.

—Sanjiv Augustine, President, LitheSpeed, Author, Managing Agile Projects

Strong motivation for agile Development. Business has long desired a comprehensive review of the economics of software development and this work by David Rico goes a long way towards this goal. We in the community have been telling our business partners that lean and agile methods are superior for a variety of reasons but often have lacked the data to quantify our assertions. Dr. Rico's extensive research into the ROI of various software development practices finally allows us to quantify the impact that process has on business results. David Rico is at the forefront of bringing new levels of rigor and science to the problem of software economics. His data and his insights into that data are transforming how we think about software development processes.

—Roland Cuellar, Vice President, LitheSpeed, Certified Scrum Master, Lean Six Sigma Green Belt

Sheds important light on the costs and benefits of agile methods. David Rico brings together key data and useful business metrics to help shed light on the success of Agile methods on the software industry, instead of hearsay and evangelism without grounding. I find this invaluable in conversations with executive management to ground Agile approaches in reality. I highly recommend it.

—Gabrielle Benefield, Certified Scrum Trainer, Scrum Training Institute

Agile methods for an agile world. The world is changing. The increased use of technology in the form of social networking, text messaging, and wireless internet access is fundamentally altering information flows. In order to manage the frenetic pace of information exchange inherent in modern projects, agile methods are arguably the most effective methods a business can use. In The Business Value of Agile Methods, David Rico reveals the history of the evolution of agile methods from traditional management practices, and presents valuable information about the current state of the art of the practice of agile methods. The structure of the book is such that it is broken down into individual topics that are as quick and easy to read as an executive summary, yet highly informative. The large number of sections represents a body of knowledge that as a whole might be equivalent to a year of graduate management study. I can attest to the fact that he takes a great deal of thoughtfulness and care into the advice he offers his audience. That same level of care is found in every section of this book. If you are looking for an easy to read, informative, and compelling book on the complete toolbox of agile methods history and practice look no further than The Business Value of Agile Methods. Beyond the scope of this book itself, the further readings section at the end of each chapter is the best guide you can find to industry standards and other works on the subject matter. Such a comprehensive and concise guide to literature could only be assembled by an IT industry professional with over twenty years of professional and academic experience on a wide diversity of projects, such as Dr. Rico.

—Anwar Al Mallah

Provides powerful evidence that agile methods can improve the bottom line. Agile methods have risen to the forefront of software development methodologies. Organizations large and small have begun to investigate the benefits of integrating Agile methodologies into the workplace. Now, a new book by Dr. David F. Rico, Dr. Hasan H. Sayani, and Dr. Saya Sone provides a thorough analysis of the business value of Agile methods.

The Business Value Of Agile Methods begins with an introduction that touches the history, practices, tools, and technologies of various Agile methods. From there it moves on to examine the costs and benefits of Agile methods. It concludes by showing the benefits of Agile methods in financial terms as measured by ROI, NPV, and ROA.

This is a great book for anyone who wants a broad introduction to Agile methods. It is even better for people who are looking to introduce Agile methods in their workplace. In a concise, readable fashion, the authors document the financial benefits of using Agile methods. By quantifying these benefits, the authors have made it easier to champion the cause of Agile methods.

This book is a must for anyone trying to introduce Agile methods to their organization. It provides powerful evidence that using Agile methods can positively affect the bottom line. By framing the argument in financial terms, the authors have provided the ammunition required to initiate lasting organizational change.

—Jim Nix

Excellent resource for measuring the ROI of agile methods. This book captures the essentials of agile methods in a very practical, easy to read form. Each chapter provides succinct information, demonstrating the significance of agile methods. The authors stress the importance of collaboration, teamwork, and adaptability as key to the discovery of business value. The book also unravels the practical side of project management processes by showing the similarities in language, terminology, and frameworks typically found in PMI’s Project Management Body of Knowledge. It describes simple project management practices for agile software development projects, using built-in project management frameworks for planning and execution processes. If you wonder how to measure progress, return on investment, or how to get started with agile methods, this book has your answers.

—Winston Gonzalez, President, Zeenie Enterprises LLC (ZeLLCo)

Compelling read for agile enthusiasts. This book captures the essentials of agile methods in a very practical, easy to read form. Each chapter provides succinct information, demonstrating the significance of agile methods. The authors stress the importance of collaboration, teamwork, and adaptability as key to the discovery of business value. The book also unravels the practical side of project management processes by showing the similarities in language, terminology, and frameworks typically found in PMI’s Project Management Body of Knowledge. It describes simple project management practices for agile software development projects, using built-in project management frameworks for planning and execution processes. If you wonder how to measure progress, return on investment, or how to get started with agile methods, this book has your answers.

I just finished reading "The Business Value of Agile Software Methods" and I'm very impressed with the breadth-yet-detailed coverage on agile. As an agile coach and consultant, I found this book something I both wanted to hand my new agile customers and also dive into for the advanced coverage of topics like ROI, metrics and business value.

For the ROI of agile methods, the authors present clear techniques for calculating business value as well as agile's historical performance with respect to ROI, using case studies and surveys to support their research. Also included are the measures of agile methods and how these can be compared (favorably) to traditional methods. For completeness, the authors cover software engineering, tools and technologies, software engineering and project management.

Each area of agile is covered in a chapter, often 8 - 10 pages, and there are 24 chapters. As such, this book is able to offer the reader education and analysis of many areas of agile, but summarize it in less than 10 pages so as to make it a quick read. While I read it straight through and enjoyed it, I think I'll use it even more as a reference to look-up information going forward.

I think this book is ideal for a novice who wants a short-and-sweet overview of what agile is, where it came from and its core values. The middle to latter sections might be a bit much for a novice as more advanced topics are covered, but not necessarily depending on their background. Readers with a business background including project management will appreciate the author's efforts to show agile methods in light of traditional "waterfall" practices and measurements.

This book will also be ideal for the agile change agents who have been wanting to show that agile really does outperform traditional methods. The authors have gathered data from numerous agile surveys and projects to present a compelling case that agile projects have higher benefits, lower costs and risks than traditional methods.

Overall I think this book will be a compelling read for agile enthusiasts of all stripes.

—Ryan Shriver, Managing Consultant, Dominion Digital

Very interesting research. The authors have provided interesting research on the business value of agile methods, and I enjoy seeing serious financial analyses being done on Agile. I had a chance to see David Rico present some of this research, and the differences between Agile and traditional methods were even greater than I expected, despite my support of Agile methods. I think books like this can go a long ways to convince traditional software development shops to consider more Agile methods.

—Arin Sime, Senior Developer, OpenSource Connections

Like Business Service Management to IT Folks. The Business Value of Agile Software Methods will affect very many conversations in which a champion socializes Agile with his/her executives. It is an excellent fit for the champion promoting Agile for the following reasons.

1. It is about the business, not about the fine points of software methods. Like Business Service Management to IT folks, this book gives the heart of the matter to the software development executive.

2. The book captures, analyzes, and synthesizes the results of hundreds of systemic research studies.

3. It provides data on the various Agile methods without favoring one over another. Furthermore, the authors are quite explicit in stating that it not the method itself but the fit of a method to a company/culture/environment that counts.

4. It places equal weight on costs and benefits of Agile, thereby giving the reader a good grasp on trade-offs. This grasp can be enhanced through free downloads of cost and benefit spreadsheets from the corresponding Download Resource Center.

5. A very impressive aspect of this new book is the broad spectrum of the metrics it provides. Just about any business metric your CIO/CFO/CXO might use as the basis for his/her decision-making process, including Real Options Analysis (ROA), is provided. Moreover, the book encourages the use of multiple metrics, clearly indicating the pro and cons of individual metrics. For example: "The business value of Agile methods may be as much as 90% higher than NPV using ROA under extreme market conditions, including high inflation, risk change, and amount of time."

An often used Agile quip is "Don't take you boss to lunch; take him/her to the daily stand-up meeting." I would suggest you give The Business Value of Agile Software Methods to your boss at the end of his/her first stand-up meeting. This recommendation is nicely seconded by the following excerpt from colleague Sanjiv Augustine's review of the book:

... those looking to build a bullet proof case for agile methods based on solid data and comprehensive research and analysis will find this an invaluable work ...

—Israel Gat, Founder and CEO at The Agile Executive

Hard Numbers and Vital Data About the Value of Agile Methods for Managers. Nearly every environment where software will be used is in a state of rapid and significant change. The product that is needed when the software is delivered many times bears only a small resemblance to the original conception of the need. Therefore, it is a no-brainer that a rigid development process with almost no flexibility rarely works. The results have been dismal; the most reliable statistics are that 70% of software development projects are by some metric a failure. In response, various methods collectively called "agile" have been adopted and they generally have proven to be much more effective. To be considered agile, the software development method must allow a great deal of flexibility into the process and some of the most widely used methods are examined here.

What makes this book distinct from so many others is the presence of many numbers that will allow the reader to not only understand the benefits of using agile development, but also to compare and contrast the four agile methods that are most widely used. Those methods are pair programming, test-driven development, extreme programming and Scrum. The comparisons are extensive, for example in chapter 18 the data describes the total life cycle costs of all four agile methods and what are termed the traditional methods.

With so much hard data so skewed in favor of agile development, it would be very difficult for a traditionalist to argue against adopting one of the agile development methods. The only arguments against that could be made is that either the data is wrong or that adopting an agile method is extremely difficult. Given the large number of references given here, the first criticism is impossible.

—Charles Ashbacher, President of Ashbacher Technologies, Author of Six Books, and Co-Editor of the Journal of Recreational Mathematics

Agile project management optimizes time and performance. We were knocking our heads trying to find the right language to explain the value our leadership and organization development services bring to our business clients, but more, how to be more efficient in our design and delivery. Then came along Drs. David Rico, Hasan Sayani and Saya Sone's explosive book entitled "Business Value of Agile Software Methods" with a specific emphasis on "Business Value Metrics" that made complete sense. This approach not only speaks from hard data-rich examples, but also presents new thinking about how to measure and assess the level of teamwork, scalable development, and flexibility that accompanies the transformation process in any culture change effort. This is really a breath of fresh air in project development and management. Agile methods respond to organizational systems that have to maximize learning, while viewing the measurement process as essential to optimizing knowledge about their customers' preferences and the value they always expect. This work shows how to value time and by so doing, how to reduce waste and optimize return on investment.

—Dr. Omowale T. Elson, Managing Partner, Elson Consulting Group

Much needed quantification. This is an important book that has arrived at an important time. It does a great job, in a very concise way, of presenting the various aspects of Agile Software Development and its various incarnations. Most importantly, it also provides a comprehensive quantification of the benefits, from a business perspective, that provide the necessary economic backup that has long been missing for decision makers who are looking to adopt these methods. I enjoyed the fact that the book is right to the point, not unnecessarily long-winded, and easy to read. This is another aspect that is important as the decision makers who are on the fence with regard to the business value of software are frequently impatient about getting the data behind this. This book provides that information quickly.

—Bruce Trask, Chief Executive Officer, MDE Systems

Table of Contents: [Top of Page]

    Chapter 1 — Introduction to Agile Methods

      1.1 What Are Agile Methods?
      1.2 Why Agile Methods Emerged
      1.3 How Agile Methods Emerged
      1.4 First Agile Methods
      1.5 Agile Methods Explosion
      1.6 Summary
      1.7 Further Readings

    Chapter 2 — Values of Agile Methods

      2.1 Major Values of Agile Methods
      2.2 Customer Collaboration
      2.3 Individuals and Interactions
      2.4 Working Software
      2.5 Responding to Change
      2.6 Summary
      2.7 Further Readings

    Chapter 3 — History of Agile Methods

      3.1 Project Management
      3.2 Software Methods
      3.3 Software Standards
      3.4 Process Improvement
      3.5 Agile Methods
      3.6 Summary
      3.7 Further Readings

    Chapter 4 — Antecedents of Agile Methods

      4.1 New Product Development
      4.2 Systems Engineering
      4.3 Software Project Management
      4.4 Software Engineering
      4.5 Lean Thinking
      4.6 Summary
      4.7 Further Readings

    Chapter 5 — Types of Agile Methods

      5.1 Scrum
      5.2 Extreme Programming
      5.3 Dynamic Systems Development
      5.4 Feature Driven Development
      5.5 Crystal Methods
      5.6 Summary
      5.7 Further Readings

    Chapter 6 — Practices of Agile Methods

      6.1 Onsite Customers
      6.2 Pair Programming
      6.3 Test-Driven Development
      6.4 Refactoring
      6.5 Release Planning
      6.6 Summary
      6.7 Further Readings

    Chapter 7 — Agile Project Management

      7.1 Initiating Process Group
      7.2 Planning Process Group
      7.3 Executing Process Group
      7.4 Monitoring Process Group
      7.5 Closing Process Group
      7.6 Summary
      7.7 Further Readings

    Chapter 8 — Agile Software Engineering

      8.1 Requirements
      8.2 Architecture
      8.3 Design
      8.4 Construction
      8.5 Testing
      8.6 Summary
      8.7 Further Readings

    Chapter 9 — Agile Support Processes

      9.1 Documentation
      9.2 Configuration Management
      9.3 Quality Assurance
      9.4 Verification and Validation
      9.5 Maintenance
      9.6 Summary
      9.7 Further Readings

    Chapter 10 — Agile Tools and Technologies

      10.1 Workflow Tools
      10.2 Collaboration Tools
      10.3 Development Tools
      10.4 Support Tools
      10.5 Technologies
      10.6 Summary
      10.7 Further Readings

    Chapter 11 — Comparison of Agile Methods

      11.1 Practices
      11.2 Pros and Cons
      11.3 Flexibility
      11.4 Risks
      11.5 Usage
      11.6 Summary
      11.7 Further Readings

    Chapter 12 — Agile Metrics and Models

      12.1 Traditional Measures
      12.2 Customer Collaboration
      12.3 Individuals and Interactions
      12.4 Working Software
      12.5 Responding to Change
      12.6 Summary
      12.7 Further Readings

    Chapter 13 — Surveys of Agile Methods

      13.1 Microsoft
      13.2 UMUC
      13.3 AmbySoft
      13.4 IT Agile
      13.5 Version One
      13.6 Summary
      13.7 Further Readings

    Chapter 14 — Costs and Benefits of Agile Methods

      14.1 Pair Programming
      14.2 Test-Driven Development
      14.3 Extreme Programming
      14.4 Scrum
      14.5 Agile
      14.6 Summary
      14.7 Further Readings

    Chapter 15 — ROI Metrics of Agile Methods

      15.1 Cost Metric
      15.2 Benefit Metric
      15.3 ROI Metric
      15.4 NPV Metric
      15.5 Real Options Analysis Metric
      15.6 Summary
      15.7 Further Readings

    Chapter 16 — Measures of Agile Methods

      16.1 Pair Programming
      16.2 Test-Driven Development
      16.3 Extreme Programming
      16.4 Scrum
      16.5 Agile Methods
      16.6 Summary
      16.7 Further Readings

    Chapter 17 — Costs of Agile Methods

      17.1 Pair Programming
      17.2 Test-Driven Development
      17.3 Extreme Programming
      17.4 Scrum
      17.5 Agile Methods
      17.6 Summary
      17.7 Further Readings

    Chapter 18 — Benefits of Agile Methods

      18.1 Pair Programming
      18.2 Test-Driven Development
      18.3 Extreme Programming
      18.4 Scrum
      18.5 Agile Methods
      18.6 Summary
      18.7 Further Readings

    Chapter 19 — Return on Investment of Agile Methods

      19.1 Pair Programming
      19.2 Test-Driven Development
      19.3 Extreme Programming
      19.4 Scrum
      19.5 Agile Methods
      19.6 Summary
      19.7 Further Readings

    Chapter 20 — Net Present Value of Agile Methods

      20.1 Pair Programming
      20.2 Test-Driven Development
      20.3 Extreme Programming
      20.4 Scrum
      20.5 Agile Methods
      20.6 Summary
      20.7 Further Readings

    Chapter 21 — Real Options Analysis of Agile Methods

      21.1 Pair Programming
      21.2 Test-Driven Development
      21.3 Extreme Programming
      21.4 Scrum
      21.5 Agile Methods
      21.6 Summary
      21.7 Further Readings

    Chapter 22 — Business Value of Agile Methods

      22.1 Costs
      22.2 Benefits
      22.3 Return on Investment
      22.4 Net Present Value
      22.5 Real Options Analysis
      22.6 Summary
      22.7 Further Readings

    Chapter 23 — Agile vs. Traditional Methods

      23.1 Agile vs. Traditional Costs
      23.2 Agile vs. Traditional Benefits
      23.3 Agile vs. Traditional ROI
      23.4 Agile vs. Traditional NPV
      23.5 Agile vs. Traditional ROA
      23.6 Summary
      23.7 Further Readings

    Chapter 24 — Future of Agile Methods

      24.1 Coaching and Mentoring
      24.2 Values-Driven Thinking
      24.3 Hybrid Agile Methods
      24.4 Complexity and Scalability
      24.5 Quality and Reliability
      24.6 Documentation and Maintenance
      24.7 Virtual Distributed Teams
      24.8 Technological Flexibility
      24.9 Agile Metrics and Models
      24.10 Agile Training and Education
      24.11 Crossing the Chasm
      24.12 Summary
      24.13 Further Readings


      A. Pair Programming Formulas
      B. Test-Driven Development Formulas
      C. Extreme Programming Formulas
      D. Scrum Formulas
      E. Agile Methods Formulas