The document discusses the business case for adopting agile methods over traditional waterfall approaches. It provides examples of how agile practices like iterative development, prioritized backlogs, and frequent releases can improve financial metrics like return on investment, net present value, and break-even point. While some costs like additional training may increase under agile, benefits often outweigh these and include faster time to market, continuous feedback, and higher quality code. The document demonstrates these concepts through examples comparing financial projections of projects using waterfall, releases every 6 months, and releases every 1-3 months with and without prioritization.

1. Business-Case for Agile
Can You Calculate the Advantage of Agile Methods?
Andreas Ebbert-Karroum
codecentric AG

2. AGENDA
> Introduction
> Financial Consideration
> Non-Financial Consideration
2

3. What Is a Business Case?

4. BUSINESS CASE: FINANCIAL
CONSIDERATIONS

5. Measuring Financial Consequences
Return on Investment (ROI) // Kapitalrendite
> Measuring how much of your invested „money“ you get back in return.
Net-Present-Value (NPV) // Kapitalwert
> Sum of all revenues and payments including interests.
Break-even-Point // Gewinnschwelle
> Point in time when accumulated costs and revenue are equally large.

6. Example Case – New Car-Insurance Inventory
Ricola Insurance creates new Car-
Insurance Inventory
Project duration:
12 months
Project costs:
5.000.000 SFR
Earnings after launch:
200.000 SFR each month
Project lifespan:
5 years

7. Agile As In Scrum
Relevant for financial
consideration
> Iterative and incremental
development (Sprints)
> Prioritized requirements
(Backlog)

8. Agile As In Scrum
Not considered with potential positive impact
> Higher team productivity (intrinsic motivation, self-organisation, …)
> Reaction to changes
> Including new ideas
> Stop project in time (all features implemented; cancel project)
Possibly neutral through automation
> Frequent migration & deployment
Not considered with potential negative impact
> Impeded productivity through frequent releases (for users)
> More trainings
> Higher operating costs through running systems in parallel

9. BUSINESS CASE:
PURE WATERFALL

10. Business Case: Pure Waterfall
6.000.000 €
4.000.000 €
2.000.000 €
cash flow
-€
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
months
Break-even-Point: 37 months
Return on Investment (ROI): 92%
Net-Present-Value (NPV): 2.477.399 SFR

11. BUSINESS CASE:
RELEASE EVERY 6 MONTHS

12. Business Case: Release every 6 months
6.000.000 €
4.000.000 €
2.000.000 €
cash flow
-€
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
months
Break-even-Point: 33 months
Return on Investment (ROI): 104%
Net-Present-Value (NPV): 3.033.000 SFR

13. BUSINESS CASE:
RELEASE EVERY 3 MONTHS

14. Business Case: Release every 3 months
8.000.000 €
6.000.000 €
4.000.000 €
2.000.000 €
cash flow
-€
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
months
Break-even-Point: 32 months
Return on Investment (ROI): 110%
Net-Present-Value (NPV): 3.315.000 SFR

15. BUSINESS CASE:
RELEASE EVERY MONTH

16. Business Case: Release every Monat
8.000.000 €
6.000.000 €
4.000.000 €
2.000.000 €
cash flow
-€
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
months
Break-even-Point: 31 months
Return on Investment (ROI): 114%
Net-Present-Value (NPV): 3.504.000 SFR

17. Business Case: Release every 3 months –
prioritized requirements

18. Business Case: Release every 3 months –
prioritized requirements
8.000.000 €
6.000.000 €
4.000.000 €
2.000.000 €
cash flow
-€
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
months
Break-even-Point: 29 months
Return on Investment (ROI): 123%
Net-Present-Value (NPV): 3.932.000 SFR

19. Business Case: Release every month – prioritized
requirements

20. Business Case: Release every Monat – prioritized
requirements
8.000.000 €
6.000.000 €
4.000.000 €
2.000.000 €
cash flow
-€
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
months
Break-even-Point: 27 months
Return on Investment (ROI): 128%
Net-Present-Value (NPV): 4.175.000 SFR

21. ARE WE ALWAYS
HITTING THE GOAL?

22. How successful are software projects?
The Chaos Report 2009
32% 44%
Succesful
Challanged
24% Failed

23. BUSINESS CASE: WATERFALL
WITH FOUR MONTHS DELAY

24. Business Case:
Waterfall with four months delay
6.000.000 €
4.000.000 €
2.000.000 €
-€
cash flow
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
-8.000.000 €
months
Break-even-Point: 49 months
Return on Investment (ROI): 43%
Net-Present-Value (NPV) 278.000 SFR

25. BUSINESS CASE:
RELEASE EVERY 3 MONTHS,
PRIORITIZED, 4 MONTHS DELAY

26. Business Case: Release every 3 months,
prioritized, 4 months delay
6.000.000 €
4.000.000 €
2.000.000 €
-€
cash flow
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
-8.000.000 €
months
Break-even-Point: 38 months
Return on Investment (ROI): 86 %
Net-Present-Value (NPV): 2.277.000 SFR

27. BUSINESS CASE:
RELEASE EVERY MONTH,
PRIORITIZED, 4 MONTHS DELAY

28. Business Case: Release every month, priorisiert,
prioritized, 4 months delay
6.000.000 €
4.000.000 €
2.000.000 €
-€
cash flow
1 13 25 37 49
-2.000.000 €
-4.000.000 €
-6.000.000 €
-8.000.000 €
months
Break-even-Point: 37months
Return on Investment (ROI): 91%
Net-Present-Value (NPV): 2.519.000 SFR

29. BUSINESS CASE: NON
FINANCIAL CONSIDERATIONS

30. Time to Market

31. Faster market entrance with interative,
incremental development
Functionality
First Mover Window of Opportunity
> Be the first on the market
with a new product Complete functionality of release
Fast Follower Minimal marketable functionality
> React quickly, when your Δt until product
can be launched
competitors launch a new
iterative,
product incremental
waterfall
t

34. Less non-valuable results
Working software every
month
Continuous customer
feedback
Intensive communication
instead of specification

35. High quality with lasting effect
Definition of Done 100%
90%
80%
70%
60%
50%
40%
Maintenance starts after 30%
20%
10%
2nd iteration 0%
Automating Test,
Integration and
Deployment Unstrukturiertes System
Strukturiertes Sytem

36. Andreas Ebbert-Karroum www.codecentric.de
codecentric AG, Düsseldorf
andreas.ebbert-karroum@codecentric.de