How Do You Project Budget and Timeline with Agile Development?
Have you ever looked at agile development methods and wondered, “how do you project a budget and timeline on an agile project?” We’ve certainly heard this question before from clients, and the answer is a bit nuanced. Essentially, you can’t estimate the way you might be used to. Instead, agile development is all about assessing value and adjusting the scope of your project accordingly. In this way, budget and timeline are most effective when you estimate based on the value of return instead of the scope known at the outset.
We see skepticism around estimates in agile development most frequently among those who are used to working on projects using the Waterfall Method. In a waterfall project, the first phase of development is extensive requirements gathering, which can make business stakeholders feel like they have a clear estimate for planned work based on scope. However, scope is always a moving target and often unseen issues arise during development that can change the scope, and thus affect the budget and timeline. On an agile development project, we recommend deciding what the project is worth, setting the budget and timeline based on worth, and then adjusting the scope accordingly as you go.
Adjust Scope with Value-Based Thinking
Scope should be adjusted and measured according to value. Value can be different for every organization and every project. It is often measured in return on investment, but it could be any other metric that’s important to your business. We’ve found that it helps to start by asking “why” you’re building the solution to help get at the heart of the business impact you’re hoping to achieve.
Utilizing value-based thinking also helps you limit the scope of your project to stay within your budget. Just because anything is possible with enough time or money, doesn’t mean that every possible idea will bring business value. By keeping value in the forefront, you’ll make sure that you don’t waste resources on creating features that don’t work or pay off.
A good analogy for value-based decision making is to think of buying a house. Listing all the features you’d like to have in a house could push your home search out of your budget, so you need to think about which features will really benefit your family the most and which you could go without. Then you can set your budget based on what you can afford and what your home is worth to you and prune features to get the best value from your home search. Building software is much the same—your program doesn’t need every feature you can dream up; it only needs those that help your users and drive value.
Determining value doesn’t need to be a gut decision, either. Agile development believes in the power of empiricism and making data-driven decisions. Agile is built around cycles of continual releases, so you can get your software in front of users early in the process. Then you can use data from actual users to see if your predictions were right or if you need to change course.
We’ve found that utilizing the more “traditional” way of estimating budget and timeline where the projection is based off a list of everything you might do from the beginning of the project often leaves you in the lurch when the list changes mid-project. By practicing the value-based thinking of agile and adjusting scope accordingly, we believe that you can meet your budget and timelines requirements, end up with an effective piece of technology, and save yourself some headaches in the process. You may also find that as you begin to deliver value and gather more data that you have more flexibility in the scope than you expected. If you’re trying to budget for a new project or running into issues predicting budget on a current development project, we can help you think through what you’re trying to achieve and figure out your budget issues through a value-based perspective.
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