Saturday, May 4, 2013

ROI for Scrum Training

Does Scrum Training give a good ROI?

Well, of course, that depends. Mainly, how whether the Team (the full Team) takes an aggressive attitude toward improvement.

But let's look at the following calculation.

We start with the a Team that, fully loaded, costs about $1 million per year.
Their current Business Value delivered after 1 year's work....taking the NPV (net present value) of all future cash flows, is currently $3 million.  Now, maybe you can follow most of the rest below.
Financial Benefits Estimate  
Cost of Team$1,000,000 
Business Value Delivered by Team$3,000,000 
Note: This is NPV from work delivered in one year 
Improvement Factor2 
Note: Reasonable improvement factor in 12 months. 
Note: Jeff Sutherland is looking for a factor of 5x-10x. 
Note: This is usually measured as an improvement in velocity.
BV Run rate after improvement$6,000,000per year's work
Gross BV Improvement$3,000,000per year's work
Note: Per year!  
Note: Thus, this is a LOW (conservative) estimate 
Investment required to obtain improvement$750,000 
Note: This includes many things, mainly accumulated cost of impediment removals
Note: This is a HIGH (conservative) estimate 
Note: At some point, a lower investment could correlate with a lower improvement factor.
Net Net BV Improvement$2,250,000 
Return on Investment300% 
Let's talk about the investment of $750,000

So, this includes the cost of training.

This includes the cost of travel to the training.

This includes the time lost while training.

This includes the cost of removing impediments for the Team (this is by far the biggest cost).

Removing impediments may require servers, software, training on automated testing, etc, etc, etc.

To be honest, we think $750,000 is a gross over-estimate of the cost of getting a 100% improvement in velocity.  It will cost MUCH less. Maybe $100,000 or $200,000 or $300,000 -- depending on your situation.  If the cost is 'only' $300,000, then the ROI after one year becomes 900%.  Or 9x.  That is huge.

Where would I invest first?

1. Train the whole Team.
2. Get an Agile Coach (I won't debate here how much time the coach should be dedicated to the Team. But a coach for one Team.)
3. Improve the Product Owner
4. Improve the continuous builds
5. Improve automated testing
6. Improve integration and regression testing, so that they are much more robust

Almost always, these are the top areas.

Each Team also has its own specific things, things unique to that Team.

Some Teams are fundamentally dysfunctional.  Some Teams need people skills.  Or facilitation on decision-making. Or training in specific skill sets.  Lots of other possibilities.

The key thing is that you see that we think starting Scrum is the key to releasing all these benefits.

And that it will not be Scrum alone that releases the benefits.  Getting all the benefits will require hard work and further investment.  But it starts with Scrum.

And Scrum, if played professionally, has a huge ROI.  Huge.

Note: Here is a link to a spreadsheet, so that you can do your own calculations.  Use different assumptions, and see what you get as an ROI.

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