Budgeting in an Agile World
Agile budgeting can be a blasphemous term. It’s not uncommon when the subject of budgeting is brought up to hear “We’re agile. We don’t need budgets.”
While it may be true that an agile team itself doesn’t need budgets, it is almost certainly true that the company housing that agile team does. Businesses need to understand, project and in many cases contain costs. Budgeting provides the mechanism to do that.
Traditional software development approaches budgeting at the project level. Each project up for consideration must have a defined cost, benefits and the all-important ROI. The projects are approved based on the ROI or some combination of factors (hopefully *not* including “Who has the loudest voice?”) and the projected cost is turned into the approved budget for that project. ‘Resources’ are amassed and the project work begins.
Many organizations have leveraged agile to ease that process. A nice simple agile approach means one does know the ongoing costs of the development team(s). By feeding in a stream of prioritized initiatives or features to stable teams, the overall costs are well-known. It’s just the per-initiative or per-feature cost that may be less well-known (and many an agilist would say that is rightly so).
The Scaled Agile Framework® (SAFe®) recognizes some of the inherent issues with project-based budgeting and proposes an improved form of budgeting at the Portfolio level (far away from individual agile teams, mind you).The SAFe approach essentially allocates funding to various Agile Release Trains (ART’s) to allow for budgeting at the high level while leaving feature decisions in the hands of those who are most knowledgeable about the value and priority of the options. It also describes the potential for assigning budgets to specific portfolio items that might reach out across ART’s and Programs.
When we interviewed customers about their current and desired budgeting practices with respect to product development, we found one consistent theme: variety abounds. We found those who espouse the approached learned from their SAFe training. We found those who practice old-school project-based budgeting. And we found those who would prefer to utilize strategic themes as a means to budget development capacity. Budgeting clearly remains a practice with quite a bit of inherent variety so a solution for it must be adaptive.
In the Summer 2015 Release, VersionOne takes an initial step towards supporting budgeting within product development with the introduction of Enterprise Budgeting. This new capability is not so much a means to replace the financial people and systems, but as a mechanism to bring the budgets closer to the development organization’s world. This allows quicker cycles in planning and quicker decisions when options must be weighed. As the variety of current market practices indicate, this is an area that is sure to continue its evolution.
Scaled Agile Framework and SAFe are registered trademarks of Scaled Agile, Inc.