September 21, 2023


Technology Room

Agile vs. Waterfall Hybrid Methodology

8 min read

The deadlock between Agile and Waterfall processes has endured in venture administration discourse for many years. Software program growth groups thrive in Agile environments, however a scarcity of administration assist is likely one of the major obstacles to Agile transformation. A venture supervisor working within the software program trade for any size of time has most likely encountered a C-suite that wishes them to “do Waterfall.” However what precisely does that imply in apply?

For years, studies have shown a constructive relationship between the usage of Agile frameworks and project success, and it might be tempting for a venture supervisor to imagine they simply have to promote their company officers on Agile’s outcomes. Nevertheless it’s equally vital to grasp what higher administration likes in regards to the Waterfall methodology. If you happen to perceive the monetary safeguards that Waterfall affords the C-suite, you possibly can craft a hybrid framework that may bridge the hole between Agile practices and enterprise Waterfall as soon as and for all. The start of that understanding lies in Waterfall’s principally untold origin story.

The Murky Origins of Waterfall Methodology

Most individuals in organizational administration affiliate the time period “Waterfall” with the chart under, which comes from “Managing the Development of Large Software Systems,” an influential educational paper written by Winston W. Royce, PhD, in 1970. Royce’s illustration is extensively credited as the primary expression of Waterfall growth.

The Waterfall model, a series of steps from System Requirements, Software Requirements, Analysis, Program Design, Coding, Testing, to Operations.

The crediting of Waterfall growth to Royce’s analysis is likely one of the unusual ironies of the software program trade. In his paper, Royce by no means makes use of the phrase “waterfall” or advocates it as an efficient system; he really presents what would come to be referred to as Waterfall as a cautionary story—an instance of a course of that’s “dangerous and invitations failure” as a result of it doesn’t account for the required iteration wanted amongst software program growth levels.

Royce was not alone: 18 years later, Barry W. Boehm, PhD (who would quickly turn out to be director of DARPA), used a really similar illustration, once more for instance of a problematic software program growth life cycle, and proposed iterative growth as a positive various. In 1996, nearly the complete software program trade endorsed an iterative growth cycle known as the Rational Unified Process (RUP), which was itself a synthesis of greatest practices universally acknowledged by software program engineers.

This raises a giant query: Why would anybody in administration push again in opposition to the usage of Agile over Waterfall, a framework that since its inception has been seen by trade consultants and professionals to be at odds with environment friendly growth practices?

OpEx vs. CapEx: The Monetary Case for Waterfall

The rationale Waterfall stays in favor requires somewhat data a couple of enterprise operate that growth groups seldom take into consideration: accounting.

In double-entry accounting, there are two sorts of bills: operational expenses and capital expenses (additionally generally known as OpEx and CapEx). Any expense lowers the web income of an organization, however an operational expense—reminiscent of lease, payroll, or insurance coverage—lowers it extra. The cash is spent, and is due to this fact now not on the books. A capital expense—reminiscent of actual property, manufacturing unit gear, or workplace furnishings—lowers income much less due to an accounting method known as depreciation, which distributes the expense over a number of years. Additionally, as soon as an asset has been bought, it’s thought of a part of the corporate’s internet value.

Between 2000 and 2002—even because the Agile Manifesto was being developed—the company world was rocked by a pair of main accounting scandals, beginning with the US vitality firm Enron. Put merely, Enron (with the alleged complicity of accounting agency Arthur Andersen) hid main losses from buyers by deliberately mismanaging operational bills and capital bills. This was half of a bigger scheme to fraudulently inflate its income, and due to this fact increase its inventory market worth, by billions of {dollars}.

Shortly thereafter, a similar scandal occurred at US telecommunications firm WorldCom. WorldCom additionally hid losses by purposefully miscategorizing operational bills as capital bills, and the 2002 session of Congress reacted by passing the Sarbanes-Oxley Act. Included on this invoice’s provisions have been new guidelines that made firm officers, such because the CEO and CFO, personally answerable for shareholder losses that occurred due to a scarcity of due diligence.

In the case of software program growth, CapEx versus OpEx is an particularly advanced situation: CapEx seems to be good on a steadiness sheet, permitting firms to report a greater working revenue and borrow bigger quantities.The draw back, nevertheless, is that capitalization standards have advanced and require documentation, evaluations, and approvals—all of which may significantly hinder the software program growth course of.

That is the place venture administration performs a central position. Within the wake of this laws, CFOs wanted a security mechanism that they might level to: a administration fashion that would show they’d met the necessities of the Sarbanes-Oxley Act. The Undertaking Administration Institute had a solution: the phase-gate course of (also referred to as stage-gate). This Waterfall method makes use of a collection of “gates”—pauses the place govt approval could be wanted for growth to advance. By defining a stage that contained solely CapEx-eligible exercise, and isolating it from all different levels, CFOs may show that they’d exercised due diligence when itemizing an expenditure as a capital expense.

The phase-gate process: Establish Scope, Build Business Case, Develop, Test and Validate, and Launch, and five gates. Gate 3 is for capital expenses.

Quick-forward to the current day, and phase-gate administration has been the de facto commonplace for growth initiatives at public firms for 20 years—Stage-Gate Worldwide estimates that 80% of the Fortune 1000 uses some variation of this framework. For an Agile developer or venture supervisor, this will appear baffling. Doesn’t your CFO know the advantages of Agile? They could or could not, however both means, crucial factor for a venture supervisor to recollect is: They don’t care.

When the CFO needs you to “do Waterfall,” it’s not based mostly on a perception that Waterfall is the best option to ship software program. It not often issues to them if programmers use RUP, Scrum, XP, Crystal, FDD, DSDM, Kanban boards, or every other growth method or administration framework; what they care about is capitalizing the venture with out violating the phrases of the Sarbanes-Oxley Act.

The excellent news is that every thing it is advisable do to guarantee the CFO that the venture will cross an audit takes place outdoors of the particular growth course of. If you happen to can guarantee the C-suite that their wants can be met, they need to be amenable to a hybrid methodology through which monetary considerations are dealt with through Waterfall within the starting stage and growth is finished in an Agile framework:

The first three gates and two phases of the phase-gate process, followed by the logo for Agile development.

If a venture supervisor understands what their CFO needs and may guarantee them of the operational oversight offered by a phase-gate framework, there’s no purpose to make use of Waterfall over Agile in growth. Simply method the necessities of phase-gate administration with the understanding that its goal is monetary and authorized and doesn’t must affect your group’s growth work. Right here’s learn how to get began:

Deal with Budgeting as Iterative … Till It Isn’t

Yearly, the company price range allocates a hard and fast quantity to capital expenditures. One small piece of that’s allotted to software program growth initiatives, and enterprise leaders negotiate for the largest slice potential for his or her initiatives. This negotiation course of normally goes on for the primary two or three months of the fiscal 12 months.

Negotiation is extraordinarily iterative, so venture budgets fluctuate continually all through this course of. Empower what you are promoting sponsor by offering them with adjustable estimates. The purpose right here is to determine a price range envelope, so broad choices for a number of contingencies can be extraordinarily useful. For instance, alongside a baseline estimate, you would possibly present a less expensive possibility that will be possible if cost-saving circumstances are met, like doing information migration through guide entry, or a costlier possibility if additional options are included, like a cell app. It will assist what you are promoting sponsor alter their price range request as treasury committee negotiations get underway.

These estimates have to be offered forward of price range negotiations, as a result of as soon as the treasury committee approves the initiatives for the 12 months, there is no such thing as a going again. Within the phase-gate system, gate 3 is the place the venture is given treasury approval. Flexibility in budgeting exists, however solely on the entrance finish of the method, earlier than this gate happens.

Perceive Materiality

Your venture management workplace (or, for those who don’t have one, your monetary controller) can assist you perceive firm thresholds for materiality—the purpose at which monetary variation is vital sufficient to be recorded: The acquisition of a field of pens could also be thought of immaterial, however shopping for new computer systems for the group isn’t. The road the place immaterial turns into materials varies by firm. Understanding your organization’s threshold, and documenting accordingly, will endear you to anybody making accounting choices.

Share your area data together with your counterpart in finance; for instance, understanding the idea of swapping user stories and reaching consensus on learn how to deal with the apply will keep away from the looks of impropriety. Guarantee them that if any extra expense from a swap threatens to exceed the materiality threshold, you’ll escalate it so it may be correctly documented.

Communicate the Language of Finance

If you’re not already accustomed to weekly status reports and threat logs, get acquainted. Learn them. Love them. Fill them out frequently and precisely. Give them to your venture administration workplace and they’ll love you in flip.

Most significantly, for those who present venture price range stories or updates, make sure that your line merchandise titles and descriptions precisely match those you used when the price range was first permitted. If the permitted price range refers to “Epic: Authentication UI,” then that’s what it is best to put in your report—not “Epic Login Display screen” or every other variation. Ignore this recommendation and you might be assured to create friction and frustration throughout the complete monetary arm of the group.

Worth Delivered

If you happen to meet the monetary necessities above, congratulations! You’re fulfilling the C-suite’s have to “do Waterfall.” The capital bills are correctly recorded, and no a part of the method has required any change in how code is definitely written or how updates are delivered. Any compromises you’ve needed to make in planning have gained you allies in different departments and the C-suite. The method has additionally given you a greater understanding of how your group can work with different components of the group, quite than toiling in isolation—or worse, working in opposition to those that are presupposed to be in your facet.

An Agile purist would possibly contemplate these monetary considerations to be “contract negotiations.” Nonetheless, it’s simply as legitimate to consider your monetary colleagues as inner enterprise clients. Assembly their wants on issues of finance is simply one other type of buyer collaboration. And in Agile, the client’s notion of worth delivered all the time wins.

Additional Studying on the Toptal Initiatives Weblog:

What Is an Agile Coach and How Can You Turn out to be One?

SAFe Case Research: Transformation Notes From the Subject

Scrum Grasp vs. Agile Coach: Why Profitable Transformations Want Each

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