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“Sprint Contract”: managing scope
    and cost in Scrum projects
              Carlos Santos da Silva
             http://c-santos.blog.com
       http://br.linkedin.com/in/silvacarloss

             October/2012 (latest review)


                    Nokia Internal Use Only
Bio
 Working in Manaus Industrial Park for +24 years
  Industry: 12 years
  R&D:      12 years
 Experience
  Development embedded software for automated devices,
   microwave-ovens, TV sets, DVD payers, telephones;
  Managed Product Engineering, Industrial Engineering and
   Quality Assurance;
  Managed SW development projects for LCD/Plasma TVs;
  Managed Operations for Mobile Linux Software area;
  Managing Product Program for mobile devices.



                         Nokia Internal Use Only
Agenda
• Introduction
• Framework (concept)
• Framework (practice)




                    Nokia Internal Use Only
Introduction




   Nokia Internal Use Only
Portfolio Setup
                           Company Portfolio
                                       Program A
                                                       Program B
        Project A
                               Project B                           Project E
     Subproject X
                                                       Program C
            Subproject Y       Project C




                                                                      External
How to manage scope and cost                                          Project D
 of an external Scrum project?
                             Nokia Internal Use Only
Types of Contracts & Risks
                               Fixed Cost &
 High                          Fixed Scope                                Low
                            1. the "Sprint Contract"
                          2. Fixed Price / Fixed Scope
                             3. Time and Materials
           4. Time and Materials with Fixed Scope and a Cost Ceiling
           5. Time and Materials with Variable Scope and Cost Ceiling
Supplier                   6. Phased Development                        Customer
                          7. Bonus / Penalty Clauses
                                8. Fixed Profit
                   9. “Money for Nothing, Changes for Free”
                               10. Joint Ventures

                             Variable Cost &
 Low                         Variable Scope                               High




                               Nokia Internal Use Only
Scrum Project Parameters


                     Cost                                        Quality
• PBL                                        • Sprint
• Sprint       • Team Size                     Length         • DoD
  Backlog      • Sprint
                 Length
     Scope                                             Time




                             Nokia Internal Use Only
Fixed or Variable


                 Revenue




                                                           $$$
$$$




                                                                                     u   e
                                                                              v   en
                                Revenue is constant,
                                independently of the
                                                                         Re
                 Pr
                   ofi          effort applied or delivery date.
                         t                                                    it
                                                                         P rof




                 Effort                                                 Effort

      Fixed Price/ Fixed Scope                             Variable Scope/ Variable Cost

                                        Nokia Internal Use Only
Bonus/Penalty Clause


                   Revenue
$$$




                   Pro                            Sprint Review
                         fit




                                          G
                                           ai
                                           n/
                                             Lo
                                                ss
                   Effort

      Fixed Price / Variable Scope
                Nokia Internal Use Only
Framework




  Nokia Internal Use Only
Sprint Contract (example)
     Project Start




     Sprint Work
      Sprint Work




                                                         no

                               Payment:
          Goal?      no
                           SprintRate * 90%


           yes


                               Payment:
no     Pts <90%?     yes
                           SprintRate * 95%


           no

                                                                        Payment:
                              Payment:                                SprintRate *
     Pts 90~100%?    yes                                ROI?   yes
                              SprintRate                             MissingSprints *
                                                                           30%

           no

                                                                      Finish Project
                               Payment:
       Pts > 100%    yes
                           SprintRate * 105%




                                   Nokia Internal Use Only
Sprint Contract (Simulation: Sprint rate $1000)
 Sprint #1     Sprint #2        Sprint #3                 Sprint #4        Sprint #5




 Sprint #6
 Sprint #6     Sprint #7
               Sprint #7       Sprint #8
                               Sprint #8                  Sprint #9
                                                          Sprint #9        Sprint #10




ROI?           Goal?                  Scoring?                        Payment:


                                                                      R$1.050
                                                                      R$1.000
                                                                      R$900
                                                                      R$950
                                               <90%
                                                90~100%
                                               >100%                  R$1.500


                      Project Overall Cost:

                           +
                    R$4.900 R$1.500     =    R$6.400


                           Nokia Internal Use Only
In Practice...




    Nokia Internal Use Only
First Estimation

•   Customer’s PO prepares an initial PBL
•   Supplier’s team comes for estimation
•   Story points relative (size)
•   Planning Poker: 1, 2, 3, 5, 8, 13 and 20 pts




                    Nokia Internal Use Only
Sprints to Go
• First velocity estimated by the team (sprint length= 15 d)
• First velocity used to calculate remaining sprints
   – Backlog = 291 pts; S01 = 34 pts
   – 291 pts / 34 pts = 8.5 sprints  9 sprints




                             Nokia Internal Use Only
Make or Buy?
• Make of Buy decision based on:
  – Strategic project
  – Competence and resources available to do internally
  – Cost comparison: internal vs. external
  – Other relevant decision
• What’s the internal cost?
  – Team size during estimation meeting?
  – Raise effort in Man Month, then:
     • MMRate = $10.000
     • MHRate = $10.000/176h = $56,82
     • MDRate =MH * 8.8h = $500,02
     • Project = SprintLen*TeamSize*MDRate* SprintsToGo =
       15*5*500*9 = $337.500 (SprintRate = $37.500)
                            Nokia Internal Use Only
How to validate Goal, %pts e ROI?




           Nokia Internal Use Only
Payment Calendar
         Sprint Length: 15 days




S01:   Aug                   S04/05: Nov
S02:   Sep                   S06:    Dec
S03:   Oct                   S07/08: Jan+



             Nokia Internal Use Only
Delivery Results
                  •      Actually run in practice during 1.5 years
                  •      Product Owner (customer)
                  •      Scrum Master (supplier)
                  •      Transparency
                                                                                                                                                                     Project On Time Delivery per Sprint
                                                                                                                                               120%
                                 Project On Time Delivery per Sprint
                                                                                                                                                      100%    100%      100%     100%              100%      100%     100%      100%    100%    100%
                120%                                                                                                                           100%
                                 100%       100%        100%           100%        100%         100%      100%
                100%
                                                                                                                                               80%




                                                                                                                               Delivery Rate
                80%
Delivery Rate




                        65%                                                                                                                    60%
                60%
                                                                                                                                                                                            39%
                                                                                                                                               40%
                40%

                                                                                                                                               20%
                20%


                 0%                                                                                                                             0%
                         1         2           3              4             5        6           7             8                                        1        2       3             4     5        6       7             8     9       10      11      12

                                                                                                                                                      2010/01 2010/02        2010/03       2010/04 2010/05        2010/06       2010/07 2010/08 2010/09 2010/10
                       2009/07   2009/08   2009/09                2009/10         2009/11            2009/12
                                                     Year/Month, Sprint#                                                                                                                     Year/Month, Sprint#

                                  Average of OTD Target 90%             Average of OTD Actual                                                                        Average of OTD Target 90%                Average of OTD Actual



                                                                                                                   Nokia Internal Use Only
Thanks 




 Nokia Internal Use Only
Recommended Material
• 10 Contracts for your next Agile Software Project
  (Peter Stevens)
• Outsourcing & Offshore Agile Delivery with Scrum
  (Craig Larman)
• Your Scrum Checklist (Boris Gloger)




                       Nokia Internal Use Only
Backup Slides




    Nokia Internal Use Only
Abordagem Ágil – Scrum




                                  Fonte: Mountain Goat
        Nokia Internal Use Only
Sprints inside Project Cycle
P                                                                                             C
    D
P                                                                                             A

        Início         Plano                       Execução               Encerra




         SP1               SRV    SP1            SRV   SP1          SRV   SP1           SRV
                 WIP                      WIP                 WIP                 WIP
         SP2               SRT    SP2            SRT   SP2          SRT   SP2           SRT

               ...                      ...                  ...                ...




                     SP1                               SRV

                                 SP2            SRT


                           Nokia Internal Use Only
Contract Example




     Nokia Internal Use Only

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Sprint Contract

  • 1. “Sprint Contract”: managing scope and cost in Scrum projects Carlos Santos da Silva http://c-santos.blog.com http://br.linkedin.com/in/silvacarloss October/2012 (latest review) Nokia Internal Use Only
  • 2. Bio  Working in Manaus Industrial Park for +24 years  Industry: 12 years  R&D: 12 years  Experience  Development embedded software for automated devices, microwave-ovens, TV sets, DVD payers, telephones;  Managed Product Engineering, Industrial Engineering and Quality Assurance;  Managed SW development projects for LCD/Plasma TVs;  Managed Operations for Mobile Linux Software area;  Managing Product Program for mobile devices. Nokia Internal Use Only
  • 3. Agenda • Introduction • Framework (concept) • Framework (practice) Nokia Internal Use Only
  • 4. Introduction Nokia Internal Use Only
  • 5. Portfolio Setup Company Portfolio Program A Program B Project A Project B Project E Subproject X Program C Subproject Y Project C External How to manage scope and cost Project D of an external Scrum project? Nokia Internal Use Only
  • 6. Types of Contracts & Risks Fixed Cost & High Fixed Scope Low 1. the "Sprint Contract" 2. Fixed Price / Fixed Scope 3. Time and Materials 4. Time and Materials with Fixed Scope and a Cost Ceiling 5. Time and Materials with Variable Scope and Cost Ceiling Supplier 6. Phased Development Customer 7. Bonus / Penalty Clauses 8. Fixed Profit 9. “Money for Nothing, Changes for Free” 10. Joint Ventures Variable Cost & Low Variable Scope High Nokia Internal Use Only
  • 7. Scrum Project Parameters Cost Quality • PBL • Sprint • Sprint • Team Size Length • DoD Backlog • Sprint Length Scope Time Nokia Internal Use Only
  • 8. Fixed or Variable Revenue $$$ $$$ u e v en Revenue is constant, independently of the Re Pr ofi effort applied or delivery date. t it P rof Effort Effort Fixed Price/ Fixed Scope Variable Scope/ Variable Cost Nokia Internal Use Only
  • 9. Bonus/Penalty Clause Revenue $$$ Pro Sprint Review fit G ai n/ Lo ss Effort Fixed Price / Variable Scope Nokia Internal Use Only
  • 10. Framework Nokia Internal Use Only
  • 11. Sprint Contract (example) Project Start Sprint Work Sprint Work no Payment: Goal? no SprintRate * 90% yes Payment: no Pts <90%? yes SprintRate * 95% no Payment: Payment: SprintRate * Pts 90~100%? yes ROI? yes SprintRate MissingSprints * 30% no Finish Project Payment: Pts > 100% yes SprintRate * 105% Nokia Internal Use Only
  • 12. Sprint Contract (Simulation: Sprint rate $1000) Sprint #1 Sprint #2 Sprint #3 Sprint #4 Sprint #5 Sprint #6 Sprint #6 Sprint #7 Sprint #7 Sprint #8 Sprint #8 Sprint #9 Sprint #9 Sprint #10 ROI? Goal? Scoring? Payment: R$1.050 R$1.000 R$900 R$950 <90% 90~100% >100% R$1.500 Project Overall Cost: + R$4.900 R$1.500 = R$6.400 Nokia Internal Use Only
  • 13. In Practice... Nokia Internal Use Only
  • 14. First Estimation • Customer’s PO prepares an initial PBL • Supplier’s team comes for estimation • Story points relative (size) • Planning Poker: 1, 2, 3, 5, 8, 13 and 20 pts Nokia Internal Use Only
  • 15. Sprints to Go • First velocity estimated by the team (sprint length= 15 d) • First velocity used to calculate remaining sprints – Backlog = 291 pts; S01 = 34 pts – 291 pts / 34 pts = 8.5 sprints  9 sprints Nokia Internal Use Only
  • 16. Make or Buy? • Make of Buy decision based on: – Strategic project – Competence and resources available to do internally – Cost comparison: internal vs. external – Other relevant decision • What’s the internal cost? – Team size during estimation meeting? – Raise effort in Man Month, then: • MMRate = $10.000 • MHRate = $10.000/176h = $56,82 • MDRate =MH * 8.8h = $500,02 • Project = SprintLen*TeamSize*MDRate* SprintsToGo = 15*5*500*9 = $337.500 (SprintRate = $37.500) Nokia Internal Use Only
  • 17. How to validate Goal, %pts e ROI? Nokia Internal Use Only
  • 18. Payment Calendar Sprint Length: 15 days S01: Aug S04/05: Nov S02: Sep S06: Dec S03: Oct S07/08: Jan+ Nokia Internal Use Only
  • 19. Delivery Results • Actually run in practice during 1.5 years • Product Owner (customer) • Scrum Master (supplier) • Transparency Project On Time Delivery per Sprint 120% Project On Time Delivery per Sprint 100% 100% 100% 100% 100% 100% 100% 100% 100% 100% 120% 100% 100% 100% 100% 100% 100% 100% 100% 100% 80% Delivery Rate 80% Delivery Rate 65% 60% 60% 39% 40% 40% 20% 20% 0% 0% 1 2 3 4 5 6 7 8 1 2 3 4 5 6 7 8 9 10 11 12 2010/01 2010/02 2010/03 2010/04 2010/05 2010/06 2010/07 2010/08 2010/09 2010/10 2009/07 2009/08 2009/09 2009/10 2009/11 2009/12 Year/Month, Sprint# Year/Month, Sprint# Average of OTD Target 90% Average of OTD Actual Average of OTD Target 90% Average of OTD Actual Nokia Internal Use Only
  • 20. Thanks  Nokia Internal Use Only
  • 21. Recommended Material • 10 Contracts for your next Agile Software Project (Peter Stevens) • Outsourcing & Offshore Agile Delivery with Scrum (Craig Larman) • Your Scrum Checklist (Boris Gloger) Nokia Internal Use Only
  • 22. Backup Slides Nokia Internal Use Only
  • 23. Abordagem Ágil – Scrum Fonte: Mountain Goat Nokia Internal Use Only
  • 24. Sprints inside Project Cycle P C D P A Início Plano Execução Encerra SP1 SRV SP1 SRV SP1 SRV SP1 SRV WIP WIP WIP WIP SP2 SRT SP2 SRT SP2 SRT SP2 SRT ... ... ... ... SP1 SRV SP2 SRT Nokia Internal Use Only
  • 25. Contract Example Nokia Internal Use Only

Editor's Notes

  1. Arcabouço Scrum com seus componentes. Idioma original em inglês para não influenciar no entendimento.
  2. Explicar sobre o ciclo PDCA. Mostrar que na camada de gerenciamento de projetos o PDCA acontece em nível macro e no Scrum acontece à cada Sprint, naturalmente refletindo positivamente no gerenciamento de projetos.O procedimento referencia ao nível de gerenciamento de projetos, a instrução de trabalho detalha sobre o arcabouço, as minutas das cerimônias e artefatos tornam-se evidências através de registros.