A Business Case for Iterative Development

As the evidence sections show, there is data to support the assertions that the waterfall is more failure-prone for software-intensive projects and that disciplined IID with evolutionary requirements and design is correlated with lower rates of failure and defects, and higher rates of productivity.

Thus, a business case can be made based on several factors, including:

  • productivity

  • quality (of both the product and the process)

  • failure, delay, or cost-overruns

  • fit of product to the true demand

This analysis draws special attention to reduced failure rates. Projects fail for many reasons, but evidence [e.g., Thomas01] has shown that waterfall practices rather than IID were associated with the most significant failure factors.

Figure 6.7 shows research on failure rates [Standish00] across 35,000 projects. On average, 23% of projects failed and were cancelled before completion in 2000.

Figure 6.7. success rates


In addition, the average cost of these projects is:

Large Company



$1.2M USD



Taking the average project cost for medium-sized companies, $1.1 million USD (let's round to $1 million), and the average year 2000 failure rate of 23%, if the organization attempts 20 projects in a year (a $20 million budget), it loses (conservatively rounding down) $4 million USD on four failed projects.

If modestly adopting IID leads to a slightly reduced failure rate of 17% (vs. 23%) then for every 20 projects attempted, one more succeeds and roughly $1 million is saved.

In this case, even a substantial investment in education and consulting expertise to transition to IID pays off handsomely.[3] If a medium sized company with 10 projects per year and an annual $10 million project budget invested $100,000 in IID skills transfer, then on average in two years one more $1 million project will be successful. Assuming a two-year analysis and a 10% discount rate, this investment gives a (rounding) NPV of $700,000 with an IRR of 200%, not to mention reclaiming the lost opportunity cost of putting that $1 million project to work.

[3] Using experienced mentors to coach IID pilot projects is an adoption best practice.

In summary, although goals such as productivity and quality improvement are associated with IID, a primary, costly issue is reducing the expensive rate of failure of software projects and IID is strongly correlated with the major factors to reduce failure and increase success. The opposite is true for waterfall practices.

Agile and Iterative Development (Agile Software Development Serie. A Manager's Guide2003)
Agile and Iterative Development (Agile Software Development Serie. A Manager's Guide2003)
Year: 2004
Pages: 156

flylib.com © 2008-2017.
If you may any questions please contact us: flylib@qtcs.net