We are mid-way through a software development project and our actual costs are starting to deviate significantly from our planned budget. How do you track these variances without slowing down the sprint velocity? Is Earned Value Management still the gold standard for Agile budget tracking?
3 answers
In my experience managing enterprise software rollouts, traditional Earned Value Management (EVM) can sometimes feel too rigid for Agile. However, "Agile EVM" is becoming very popular. Instead of tracking lines of code, you track "Story Points Delivered" against the "Budgeted Cost of Work Scheduled." This allows you to see the Cost Performance Index (CPI) in real-time. If your CPI drops below 1.0, you know immediately that you are overspending for the value being delivered. I recommend using a tool like Jira Align or even a customized Smartsheet dashboard to visualize this trend at the end of every sprint.
Are you finding that the variance is coming from unexpected labor hours or from hidden infrastructure costs like cloud computing credits? Pinpointing the source is the first step before you can adjust your tracking strategy.
For Agile, I prefer "Burn-up Charts" that include a cost line. It’s a very visual way to show stakeholders exactly when the budget will run out based on current spending.
I agree, Robert. Burn-up charts make the budget conversation much easier during stakeholder reviews because the data is hard to argue with.
It’s actually a mix of both, David. Our AWS costs spiked during the testing phase, and we didn't account for the senior architect's overtime. Do you think a "Rolling Wave" budget approach would help us re-forecast more accurately for the next quarter?