Agile budgeting: How to do Continuous Planning, Delivery and Funding (Part 4)

Investment By Horizon

In last post we saw the Investment Buckets by the teams for Quarterly Releases and how those are managed or percentages allocated. Now let’s focus on a higher picture of investment by horizon ie for a multi year product budget allocation.

Strategically the LOBs decide on their budgeting by looking at the big picture of the Org allocation into the various kinds of projects ie

1. KTLO (These products/projects generate minimal revenue for product or support. They support the Orgs and usually have a flat rate or fixed cost for years or multi year deals.
2. Evaluate: These are the Products/Ideas that requires evaluation for next horizons. They are the ones that needs some investments based on the market, an example is AI investment.
3. Invest : Products that keep the current business going. (Generate the bulk of the revenue for product revenue or support revenue), these are the ones that the Org milks.
4. Emerge : Products that creates new opportunities. (Org doesn’t know if any of these ideas will work).
5. Divest : These are the Products that have almost come to the end of life iie the licences cost keeps diminishing, no new sales etc and should be allocated least or needs permission for selling the licence or support/maintenance.

Calculating Budget For Agile Teams

Since for Agile teams , we have a stable team roster, its easy to manage the budget this way. Also we know that we have time boxed iterations for say 2 weeks. This way we don’t have to calculate the budget for 12 months period but for the period of 1 month where in i have 2 iterations or sprints of 2 weeks each.

Usually for teams that work both on the PRODUCTs and KTLO operations , what is used is called a common “blended rate” . Let’s assume it’s $125/hour. . Let’s assume that we have a team roster of 10 people, but 4 of them are half-time, that means there are a total of 8 Full-Time Employees (FTEs).

=> $125 X 6 chargeable hours per day = $750 fixed burn rate per person per day.

=> $750 X 8 FTEs on team = $6,000 fixed burn rate per day.

=> $6,000 X 10 chargeable days in a 2-week iteration = $60,000 fixed iteration burn rate.

Assumption on above is 5 day week ie 2 weeks iteration excluding any KTLO work.

Of course , you may have some of the “Specific Labour Categories” ie based on Sr. Solution Architect, Business Analyst etc differing on the $$ Rate/ Hour. This way the total budget calculation changes for the per day burn rate.