Agile vs. Waterfall: What are the overhead costs

Take “ TIA -Transparency, Inspection, Adaptation" approach to optimize cost.

In cost accounting, overhead is "expenses incurred in support of a project"; work preformed to support the project that is indirectly charged to that project. This is distinct from "direct charge expenses"

Agile presents advantage for managing overall cost. The cost profile of a Waterfall project is significantly higher than the equivalent project when done with proper Agile methods, either a direct cost or overhead. By "proper", it means actually doing continuous integration & test with automation, not just having a daily standup and a Scrum Master on staff. 
- Waterfall projects use more people (run hot) 
- Waterfall projects take much longer to finish (run long) 
- Waterfall projects have more bugs (run down) 
- Waterfall projects often need to be rebooted and restarted ( run off) 

There will be overhead, and it will be high if the Agile team is really a waterfall team in disguise and the scrum master is really a PM in disguise. If you're Agile then stick to the patterns, make sure everything is visible and then trust the Agile team to deliver. In the short term, don't forget to take the time to start well in Agile, if you fail to do the start period, you'll have the same overhead on Agile as on Waterfall. It's not the methodology, but the practice. During the start period, you'll see an overhead because the team will produce nothing while in waterfall something will be done.

The talent overhead of Agile vs. Waterfall has a different cause: Waterfall projects tend to have more staff, thus you spend more time recruiting - and recruiting is an indirect "overhead" expense. However, the extra staffs themselves along with the layers of functional management above them are direct charge expenses, thus not overhead. A high performing Agile team is the self-managed team which is more matured than the conventional team, each member is an equal partner in a team and is required to communicate and own work independently. However, they study shows that the cost of resources in Agile is 20% more than the conventional team.

Take “ TIA” approach to optimize cost. A little bit of overhead or a mastered overhead could be seen in your agile planning but with the approach "Transparency, Inspection, Adaptation." You could limit the overhead and solved it as soon as possible. No need to wait for a dedicated milestone of the project or - the worst case - the end of the project to solve this problem. The aim of Agile methodology is to deliver consistently, periodically with the better quality on a small functional perimeter.

Like everything, it depends. Part is the nature of your environment. If there is a lot of change and discovery during execution, Agile/Scrum will serve you better than re-planning with traditional Waterfall. At the same time, you will see tradeoffs. You have a daily Scrum meeting vs. a weekly traditional status meeting. So with Agile you have many more meetings, but you are much faster at finding issues and resolving them. Thus there is more agility and faster velocity, but this is obtained in part by having a daily standup vs. a weekly status meeting.

One of Agile pitfalls is silo thinking which can cause the inefficiency and mediocrity. Agile encourages most teams to use additive design, where a product is formed by a bag of stories linearly added. Most products built with Agile look like they were thought about one feature at a time and constructed one feature at a time; they lack "wholeness" and conceptual consistency. They lack a "strong center." These factors contribute to the overall inefficiency or product mediocrity associated with doing things in series vs. parallel. Mediocrity means that the product itself tends to be good but not great, often uninspiring. At least it's on time and on budget and the code is solid. Agile delivers on that aim, however, most of the emphasis is on the project, not the product. 
- Agile projects tend to deliver consistently mediocre products without holistic thinking and plan.
- Agile projects can be efficient if done right...most aren't done right.

 There are projects better fit for Agile, and others fit to apply traditional Waterfall PM. Agile as an emerging project philosophy and methodology, can be continuously tuned to reduce overhead and improve efficiency and effectiveness. 

Posted in: Agile,IT Finance