Technology

Agile vs. Waterfall: The Challenge for Finance


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Agile development processes can boost corporate responsiveness in an environment in which companies that rely on long-range planning processes and work on large-scale initiatives at a measured pace are being challenged by competitors with shorter time horizons.

Craig Sharples, Data Science Director at PwC, provided FEI’s Committee on Finance & IT (CFIT) with an overview of Agile.  He explained that “Waterfall” is a sequential development approach, while Agile breaks the project down into slices of product.  Agile teams do a little of everything all the time.  The finished product is released iteratively, and the output of each iteration feeds future requirements and design.

 

Sharples describes the role of finance in Agile application development:

  • The product owner should be from the business (vs. IT)
  • Work with IT to understand Agile, where Agile is being used, and how company policies may need to be adapted to embrace Agile principles while meeting finance needs
  • Embrace training and invest in the “spirit” of Agile, versus the mechanics and marketing spin. Avoid being a Waterfall shop with Agile mechanics
  • Work with internal audit to understand the impact of Agile on control frameworks, especially where Agile is being used on key finance applications;
  • Define finance reporting needs and work with software development to get the reports and information you need.
FEI’s Committee on Finance & IT (CFIT) is learning how finance teams can support Agile application development.  In a webinar for FEI members, sponsored by Microsoft, CFIT introduced Agile, showed how it can be implemented, and discussed options for how to account for Agile processes.  (This link provides links to the archived webinar and the Power Point deck.)

Darren Heffernan, EVP & CFO of Trintech Inc., described how Agile can be implemented in a mid-sized business.  While Agile has a number of benefits, including early course corrections and better product quality, it can also present a number of challenges, including difficulties in estimating delivery dates and total costs.

Mandy Mock, Director of Financial Information Services for Intel Corporation, described how Agile can be implemented at an enterprise level, which can be more complicated than in small teams.  She noted that significant education of teams and stakeholders is required.

Joe Prati, VP Finance - Information Technology at Johnson & Johnson, discussed Agile accounting issues.  The three primary accounting questions are:

  • When to capitalize?
  • What to capitalize? And
  • What are the depreciation implications?
Prati suggested that when deciding what to capitalize in Agile, apply similar functionality criteria as in Waterfall projects, and always capitalize at the time of deployment.  He added that depreciable lives should be consistent for all projects, regardless of development approach.

CFIT is collaborating with Financial Executives Research Foundation (FERF) on a research project on how Agile can be implemented within the finance function.  We are looking for executives who would be willing to share their experiences.  To learn more and to participate, please contact Bill Sinnett, Chief Operating Officer, Research, at [email protected]