Strategy

Agile vs. Waterfall Project Development: The Challenge for Finance


FEI Daily | 01/13/2016
by FEI Daily Staff

Companies that rely on long-range planning processes and work on large-scale initiatives at a measured pace may be challenged by competitors with shorter time horizons.

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In today’s competitive business environment, new product development requires rapid response to dynamic customer needs. Companies are looking for more efficient product and project development processes that help them bring innovation to the marketplace while incorporating customer feedback quickly and continuously.

Agile is one such process that can boost corporate responsiveness.

Agile was first adopted by software developers in the mid 1990s.  Agile practices emerged in reaction to Waterfall methods, which are characterized by heavy regulation and regimentation as well as an overly incremental approach.

Agile has recently gained mainstream acceptance as a way to boost corporate responsiveness.  IDC estimates the market size for Agile life cycle management tools will surpass $1 billion in worldwide revenues by 2017.

However, many companies are struggling to scale Agile throughout the enterprise, and find it more difficult than adopting it at the team level.  Finance is often an impediment to Agile application development, from both a cost accounting and a financial accounting perspective.  For example:

  • Traditional cost accounting expects a long horizon with detailed cost estimates;
  • Traditional budgeting draws attention to budget overruns; and
  • Traditional financial accounting needs to segregate capital expenses from operating expenses.
Agile practices are now being deployed in many industries, but CFOs will be challenged to align their financial and accounting practices to support these practices with the right policies and technologies.

Craig Sharples, data science director at PwC, offers the following suggestions for integrating Finance into 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 and meet 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 can support Agile application development.  In a special webcast for FEI members, sponsored by Microsoft, CFIT will introduce Agile, show how it can be implemented, and discuss options for how to account for Agile processes.  Webcast panelists will include:

 

Joseph Prati VP Finance - Information Technology Johnson & Johnson

Darren Heffernan EVP & CFO Trintech Inc.

Mandy Mock Director of Financial Information Services Intel Corporation

Craig Sharples Data Science Director PricewaterhouseCoopers

 

The Agile Finance webcast is scheduled for Thursday, January 21, at 2:00 p.m. ET.  Click here to register for this free webcast.