How did I measure Earned Value (EV) in IT Agile Engagements?

This concept is called Earned Value Management (EVM).

Three data points are used to establish the initial baseline:

1. The number of planned sprints (or iterations) in a release
2. The total number of planned story points in a release
3. The planned budget for the release

To calculate the Agile EVM metrics, there are four measurements needed:

1. The total story points that were completed.
2. The number of sprints (or iterations) completed.
3. The total Actual Cost (AC)
4. The total story points added or removed from the release plan.

The comparison of the Earned Value (EV) against the Planned Value (PV) lies at the core of the EVM.

Planned Value (PV) is the value of the work planned for a certain date. It is the entire budget for the work to be completed at the planned date.

In Scrum terminology, it is the sum of the estimated feature sizes for all the features up until the planned date.

Earned (EV) is the value of the work completed on the same date as used for PV.

Earned Value is not synonymous with the actual cost, nor does the term refer to business value. Earned Value refers to the technical performance (work) "earned" against the baseline, or the work planned.

In Scrum terminology, it is the sum of the estimated story points for the features up until the calculation date.

Actual Cost is what the name implies: the cost in dollars to complete a set of features.

So, now to calculate Earned Value (EV), I need to do it as

Let's say the total budget of the project (as per the initial plan) is $175,000.

Then PV = Expected % completion * Total budget = 25% * $175,000 = $43,750

Now Actual % completion of work = Sigma or summation of story points completed/Total story points planned = 40/200 (in this example) = 1/5 = (1/5) * 100 % = 20%

Some of the values used above will be from the Sprint Closure report or the metrics at the end of the sprint or metrics captured "until" now.

EV = Actual % completion of work * Total budget

= 20% of $175,000 = $35,000

Now Schedule Performance Index (SPI) = Earned Value / Planned Value; it indicates whether this project is ahead of, behind, or on schedule.

Cost Performance Index (CPI) = EV/AC, where AC is the Actual Cost. It indicates whether the project is under, over, or on budget.

Now from a pragmatic approach, I have integrated all these calculations in my Corporate Pricing Deck (CPD) where I take "informed decisions" by correlating or corroborating these insights or inferences together with the agile contracting/pricing models and the clauses of the SoW (Statement of Work). That's how the real-time IT industry operates!

Just knowing these formulas, may help one to clear PMP exams but NOT to effectively, and efficiently execute complex real-time IT engagements. One needs to know how to apply it correctly from a "systems thinking" approach and make data-driven choices/informed decisions within the constraints.

To learn more about CPD, one can read the below article on it.

(3) Importance of Corporate Pricing Deck (CPD)! | LinkedIn

And to know more about responding to RFPs & SoW etc. you can refer to my below YouTube Video.

Balaji's Experiential Insights on - How to Respond to RFPs amp; How to Use Corporate Pricing Deck (CPD)

Balaji's Experiential Insights on - How to Respond to RFPs & How to Use Corporate Pricing Deck (CPD) (youtube.com)

Balaji's Experiential Insights on How to Write a Statement of Work (SoW) in a real-time IT project?

Balaji's Experiential Insights on How to Write a Statement of Work (SoW) in a real-time IT project? (youtube.com)

If you like to be mentored by me on all these real-time capabilities, then the first step is to ping me on my WhatsApp No. (+91 9600074231) and then to book a timeslot with me for a free "Career Strategy" call.

Hope to meet you all soon in my next video/article!