In this article we will focus on this part of the 360 SDLC. Please refer to the full 360 SDLC graphic at the end of this article for references. You may also want to refer to the Blog Article "The 360 SDLC Overview".
When you were hired it may not have been clearly explained to you that you would need to know some important things about running a profitable company. No you don't need to be an MBA to be highly successful, but knowing a thing or two about what your CEO and CIO are concerned about does help. Don't worry, I will distill some of the most important things to realize in this section about understanding business.
First, realize that every business is concerned with the following equation:
Profitability = Revenue - Costs
I am sure you have seen this at one point in your life. But if not, profitability is the ability for your business to create a financial gain. Trust me, everyone is much happier when the company is producing a profit. Your CFO may also refer to the PnL which stands for the total Profit or Loss made over a period of time. When a company's revenue exceeds it costs then we have a profit. If however, costs exceed revenue then we have a loss and a problem. Simple, revenue is the money the business will receive for providing its product or service and revenue and pricing is set by the business. With me so far? If so, you may be asking, "where do the costs come from." This is the next topic.
Costs are just the amount that must be spent to produce the software or service being sold. There are many costs associated with business, but believe it or not, you hold one of the largest costs of the company. The business must pay your engineering team a market wage to receive their work. The engineer's wage can be factored into an hourly rate. For example, if an engineer is making $80,000 per year, their hourly rate would be a little more than $38 per hour. If we know that the engineer estimates that it will take him 80 hours to complete a feature for the company, then the company expects this feature to cost $38 x 80 = $3,040. the company may have a goal to make 65% on all new features so they would have to set the price of the feature at $5,000 which would mean their profit would be calculated at $5,000 - $3,040 = $1,960. We see that understanding the costs helps create a budget for features and helps initially set revenue targets. Your teams' input on the estimated time for a feature sets this budget. And when you complete the feature your teams' input on the actual time is used to calculate the actual profitability for that feature. Without the cost information, the business is flying blind. And the better we get at estimations and tracking actual time, the easier it is for business to make accurate predictions and set price correctly.
How do we deliver estimated and actual time as part of the SDLC. In the 360 SDLC diagram, you see that Budget is part of the metrics gathered during the planning phase. If we require time estimations during the planning phase we can submit the estimated cost to set the budget of the feature. During the Build phase we require actual time worked on the feature be tracked. This doesn't mean the engineer must account for every second of the day, only that as a feature is completed that he is accountable for the final hours it took to produce it. Testers can add their time as well if it is significant. I recommend that the estimations and actual tracking be done at the task level. Use a tool like Jira to break down an engineer's work into tasks and have the engineer enter time each day for the tasks.
All that is left is to generate a time or cost report after the planning phase which is based on the estimates and again at the deployment phase based on the actual time. Use tools to produce these reports. Suddenly, you are now providing a key component to the health of your company that is always in front of the senior leadership. And you can start answering the question, "Are we working on the right things". If we can hit our revenue targets with the features that are being worked on, then at least monetarily we are working on the right things.
Take care and go do something amazing today!
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