Resource Cost Versus User Story Cost -- Can We Match Them?

12 August 2013

Sunil Upadhye
IDC Technologies Inc


Each quarter we need to go through a funding gate review, and management always wants to know why user story cost cannot match with resource cost. I believe there are a number of reasons, and here I provide them along with suggestions for management.

  1. Up-front estimation of user story cost does not give a real picture of how many actual hours have been put in by each stakeholder to complete the user story, from definition to post-production checkout.
  2. For an Agile team, resource cost is a fixed cost and user story cost is a variable cost, one that depends on many factors. These include the complexity of the user story, the number of hours actually required to complete the user story, and who all the stakeholders are who worked on that user story right from definition to post-production checkout (BA, tester, developers, customer, ScrumMaster, architect, data modeler, DBAs, deployment engineers, etc.).
  3. To determine the real cost of a user story, I think it is a good idea for each resource to put the user story in the time sheet, and when we apply actuals we can know the real cost of that user story. Due to the variable nature of user stories, there are times when a given user story may not require all the stakeholders. Each user story is different and can have different stakeholders.
  4. User story cost = actual number of hours / each stakeholder * rate of each stakeholder. On the other hand, resource cost or sprint cost = 10 (#days in a sprint) * 8 (hours per day) * rate (per resource). In any given sprint, the resource time and rate are fixed; but for a user story, the time for each resource is variable even though the rate is fixed.
  5. We found that actual user story cost is almost always higher than the resource cost due to the variable cost of user stories.
  6. Over a period of time, by tracking actual user story cost, we can become better at estimating an Agile project rather than estimating sprints and the resources required for each sprint.
  7. We also found that in certain situations, for simple to medium user stories, resource cost is higher than user story cost.
  8. There are no ways to match user story cost to resource cost -- and this is very difficult to convey to management.
  9. We think Agile projects should be funded not on user story cost but instead based on the number of sprints and the number of resources required to complete each sprint * the rate of each resource.
  10. We think user story cost is not a good indicator.
  11.  No matter whether a user story is deployed to production or not, we need to pay resources, even in cases of experimentation and throw-away code. In our experience, resource cost is a good indicator for funding approval.

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Comments

Glen Wang, CSM, 8/12/2013 10:08:25 PM
This is a good discussion about user story cost, though the conclusion is that user story cost is not a good indicator.
Bhoodev Singh, CSP,CSM,CSPO, 8/14/2013 11:39:14 AM
At first place, I don't understand how you would determine the user story cost without considering the resource cost. Resource cost data points are required in order to calculate the user story cost.

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