Agile Software Management Accounting for Systems
- Feb 20, 2004
- Sample Chapter is provided courtesy of Prentice Hall Professional
- A General System
- Detail Complexity Versus Systems Complexity
- Throughput Accounting for General Systems
- A System of Software Development
- A More Complex Software Development System
- The System Goal
- Financial Metrics for General Business Systems
- Financial Metrics for Software Development Systems
- Predicting the Future
- Framing the Problem
- Understanding Software Production in the Value Chain
- Throughput Accounting Versus Cost Accounting
- Summary
This chapter is from the book
Agile Management for Software Engineering: Applying the Theory of Constraints for Business Results
The System Goal
Throughout the rest of this text, I will refer to the desired adaptive behavior of the system as The System Goal. Undesired adaptive behavior is failure to meet the system goal. In other words, it is energy needlessly expended. Lean Production has a different term for this—waste! The Toyota Production System uses the original Japanese term—muda! Waste can be the generation of by-product or simply energy expended that produces no positive value-added in pursuit of the system goal.
Expending energy costs money. Undesired adaptive behavior, or waste, means that the OE is higher than it needs to be. The same T can be achieved with less OE if waste is reduced or eliminated.
The goal of a business, with the exception of not-for-profit and charitable foundations, is to make a profit. In other words, the desired adaptive behavior of a software development system is to make a profit—not produce working code! Working code alone is not enough. The code delivered as Throughput must be of customer value. The greater the value, the greater the Throughput! Throughput in software development is measured in units of currency ($).
A profit implies that the value of the output from the business is greater than the value of the input to the business. The input to a software development business is the Investment (I) made in product ideas and the cost of expending energy (OE) developing the software. The output from the business is the sales value of working code less any direct costs of sale, such as installation, training, delivery, hardware, operating systems, or middleware. The elementary metrics Throughput, Investment, Operating Expense and Inventory are defined in Figure 2-8.
)
Figure 2-8. Summarizing Throughput Accounting for general systems.
Account Sign In
View your cart