In my posting of November 18, 2009 entitled “DCG’s Software Development Value Index - A metric for effectiveness, efficiency and economy,” I referenced the concept that the system represented by a software development group takes inputs and performs a transformation of those inputs into outputs.  I proposed a system-based metric for assessing the value provided by the software development group as a result.

Now I would like to come back the concept that the transformation part of the process can be value neutral, value add or value multiplier.  What do I mean by those terms and how should they be prioritized when considering a project portfolio for a software development group?

A “Value neutral” project does not change perceived value of product or application e.g. some architectural changes, bug fixes, make work.

A “Value add” project clearly adds to perceived value but probably only for a subset of all the possible beneficiaries.  Examples might be interfaces to 3rd party software, incremental functionality to existing component, new local capability.

A “Value multiplier” project increases value for all possible beneficiaries.  Examples might be new front end, new component to enable new clients/market, new general capability, new language support.

Obviously, in an ideal world, all projects in a software development portfolio would be value multipliers.  However, that is not realistic and could even be a high risk allocation of resources.  In practice, a typical portfolio will contain a mix of the three types of project.

So what is the right balance?  It depends on the risk tolerance of the business, the available discretionary funds and the degree to which the business can drive the software development group to be flexible.  However, the DCG “rule of thumb” is to appotion your software development dollars somewhere between $1-$2-$1 and $1-$2-3 for value neutral - value add - value multiplier.  In other words, always try to spend twice as much on value add as value neutral then try to spend one to three times the value neutral amount of value multipliers.

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