How much does a Story Point cost?
I’ve recently been coaching a team that has taken particularly well to Scrum. After a few iterations the project team quickly settled down into a regular rhythm of producing software. The ScrumMaster (Ken) dutifully recorded the teams Velocity [the number of Story Points completed per iteration], in addition to some financial metrics. This included the cost of each iteration (also known as the burn rate).
At some point the Ken decided to calculate the cost of each story point. This is a brief description of what he did and the results.
The Story Point Cost
The cost of each story point was calculated using a simple calculation; cost per iteration divided by the number of story points per iteration. For simplicity I’ve called this the Story Point Cost.
Story Point Cost = (Cost per Iteration) / (Story Points per Iteration)
The team was estimating Story Points using a linear scale (0 through 5), so there was no complicated mathematics. If you’re using a Fibonacci or exponential scale then you may wish to use something more sophisticated. I should also mention that the cost per iteration (burn rate) was an approximate calculation and should only be considered as indicative of the true cost.
Here an image (WordPress doesn’t do tables) of the results tabulated after the ninth iteration:
And a graphical representation of the same data:
What is interesting in the graph above is the rapid decline of the Story Point Cost after the first iteration. Clearly there was something happening to the team that led to this dramatic decline.
I was a part of the team at the time, and my recollection was that the team did a lot of learning (about Scrum) during that first iteration. I’m sure there was some synergy due to closer collaboration between team members but as the team had previously worked together this was unlikely to account for the magnitude of the decline.
What can be done with this information
So what use is this information? The most obvious use is in estimating the final cost of the project by multiplying the total estimated story points by the high and low values to calculated a range. For practical reasons, I would have discarded the very first value simply because it’s so far outside that of the others.
Finally, is it valid to compare the Story Point Cost between two different terms? Absolutely not. Different teams have different abilities, ways of estimating and work habits. The consequence of this is that different teams will have very different results in both their estimates and Story Point Costs. As a direct example of this, here are the results for a different team. Firstly the tabulated data:
And the graphical data:
Summary
I’ve looked at a simple calculation that uses empirical data to calculate the Story Point Cost. Provided that you are using a linear scale for estimating Story Points, calculating the Story Point Cost may be a quick and easy way to provide the Product Owner with a cost range for a given project.
I’ve also presented some simple graphs to show how the Story Point Cost changed over the duration of the project.
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Le coût du point
Kane Mar vient de publier un billet, pertinent comme toujours, sur “How Much does a Story Point cost?”
C’est une mesure qui se rapproche de celle de la vélocité, qui est la mesure standard des plannings agiles. La… -
[...] How much does a Story Point cost? « Kane Mar (tags: agile blogs) [...]
That’s very interesting, but as a student, I wonder why iterations have different costs ? What elements have been considered ?
For example, if you consider only teamate’s wages, it may be a constant value.
That’s a good question and looking back on it I could have explained myself better. The “cost per iteration” is purely a function of team hours multiplied by an internal rate per hour. Specifically,
(Cost Per Iteration) = (Total Team Hours) * US$105
The US$105 was some internally determined number that the client used for project budgeting. So, the question now becomes, why does the total number of hours per iteration change constant? It’s simply because people have doctors appointments, take vacation, public holidays etc. For a team of 9 people, there is sufficient activity for the total number of hours to fluctuate by +/-10% every iteration.
I hope that answers the question. Thanks for ask it!
I think you could use the first Iteration cost as a ‘startup’ cost. The team is forming, storming, & hopefully norming during that time. I also think using two values (low & highest, throwing out the first iteration value) is a very good idea.
Thank you this is very helpful.
I am a member of a scrum team and am completely lost. We have been told (maybe incorrectly) that story points are an index of complexity, not time.
Our, managers then came our with calculations similar to yours saying how many story points we are expected to do per sprint.
This seems completely crazy to us, as we reported extremely long simple tasks (and therefor costly in terms of man hours), and short simple talks as similar story points.
>We have been told (maybe incorrectly) that story points are an
> index of complexity, not time.
I believe that is an incorrect interpretation of Story Points. In a recent email on the Trainers email list, Mike Cohn (author of Agile Estimating and Planning) said:
“… there should be no “two schools of thought” as to what we should estimate. There is no point in estimating complexity except as complexity influences the effort involved. Story points should represent an estimate of how long something will take to do.”
>Our, managers then came our with calculations similar to yours
> saying how many story points we are expected to do per sprint.
I’m sorry to hear this. The teams velocity is what is it … in other words, it cannot be determined ahead of time.
From what you’ve said, I imagine that your management is using a projects budget as the starting point and are working backwards to derive a “expected velocity.” This is purely fiction and should be reject out of hand without further consideration.
we calculate story pionts relatively and number of story completed per iteration is velocty. per iteration cost is okay bu an iteration may have stories with different story points so we can not have same cost for every story in iteration