Risk Management For Software Projects: Tom Demarco, The Atlantic Systems Guild, Camden, Me

SUGI 29
Planning, Development and Support
Paper 130-29
Risk Management for Software Projects

Tom DeMarco, The Atlantic Systems Guild, Camden, ME
ABSTRACT
Risk management is project management for adults. It guides project managers to focus specifically on what can go wrong, instead the more usual "if everything goes as planned" approach. The benefits of risk management include these: it enables aggressive risk-taking it protects management from being blind-sided it provides minimum cost downside protection In this keynote, Tom DeMarco lays out the basics of a risk-focused strategy and provides clear guidelines for its implementation.
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Risk Management for Software Projects

SUGI2004: Montreal, May 10, 2004 Copyright 2004 by Tom DeMarco: The Atlantic Systems Guild
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RISK MANAGEMENT . . .
nothing but the beef: three reasons why you bother one key tool use of monte-carlo simulation one metric to track (late) risk manifestation a useful pattern from the past a scary but wonderful observation the did-we-really-do-it? test
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RISK MANAGEMENT ATROCITIES

Youre blind-sided by a risk thats happened a thousand times before. You have no infrastructure in place to deal with a risk when it materializes. You dont have a useful (early) transition indicator.
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DENVER INTERNATIONAL AIRPORT

The automated baggage handling system:
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D.I.A. PROJECT: CRITICAL PATH

1993 1994 1995 Baggage Handling Software . . Integration testing . Acceptance & signoff
Airport opening
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RISK MANAGEMENT ATROCITIES

Youre blind-sided by a risk thats happened a thousand times before. You have no infrastructure in place to deal with a risk when it materializes. You dont have a useful (early) transition indicator.
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1. You have zero chance of delivering before January of next year. 2. My best guess is youll be done around April 1st . . . 3. but to be at least 50% sure, youd better advertise a date of May 1 or later. 4. To be 100% safe, youd have to allow for delivery as late as end of next year.
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RISK DIAGRAM:
A risk diagram shows explicitly how uncertain we are about delivery date (or anything else).
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SENSIBLE RISK MANAGEMENT:

Effort
52 person months
20,000 FP
Size in (for example) Function Points
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SENSIBLE RISK MANAGEMENT:

The project will take this much time.
9/2000 Effort 40 52 70 (Person Months) Delivery Date 6/2000 11/2000

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RISK DIAGRAMS IN USE:

Size Inflation
Productivity Variation
Sources of Uncertainty
Flaw in size estimate
Risk Modeling Process
Delivery Date
Resultant Uncertainty
etc.
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Number of Instances in Range

100 10 20 30 40 50 60 70 80 90 0
21-FEB-04
3-JUN-04
15-SEP-04
Alpha Platform:
27-DEC-04
9-APR-05
Project Simulation (500 Runs)
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Completion Date
15
21-JUL-05
3-NOV-05
15-FEB-06
27-MAY-06
9-SEP-06
CANCELLED
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Alpha Platform Project

Earned Value Demonstrated by Versions Running
18.00 16.00 Earned Value (Running) in Millions 14.00 12.00 10.00 8.00 6.00 4.00 2.00 Jun-01 Dec-01 Jun-02 Dec-02 Jun-03 Dec-03
September 22, 2003
Expected Version Acceptance Date Actual Version Acceptance Date
Jun-04
Dec-04
Calendar Date
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SCARY BUT WONDERFUL OBSERVATION:
The real reason we need to do risk management is not to avoid risks, but to enable aggressive risk-taking.
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THE FIVE CORE RISKS

The following five risks are common to all hightech projects: Size inflation Original estimate flaw Personnel turnover Failure to concur (breakdown among the interested parties) Productivity variation
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THE ARE WE REALLY DOING RISK MANAGEMENT TEST

(in six parts): 1. Is there a census of risks with at least 10-20 risks on it? 2. Is each risk quantified as to probability and cost and schedule impact? 3. Is there at least one early transition indicator associated with each risk?
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THE ARE WE REALLY DOING RISK MANAGEMENT TEST (CONTINUED)

4. Does the census include the core risks indicated by past industry experience? 5. Are risk diagrams used widely to specify both the causal risks as well as the net result (schedule and cost) risks?
6. Is the scheduled delivery date significantly different from the best-case scenario?
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SUGI 29

Planning, Development and Support