Mike Cottmeyer from Version One has written an excellent blog post about Velocity, and the importance of management and teams taking a responsible attitude towards it…
Mike also describes the usual challenge in any business – where management need some sort of basis for funding a project, yet teams are really in no position to estimate the size of the project until they get into the work.
In some methodologies – for example RUP – there is an initial stage of the project (“inception”) to do some high level scoping before seeking approval for full funding. It’s also quite common in waterfall projects to complete the reuirements analysis before going on to request full funding. In these cases, only the initial stages need to be funded and then the team knows more by the time they ask for the rest of the money.
Effectively it’s a two-step approval process. Approval 1 gets the money for analysis. Approval 2 gets the money for the rest of the project, when more is known about the requirements and scope.
But in agile projects, this two step approach often doesn’t exist.
Although for large agile projects – especially those that require additional funding – this needn’t necessarily be the case. For all the same reasons, it’s entirely appropriate for an agile team to want some initial funding first, in order to learn more about the project before returning to request the full amount.
I wrote a little while back about how this could work, and the artefacts an agile team might produce with some seed money during the early stages of a project. In an ideal world, the team would at least secure enough funding to produce the Product Backlog, and complete a few Sprints to establish their Velocity.