New CapEx and OpEx Article

New CapEx and OpEx Article

SAFe Updates

Hi Folks,

I’ve been working off and on for the last 4-5 months refactoring the CapEx/OpEx article. There are a number of reasons for this:

  1. As Agile crosses the chasm to the larger enterprise, it is a topic of increasing awareness, and often a major concern. Some transformations are stopped due to a lack of understanding of the applicability of current accounting treatments for CapEx in software, which are currently typically based on waterfall development. More and more information is becoming available on the problem, as well as potential solutions.
  2. I was never thrilled with the article anyway, as some readers thought it tended to capitulate to Story tasking by hours, which SAFe doesn’t even recommend
  3. In addition, I recently had the opportunity to attend a full day workshop at Rally/CA facilitated by Catherine Connor and led by Pat Reed. Pat has been working with the Agile Alliance Agile accounting standard program and industry in general to advance an understanding of the topic. Catherine is working with number of enterprises on this same topic. Also attending the workshop was an Agile/savvy technical accountant from one of the world’s largest financial services companies. Fortunately, I got to sit by her the whole day, and I picked at her brain mercilessly. Thanks Melyssa!

While there were a variety of opinions on the topic, I think we did come together with some common agreement and language to describe the problem and potential solutions.

The SAFe perspective is now provided in this new article. In the Learn More section below, I’ve linked to Catherine and Pat’s (brand) newly published writings on the same topic.

I’d like to use this blog post, which is open to comments, to get additional feedback on the article, and the general topic. So please fire away in the comments below.

I’d also like to thank Catherine, Pat and Melyssa for their joint efforts in helping to bring the business benefits of Lean-Agile development to some of the world’s largest enterprises. We share that mission fully.

And to the readers, thanks for all you do for all those enterprises out there, as well as for your contributions to SAFe,

Stay SAFe!



Author Info

Dean Leffingwell

Recognized as the one of the world’s foremost authorities on Lean-Agile best practices, Dean Leffingwell is an author, entrepreneur, and software development methodologist.

comment (7)

  1. John Okoro

    23 Apr 2016 - 7:54 am

    My video blog this week covers the SAFe CapEx & OpEx article and gives my practitioner’s perspective.

    • Richard Knaster

      24 Apr 2016 - 4:18 pm

      Thanks John for sharing your video on CapEx & OPex with the SAFe Community!


  2. Mats Janemalm

    12 Apr 2016 - 12:14 am

    I do think it is within our scope to state that this kind of catagorisation of labour costs should go away.
    In my experience large enterprises want to retain their value by assigning a certain part of the budget for capex. Capex and Opex then gets fragmented down in the organisation having different stakeholders watching their responsibility. A lot of work have to be spent in follow up of Donald-Duck-Money instead of real value. The worst thing is, product owners are stoped from maximising the value of the backlog since it is already predefined.

    Really these very old accounting rules is an impediment for implementing Safe or any agile framwork. Capex is evel and goes against the agile way of thinking. We need to recommend another way to estimate value instead of just converting a costs.

  3. Steven

    07 Apr 2016 - 12:54 pm

    In the article you assuming that funding is already available and the funding can be allocated as appropriate to value streams. How ever, most companies have an annual planning process and budgets and funding levels are determined as part of this process. There must be some justification and estimating to get the funding which is assumed at the start of the SAFe process. How do you recommend developing those estimates and justifications needed as part of annual planning. We are having some conflict on this at present at my company. Thanks.

    • Dean Leffingwell

      Dean Leffingwell

      12 Apr 2016 - 12:36 pm

      Hi Steven,
      How budgets are allocated to value streams is driven completely by the strategy of the company, and is currently outside the scope of SAFe. At one time, I wrote about this a bit, using Moore’s Escape Velocity paradigm as guidance, but it was opining outside the scope of our comfort area, so we didn’t proceed with any such guidance. But I would start with Escape Velocity with your team; it’s the best book I know in this area, though I’d expect there are many others. SAFe kicks in with the establishment of the non-project based funding practices of work within each value stream, once that budget has been established.

  4. Nick Radov

    24 Mar 2016 - 12:26 pm

    Could you please explain why expensing all Agile development labor costs does not optimize economics over time? Many large software companies have elected to do exactly this, and have decided that technical feasibility is only established when the product is actually shipped.

    • Dean Leffingwell

      Dean Leffingwell

      25 Mar 2016 - 10:50 am

      Hi Nick,
      As described in the article, some enterprises choose not to capitalize software development costs, perhaps for the reason that you indicated. For others, capitalization is material to their overall economics. SAFe takes no position with respect to whether not an enterprise should or should not capitalize; that would be financial guidance well outside the scope of our expertise or responsibility. Rather we are simply attempting to describe the types of activities that would appear to map to the FASB guidelines. Any decision for capitalization is solely at the discretion of the enterprise.

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