SIP vs ROI

As I understand it, Software In Process (SIP) has generally been 
measured in dollars.  While I see the value in measuring it as the 
average time to implement a feature, I think it's more valuable to 
measure it in dollars.
_ _ _

Here's my definition:

"Software In Process (SIP) is a measure of the total dollar value 
invested in producing automation which has not yet been put to 
productive use."

IE: It's what you've paid for software (automation) that is not yet 
producing business value.
_ _ _

In business, Return On Investment (ROI) is generally a more important 
value than SIP.  ROI is a measure of the value you get for a given 
investment, while SIP is only a measure of cost -- the "Investment" 
part of ROI.  But SIP is easier to measure objectively than ROI:

Computing ROI for a proposed project involves speculation about 
future events, should you make or not make an investment.  After the 
investment is made, ROI still involves speculation about events that 
would have happened had you not made the investment.  Further, ROI 
involves subjective valuation of returns:  What is the dollar value 
of a happier customer?  These are good and important things to 
estimate, to determine the overall business value of a project, but 
these properties make ROI an unsuitable measure for detailed project 
management, due to its inherently subjective nature.

SIP is easier to measure objectively, as it's only a measure of 
cost.  Cost is easier to measure objectively than value.  Also, it's 
easier to objectively measure the results of actual events that have 
occurred than it is to objectively measure the effect of events in a 
speculative fictional timeline of things that might happen or things 
that could have happened (but didn't).

SIP is not only easier to measure, it's also useful:  SIP is a 
measure of fat or waste in a project.  A project may be delivering 
great ROI, but if its SIP is also high, then the project is not doing 
an efficient job of producing business value.  Reducing SIP while 
preserving or improving the business value that a project produces 
always improves ROI.  And there are good ways to reduce SIP without 
reducing the business value returned by the project.

Thus SIP gives you a much more objective measure of improvement in 
project performance, subject only to the requirement that you 
preserve most of the existing business value.
_ _ _

Measuring SIP in dollars instead of time neatly resolves the question 
of when SIP starts:  It starts whenever anyone makes any investment 
into the future automation of a task.

When a salesman says, "Gee, I wish feature X where in the product," 
then he's put is two cents in.  If the feature is implemented a year 
later, than the SIP of $0.02 is carried for a year.  This is small 
change; I wouldn't worry about it.

Suppose that someone writes on a card that they want feature X, and 
then the developers think about it for a few minutes and write on the 
card that it will take 6 ideal engineering days to implement it.  
Then suppose we wait six months before implementing it.  That's a few 
minutes of SIP "inventory" that we just carried for several months.  
In volume, this could get to be annoying, but it's probably not a 
significant issue.  The customer will probably spend more time 
thinking about things they want than this SIP figure, so we should 
probably not be too concerned about it.

On the other hand, suppose that an analyst sits down with the 
customer, interviews them for several hours and spends several days 
creating a detailed requirements document.  If it takes several 
months to develop and deliver a system meeting the requirements, then 
the SIP value will be significant.  Even with incremental delivery, 
the SIP value of the portions of the requirement not delivered until 
later iterations will be significant.  If one can find a way to 
gather requirements iteratively, "just in time" as they're needed, 
one can reduce the SIP inventory and improve ROI.


When we measure SIP in dollars then we can track and measure it from 
the first investment of any resources until the functionality is 
delivered, to start producing business value.  The "break even point" 
and Return on Investment (ROI) are more important overall measures to 
the business, but it should be remarkably clear to everyone involved 
that an investment in business process automation won't provide 
business value until it's in use.


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