![\"Cost](\"http:\/\/blog.plataformatec.com.br\/wp-content\/uploads\/2016\/11\/cost-of-choice.png\")
source: xkcd<\/a><\/p>\nWhat is cost of delay<\/h2>\n
Cost of Delay (CoD) is the economic impact of a project’s delay.<\/strong> In other words, it is how much you will fail to make if the product, or feature, is not ready on a certain date. The benefit of using it is to be able to make more-informed and better decisions because you’re taking into account the economic impact.<\/p>\n To calculate CoD you can just estimate how much profit is expected from the software project’s result after a period of time.<\/p>\n Let\u2019s say you expect that the software product you are developing, once finished, will give the company a return of US$ 10,000 per week. In that context, the cost of delay is US$ 10,000\/week. In other words, for every week that the project is delayed, the company would be losing US$ 10,000. Not that good, uh?<\/p>\n Another metric related to cost of delay is CD3 (Cost of Delay Divided by Duration). The difference between both is that in CD3, we divide CoD by the duration of the project. That can be a good metric for prioritization. Here\u2019s how to calculate it:<\/p>\n The higher the CD3 value is, more important it is, since the return on the investment will be faster.<\/p>\n In standard curves, the CoD of the project grows almost linearly with time. This is the simplest CoD to calculate, since it does not change with time.<\/p>\n In urgent curves the project needs to be delivered really fast in order to generate value to the company, otherwise a lot is lost. This happens, for example, when you know of a competitor’s big launch and there is not much time to react and compete in the market. The CoD will probably be extremely high starting on the deadline week and increase just a little over time.<\/p>\n Fixed date curve is the classic example of a project in which the deadline is immutable. In this case, the CoD is highly linked to a specific date. The urgent curve example is also valid here if you know of a competitor’s launch beforehand. Another example is when there is a national TV advertisement scheduled for a certain date, or even the implementation of new legislation that will affect the project. In this case, the CoD calculation will be a little bit more complex. In the first weeks the CoD will be growing at a moderate rate, however, after a certain week, the cost receives a huge increase, and after that, it returns to have a small growth rate.<\/p>\n The intangible curve covers those projects that have a low CoD. In this case, the projects usually have low priority inside the company, because they cause little or no impact on its results. The CoD in these cases is almost static, since there is not enough risk on delaying the project.<\/p>\n Besides the obvious outcome of using CoD, that is the knowledge of how much you will lose weekly if the project gets delayed, it is possible to use it as a decision-making tool to prioritize projects.<\/p>\n Let’s say you have two software projects: A and B. Both with standard-curve CoDs.<\/p>\nHow to calculate cost of delay<\/h2>\n
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Types of cost of delay<\/h2>\n
Standard Curve<\/h3>\n
![\"Standard](\"http:\/\/blog.plataformatec.com.br\/wp-content\/uploads\/2016\/11\/standard-curve.png\")
<\/p>\nUrgent Curve<\/h3>\n
![\"Urgent](\"http:\/\/blog.plataformatec.com.br\/wp-content\/uploads\/2016\/11\/urgent-curve.png\")
<\/p>\nFixed date curve<\/h3>\n
![\"Fixed](\"http:\/\/blog.plataformatec.com.br\/wp-content\/uploads\/2016\/11\/fixed-date-curve.png\")
<\/p>\nIntangible curve<\/h3>\n
![\"Intangible](\"http:\/\/blog.plataformatec.com.br\/wp-content\/uploads\/2016\/11\/intangible-curve.png\")
<\/p>\nHow to use it<\/h2>\n
Example<\/h3>\n
![\"Download:](\"http:\/\/blog.plataformatec.com.br\/wp-content\/uploads\/2016\/08\/forecasting-software-project-cta.png\")
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