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Procedia Computer Science 161 (2019) 66–73

The Fifth Information Systems International Conference 2019


The Fifth Information Systems International Conference 2019
Developer Payroll Approaches for Startup Environment Based on
Developer Payroll Approaches for Startup Environment Based on
Agile Project Management
Agile Project Management
Yang Agita Rindri, Ridi Ferdiana*, Rudy Hartanto
Yang Agita Rindri, Ridi Ferdiana*, Rudy Hartanto
Department of Electrical and Information Engineering, Universitas Gadjah Mada, Indonesia
Department of Electrical and Information Engineering, Universitas Gadjah Mada, Indonesia

Abstract
Abstract
Formulating developer payroll in a software development project is important for organizations to provide an equitable salary
Formulating developer
formulation that payrolldevelopers
can motivate in a software development
to work projectPayroll
professionally. is important
can alsofor be
organizations to provide
used as references an equitable
in planning salary
the cost of
formulation that can motivate
software development projectsdevelopers
in order totomeetwork professionally.
startup Payroll can
financial success. also
In the be used developer
literature, as references in planning
payroll the cost
estimations of
can be
software development
obtained by multiplyingprojects in order
the number to meet hours
of working startuponfinancial
a projectsuccess.
with theIndeveloper’s
the literature, developer
wage. However, payroll estimations
multiplying can be
the number
obtained
of workingby multiplying
hours with the the number of working
developer’s wage hours on a project
is considered withbecause
unfair the developer’s wage. However,
each developer multiplying
has different the number
competencies and
of working hours
performance. with the
In addition, notdeveloper’s
much attention wage is considered
given unfairhow
to understanding because each developer
to estimate developer has different
payroll competencies
in software developmentand
performance.
organizations In
byaddition, not much
considering attention
different given toand
competencies understanding
performance. howFor to those
estimate developer
reasons, it is payroll
important in software development
to understand how to
organizations
overcome the by considering
different different
developer’s competencies
competencies andand performance.
performance For thosepayroll
in developer reasons, it is important
formulation. Thus,tothe
understand
competencyhowand
to
overcome
performancethefactors
different
candeveloper’s
be formulated competencies and performance
into the developer payroll. Thisin developer payrolla method
paper proposes formulation. Thus, thedeveloper
in calculating competency and
payroll
performance
for a startup factors can be based
environment formulated into the
on Agile developer
Project payroll. by
Management This paper proposes
considering a method incompetency
the developer’s calculating developer payroll
and performance
for a startupThe
parameters. environment
parametersbased
consistonofAgile
how Project Management
many years developers byhave
considering the developer’s
been working, what the typecompetency and performance
of developer role is, how
parameters. The parameters
many bugs developers produceconsist of how
and how manymany
daysyears developers
developers have
are not been
able working, the
to complete what theontype
task of developer
time. This studyrole is, how
is expected
many bugsan
to provide developers
alternativeproduce
methodand how manydeveloper
to formulate days developers
payroll atarestartup
not able to complete the task on time. This study is expected
environment.
to provide an alternative method to formulate developer payroll at startup environment.
© 2019 The Authors. Published by Elsevier B.V.
© 2019
© 2019 The
The Authors.
Authors. Published by by Elsevier B.V.
This is an open accessPublished
article under Elsevier B.V.
the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
This is an open
Peer-review access
under article under
responsibility ofthe CC BY-NC-ND
thescientific
scientific license
committee (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-review under responsibility of committee ofofThe
The Fifth
Fifth Information
Information Systems
Systems International
International Conference
Conference 2019
2019.
Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019
Keywords: Agile Project Management; Startup; Payroll
Keywords: Agile Project Management; Startup; Payroll

* Corresponding author. Tel.: +62-27-455-2305; fax: +62-27-455-2305.


* E-mail ridi@ugm.ac.id
address:author.
Corresponding Tel.: +62-27-455-2305; fax: +62-27-455-2305.
E-mail address: ridi@ugm.ac.id
1877-0509 © 2019 The Authors. Published by Elsevier B.V.
This is an open
1877-0509 access
© 2019 Thearticle under
Authors. the CC BY-NC-ND
Published license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
by Elsevier B.V.
Peer-review
This under
is an open responsibility
access of the scientific
article under CC BY-NC-NDcommittee of The
license Fifth Information Systems International Conference 2019
(http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019

1877-0509 © 2019 The Authors. Published by Elsevier B.V.


This is an open access article under the CC BY-NC-ND license (http://creativecommons.org/licenses/by-nc-nd/4.0/)
Peer-review under responsibility of the scientific committee of The Fifth Information Systems International Conference 2019.
10.1016/j.procs.2019.11.100
Yang Agita Rindri et al. / Procedia Computer Science 161 (2019) 66–73 67
2 Author name / Procedia Computer Science 00 (2019) 000–000

1. Introduction

At present, the development of software startups shows a positive trend in Indonesia [1]. An organization is said to
be a startup if the organization is newly established and is still looking for the right business model for its organization
[2]. When a company has found the right business model, it is no longer called a startup but a company [2]. Many
startups adopt agile software development in developing their products. According to Version One, Ninety-four
percent (94%) of all organizations surveyed now practice agile [3]. Agile software development is considered suitable
for the environment where requirements are unknown and fast-changing [4]. Meanwhile, the traditional method is
considered not suitable because it needs huge effort even at the beginning of projects. This method is also difficult to
allow changes in requirements until the end of projects.
In software development projects, developers are very important aspects for startups because they can affect the
success or failure of a project [4]. Good developers relate to the ability to deliver applications on time with high quality
and suitable costs [5] so that the application has a long life cycle and can provide value to the startups. Software
developer turnover has become a big challenge at startups [6]. It might cause big losses for a startup because losing a
good developer means losing important business knowledge and critical technical skills [6].
Given the importance of the aspect of developers in software development organizations, the organization strives
to retain its developers by giving them the best benefits. One of the benefits given by organizations to their developers
is satisfying payroll formulation [7]. Startups must determine payroll appropriately so that developers are motivated
to perform better to the startups. Unsatisfactory salaries can cause companies to lose their good employees. It also
decreases employee performance and productivity. By considering the importance of satisfactory salary to retain
developers at startups, we have been motivated to examine how to formulate payroll that is suitable for developers,
especially for startup environment based on agile project management? What parameters need to be considered by
startups in formulating payroll? Thus, by examining these research questions, this study can fill in the gap by providing
a better understanding of payroll developers.
In the literature, it shows that most of the research related to software developers focus on developer performance.
Developer performance can be measured using several methods, including by using the number of rows produced by
the developer [8], by calculating the cumulative time spent in a project [5], by the number of tasks completed by the
developer [9], or the number of function points produced by the developer [10]. The performance of developers on
Scrum-based software development projects is calculated using the velocity [11].
Although there is a lot of research on the performance of developers, very few have focused on developer payroll
in software development projects. Research [12] proposed developer payroll based on the line of code produced by
developers. However, this method is no more relevant to measure developer productivity. Another proposed method
is by multiplying the time spent in a project with wage rate [13,14]. However, this method measures developer
productivity only based on the total time of developers spent in a project. In fact, developer productivity, especially
in agile software development, is not only about time spent in a project.

2. Literature review

Project management “is the application of knowledge, skills, tools, and techniques to project activities to meet the
project requirements” [4]. Project management has been applied in software development in the past decade. There
are several software development methodologies available, i.e. formal project management [4] consisting of using
traditional project planning, scope, and benchmarking in order to manage a project. Early software development
projects applied formal project management [4]. However, technology and businesses became more
complex and software markets became more competitive. This situation force organizations to adapt quickly to market
changes [15]. Software development is one type of projects that requires a quick response caused by changes in user
needs, technological developments, and the influence of competitor products.
This condition evolves innovation in project management, especially in software development that supports
flexibility and agility in the project. Formal project management is no longer suitable for the current software market
conditions. The solution to this condition is the introduction of the Agile Management Project (APM) which is
expected to be suitable for applying in dynamic and rapidly changing project environments [15].
68 Yang Agita Rindri et al. / Procedia Computer Science 161 (2019) 66–73
Author name / Procedia Computer Science 00 (2019) 000–000 3

Agile Project Management is a term that origins in software development. It is an outgrowth of the agile software
development movement [16]. Agile Software Development is a software development method that implements agile
principles to produce high-quality software quickly and routinely. Agile Software Development consists of several
approaches. Some of these approaches were named as follows: flexible [17], adaptive [18], iterative and extreme [18,
19], lean [20], and Scrum [18]. Of all the agile approaches, the Scrum method is the most widely used [18].
Software development projects consist of a group of developers who work together to achieve project goals [7]. To
appreciate developers’ performance, startups provide payroll for developers. The developer payroll is a cost
component that must be accurately estimated in a project [4]. There are several methods used in developer payroll.
Research [12] proposed a developer payroll based on lines of code generated by developers. This formulation is
considered not suitable for current conditions because developers tried to increase the number of lines of code, but it
did not improve the quality of the software.Another method is to multiply the amount of time spent on a project with
the developer wage rate [13, 14]. However, this method only measures developer productivity based on the time spent
by developers on a project without considering other more parameters.
Research [21] proposed developer payroll on XP-based projects involving pair programming. The method is by
multiplying total time spent on a project with the number of developer pairs with developer wage rate. This method
is almost similar to the methods proposed in research [13, 14]. This method only used the aspect of time spent by the
developer on a project as a factor that determines the performance of the developer.
Previous studies only emphasized the aspect of the time spent on projects to calculate developer costs. However,
developer productivity, especially in agile software development, is not only about time spent in a project. Oliveira
et al. [22] identified that developer’s productivity from managers’ perceptions is influenced by four factors, 1) task
completion time, 2) produced artifacts that do not need rework, (3) products that meet stakeholders’ expectations, and
(4) personal behavior such as focus and proactivity. Based on Research [23], productivity factors of teams in the agile
environment are defined by the timeliness of the task completion and the products can meet user expectation.
It can be concluded that previous studies only emphasized the aspect of the time spent on projects as the only
productivity parameter to calculate developer costs. However, developer productivity parameter, especially in agile
software development, is not only the time spent in a project. This study attempts to use productivity parameters
proposed by research [22] and [23] to be implemented in formulating developer payroll.

3. Research approaches

The study begins with a preliminary survey conducted in November 2018 at 5 startups to obtain information about
characteristics used in developer payroll formulation. Four (4) startups answered that they adopt Agile Software
Development in their projects, while one (1) startup adopts both Agile Software Development and Traditional Project
Management in its project. The preliminary survey shows that each organization has different standards in determining
payroll for software developers. Most of those startups choose the competency level as one of the parameters to
formulate developer payroll. However, the competency level was not further explained.
Besides the preliminary survey, from the literature review, we choose two papers that study the developer
productivity. Oliveira et al. [22] identified that the developer’s productivity from managers’ perceptions is influenced
by four factors, 1) task completion time, 2) produced artifacts that do not need rework, (3) products that meet
stakeholders’ expectations, and (4) personal behavior, such as focus and proactivity. We choose factor (1), (2), and
(3) as performance factors that should be included in formulating developer payroll. Factor (1) relates to how many
days developers cannot complete tasks on time. Factor (2) and (3) relate to the number of bugs generated by the
developers. Teams’ performance in the agile environment is defined by the timeliness of the task completion and the
products that can meet user expectations [23].
Based on the preliminary survey and literature review, an empirical method was developed to estimate developer
payroll based on developer productivity factors. The parameters used in the payroll developer formulation are limited
to 4 factors as follows: 1) The number of years of developer experience, 2) Type of developer roles, 3) Task delivered
on time on time, 4) The number of bugs generated by developers.
The formulated developer payroll is then implemented based on Agile Project Management. The steps of
implementation are in Fig 1. It can be described from Figure 1 that, in Agile Project Management, user needs are
Yang Agita Rindri et al. / Procedia Computer Science 161 (2019) 66–73 69
4 Author name / Procedia Computer Science 00 (2019) 000–000

represented in the form of user stories. Each user story is determined estimation points that describe the level of
difficulty of working on the user story. Estimation points are determined by the developers involved in the project.
All points are then calculated to obtain total points. This study requires an example case based on Agile Project
Management to obtain project length estimation, project team, the number of iterations, and project cost estimation
using the proposed empirical method. Furthermore, the realization of project implementation is required to provide
information about developer performance factors in a project. In this study, we use experimental data to implement
Fig. 1 because real data in a software development project is very sensitive and confidential.

Start

Estimate the length


Define user stories
of a project

Determine story Estimating developer


points for each costs using the proposed
user story estimation payroll
method Stop

Calculate the total


of story points

Fig. 1. Steps of payroll developer calculation.

3.1. Define user story

In this study, it is necessary to make experimental data related to the user story. This study uses simple user stories
to implement Fig. 1. Each user story is given a certain point that shows the difficulties of the user story.

Table 1. User stories.


No As I want to {action} So that {object} Estimate Priority
{actor} point
US-001 Admin Manage user accounts users have their own privilege 4 High
US-002 Admin Manage content visitors can see news and announcements 7 High
US-003 Admin Manage photo and video visitors can see photo and video galleries 7 Medium
galleries
US-004 Admin Manage menus and sub visitors can see the contents of the menu and sub menu 7 High
menus
US-005 Admin Manage the agenda visitors can see the calendar and agenda 6 Low
US-006 Admin manage download center visitors can download documents 6 Medium
US-007 Visitor Do chat activity visitors can communicate with the admin 4 Low
US-008 Admin reset user accounts the user can be helped when forgetting the password 2 Medium
Total Point of User Stories 43

3.2. Estimate the duration of a project

We can estimate the duration of a project by multiplying the total user story points obtained from Table 1 with the
effort rate using equations below [7]. The Effort rate describes the number of hours needed to complete 1 point.
According to [14], the effort rate is determined by the team's experience with the previous project, while for the newly
created team, the effort rate is 8 hours per point or 20 hours per point [14].
70 Yang Agita Rindri et al. / Procedia Computer Science 161 (2019) 66–73
Author name / Procedia Computer Science 00 (2019) 000–000 5

Total hours= effort rate x total user story points (1)

Good Case= (Total hours /developers) /effective hour per day (2)

Best Case = 75% * Good case (3)

Bad Case = 125% * Good Case (4)

The duration of the project in this experiment is 20 days, while each developer has 140 working hours in the project.
The total hours (see Table 2) are used to calculate payroll for every developer involved in the project.

Table 2. Estimates the Length of a project.


Man-day effort
Description Unit Value
Effort rate hours/Point 8
User story Point 43
Total hours Hours 344.00
Man-day rffort
The number of developers developer 3
Estimation chart Unit Days
Good case Days 16.38095
Best case Days 12
Bad case Days 20.47619
Total hours for each developer with effective hours every day is 7 hours Hours 140

4. Proposed estimation payroll method

This study provides a method in formulating developer payroll by considering developer productivity factors,
namely 1) The number of years of developer experience, 2) Type of developer roles, 3) Task delivered on time, 4)
The number of bugs produced by developers. The formulation is explained in the equations below.

Index a =1 + (N x coefficient) (5)

Rate/hour = Index a x index b x Rate (6)

Rate/Developer =Rate/hour x total hour (7)

Bug = number of bugs x Percentage x Rate/hour (8)

Late= days late x Percentage x Rate/hour (9)

Payroll = Rate/Dev –Bug – Late (10)

Nomenclature

Index a an index value based on the number of years of developer experience


Coefficient a percentage value for every 1-year increase in experience
N years of developer experience (0,1,2,3 years)
Yang Agita Rindri et al. / Procedia Computer Science 161 (2019) 66–73 71
6 Author name / Procedia Computer Science 00 (2019) 000–000

Index b an index value based on the type of developer role, e.g. project managers, quality assurance,
developer, etc. The index value can be determined by expert judgment of by startups. We choose
developer role as as the basis indices with a value of 1.0. The index value ranges from 0 to > 1. If
the workload of certain roles according to expert judgment is lighter than the workload of
developers, then the indices of those roles are considered lower than the indices of the developer
or it should be < 1.0. If the workload of certain roles according to expert judgment is heavier than
the workload of developers, then the indices of those roles are considered higher than the indices
of the developer or it should be > 1.0
Rate an hour minimum wage determined by startups
Number of bugs the total bugs produced by a developer in a project
Days late Total days of delay in completing tasks in a project/ total days of missing the deadline
Percentage The percentage of salary deductions if developers produce one bug or if developers miss the
deadline in delivering tasks

5. Case example to simulate the proposed method

We create a case example to simulate the payroll estimation method proposed in section 4 then compare it with the
payroll estimation method which only considers the parameter of the amount of time spent on the project without
regard to other parameters, such as years of experience, type of developer roles, number of bugs, and timeliness.
Examples of such case are as follows:
A software development project consists of three developers with years of experience respectively: 5 years, 0 years,
and 2 years, one technical writer with 1 year of experience, one quality assurance with 1 year of experience, one
project manager with 3 years of experience. At the beginning of the project, the team has agreed that the technical
writer and QA have only 30% of developer working hours and project manager has only 50% of developer working
hours. The length of the project is 20 days with an hour minimum wage IDR 98,000 and the effective hour per day is
7 hours. All team members complete their tasks on time and with no bugs. Based on the startup agreement, the index
value of all members is in Table 3. How does the startup formulate the developer payroll in that project?
We will solve the case example using two methods. Firstly, we use the estimation method proposed in this study.
Secondly, we use the formal method by multiplying the developer wage rate with the cumulative time spent on a
project [7]. The results are in Table 3 and Table 4.

Table 3. Payroll using the proposed method in IDR.


Type of roles Years of experience Index role Rate/hour Working hours Total payroll
Project Manager 3 1.2 145,824 70 10,207,680
Senior Developer 5 1 137,200 140 19,208,000
Junior Developer A 0 1 98,000 140 13,720,000
Junior Developer B 2 1 113,680 140 15,915,200
Quality Assurance 1 0.6 63,504 42 2,667,168
Technical Writer 1 0.4 42,336 42 1,778,112
63,496,160

The coefficient used in the given case example is 0.08. It means that every time the developer experiences increase
1 year, the developer salary will increase 8 % of minimum hourly wages. However, startups are allowed to modify
the coefficient.
72 Yang Agita Rindri et al. / Procedia Computer Science 161 (2019) 66–73
Author name / Procedia Computer Science 00 (2019) 000–000 7

Table 4. Payroll using conventional method in IDR.


Type of role Rate/hour Working hours Total payroll
Project manager 98,000 70 6,860,000
Senior developer 98,000 140 13,720,000
Junior developer A 98,000 140 13,720,000
Junior developer B 98,000 140 13,720,000
Tester 98,000 42 4,116,000
Technical writer 98,000 42 4,116,000
56,252,000

6. Discussion

Table 3 described the implementation of the proposed method in the example case. The salary received by each
developer can vary based on proposed parameters, namely years of experience, type of developer roles, bugs, and task
completion time. As we see from Table 3, we have three developers with different years of experience. Although they
have a similar role, they have different years of experience. Thus, they also have a different salary. Senior developers
can take advantage of this proposed method because it provides a better appreciation for their experience aspect. Good
developers can also take advantage of this proposed method because their timeliness and their produced high-quality
software gain better appreciation from the organization. However, new developers might gain disadvantaged because
they get smaller salaries, but it encourages them to be more productive.
Furthermore, there are also different salaries among developers and the project manager. Project manager with 3
years of experience receives more salary than the senior developer with 5 years of experience. Although the senior
developer has more years of experience, he receives less salary than the project manager. It is caused by the manager’s
index is higher than the developer’s index. However, at the beginning of the project, we assumed that the manager’s
working hour is only 50% of the developer’s working hours.
Table 4 described developer payroll without including performance parameters, namely years of experience,
developer roles, bugs, and task completion time. We can see that all developers who write codes receive a similar
salary although they have different years of experience. This conventional method is considered unfair and will cause
dissatisfaction among senior developers. However, this conventional method seems to be more interesting from the
organization’s viewpoint because the organization only needs to pay a lower cost than the cost in the proposed method.

7. Conclusion

In calculating the developer payroll, it is necessary to determine performance factors that can affect the developer
payroll. Parameters used in this study consist of four parameters, namely years of experience, developer roles,
timeliness, and the number of bugs produced by developers. This study shows that the longer the years of experience,
the more payroll received by developers. Furthermore, timeliness and number of bugs could be a punishment
mechanism affecting developer payroll. The solution in Table 2 and Table 3 shows us that the proposed method in
this study provides a more equitable solution than the existing method commonly used in calculating developer payroll
[3].

8. Limitation and future work

This study has several limitations. Firstly, this study only focused on formulating developer payroll at startup
environment, although there are still many big organizations available. Secondly, this study used agile project
management. Future research can extend this study by taking into account other parameters. Other researchers can
also use the non-agile project management as a research environment.
Yang Agita Rindri et al. / Procedia Computer Science 161 (2019) 66–73 73
8 Author name / Procedia Computer Science 00 (2019) 000–000

Acknowledgements

We would like to express our sincere gratitude to Lembaga Pengelola Dana Pendidikan (LPDP) for funding this
research and publication.

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