An Essence-Based Software Development Methodology to Support a Hybrid Waterfall-Agile in the Banking Domain: A Case Study at Bank XYZ

Abstract

Bank XYZ experienced a decline in on-time software project delivery, from 93.02% in 2021 to 85.00% in 2023, indicating that its predominantly sequential Waterfall process was insufficiently adaptive to changing requirements, while partial agile adoption remained unstandardized across teams. This study aims to design an Essence Framework-based hybrid Waterfall-Agile methodology that preserves governance, documentation, and approval controls required in a regulated banking environment while enabling faster iteration and better work visibility. The study employed a Design Science Research approach. Problem diagnosis was conducted through interviews and document analysis, while literature synthesis was used to build a practice backlog. Selected practices were mapped to Essence elements and assembled into a five-stage methodology consisting of Planning, Designing & Development, Testing, Release & Deployment, and Post-Implementation, followed by a pilot implementation in one project and qualitative evaluation through semi-structured interviews with developers, QA members, and external experts. The results show that the proposed methodology improved work visibility through Kanban-based flow visualization, increased clarity and traceability of workflow and artefacts, and remained fully compatible with the existing stage-gate and regulatory controls. However, the evaluation also identified gaps in layered testing, particularly unit testing and test automation, along with the need for clearer transition guidance. These findings contribute empirical evidence that Essence can support traceable and structured tailoring of hybrid software development methodologies in high-compliance financial environments, thereby strengthening software engineering process maturity in regulated sectors