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I am sorry to tell you, but your colleague is right. The iterative process was developed in parallel with the waterfall model. This is perfectly pointed out by Craig Larman in a speech he gave two years ago. At the time the waterfall method came into official existence, there were also attempts at the DoD to promote iterative and incremental development. Even Dr. Royce ("inventor" of the waterfall method) knew at the time that there was more than one way to do development. When he first wrote about his process, he expressed that it was his personal view and that it was suited for some (but not all) situations. I guess Royce's process had a better "feel" for traditional management; it does provide a feeling of control and prediction.
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