Scribd
Upload
9 views3 pages

Software Economics

The document discusses the importance of integrating software economics into software engineering to enhance value creation and improve decision-making. It highlights the disconnect between technical design decisions and economic considerations, emphasizing the need for better understanding of costs and benefits in software development. The text advocates for improved monitoring and control in dynamic investment management to navigate uncertainties in software-intensive systems.

Uploaded by

storesandrana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
9 views3 pages

Software Economics

The document discusses the importance of integrating software economics into software engineering to enhance value creation and improve decision-making. It highlights the disconnect between technical design decisions and economic considerations, emphasizing the need for better understanding of costs and benefits in software development. The text advocates for improved monitoring and control in dynamic investment management to navigate uncertainties in software-intensive systems.

Uploaded by

storesandrana
Copyright
© © All Rights Reserved
We take content rights seriously. If you suspect this is your content, claim it here.
Available Formats
Download as DOCX, PDF, TXT or read online on Scribd
You are on page 1/ 3

Software Economics

Introduction
Rapid, sustained advances in computing and communications are now enabling the incorporation
of high-speed, low-cost, distributed information processing capabilities into technology
components and system of all kinds, at all scales. This trend promises to provide enormous
benefits by enabling new functions and improving the performance of existing functions. The
potential for value creation is seen to be so great that it is driving information machinery into
essentially all serious social, business, and military humanmachine systems: appliances, homes,
communities, industries, research activities, armies. The results will transform society .

A Software Engineering Decision-Making Today


Guided largely by the principle of separation of concerns, most software designers today make
their design decisions in an economics-independent "Flatland," where the focus is on
representation structure and logical semantics. An analysis of sixteen books on software
architecture and object-oriented design, for example, showed that only two included the word
cost in the index. More generally, links between technical issues and value creation appear not
to be central concerns of most software designers and engineers today. Part of the problem is
that the links are not even understood very well in theory.
Software Engineering as a Value-Creation Activity
The core competency of software engineers is in making technical software product and process
design decisions. Today, however, there is a disconnect between the decision criteria that tend to
guide software engineers and overarching value creation criteria. It is not that technical criteria
such as information hiding, abstraction, and the need for mathematical precision are incorrect.
On average, they are enormously better than no sound decision criteria
B Why an Increased Emphasis on Software Economics?
Software economics is situated at intersection of information economics and software design and
engineering. It is concerned with improving the value created by investments in the
development and use of software. The goal is first to understand the relationships between
economic objectives, constraints, and conditions, on one hand, and technical software issues, on
the other, and then to use this understanding to improve software productivity. The benefit
sought is a significant, measurable improvement in value created by investments in software-
intensive information technology projects and portfolios at all levels: project, program, portfolio,
enterprise, industry, and national.

C. History and Current Status of Software Economics


Software economics can be considered as a branch of information economics, a subfield of
economics which began to receive serious treatment in the 1960s. Its original subjects were such
topics as the economics of advertising and search for best prices , the economics of investments
in research and development, and the economics of the overall knowledge industry .A good early
comprehensive treatment of information economics is Economic Theory of Teams
D. Shortcomings that Need to be Addressed
Currently, our ability to reason about software cost is considerably stronger than our ability to
reason about software benefits, about such benefit sources as development cycle time, delivered
quality, synergies among concurrent and sequential projects, and real options, including strategic
opportunities. The trends toward software-based systems discussed above make it clear that the
ability to reason about both costs and benefits, sometimes in sophisticated terms, and under such
difficulties as uncertainty, incomplete information, and competition, will be a critical success
factor for future enterprises.
E. Better Monitoring & Control for Dynamic Investment Management
Software-intensive systems design generally occurs in a situation of uncertainty and limited
knowledge. Designers are confronted with uncertainties and incomplete knowledge of
competitor behavior, technology development, properties of products, macro-economic
conditions, the status of larger projects within which a given activity is embedded. Conditions
change and new information is gained continuously. The benefits that were envisioned at the
beginning of such a project often turn out to be not the ones that are ultimately realized, nor are
the paths by which such activities progress the ones that were planned. Rather, complex projects
take complex, unforeseen paths. The search for value in spaces that are at best only partially
known are necessary dynamic if the are to be most effective.
A. Modeling Costs, Benefits, and Value
Modeling Software Development Cost, Schedule, and Quality
In Section II.C, we discussed several software cost estimation models, and indicated that each
had at least passed a market test for value by remaining economically viable over at least a
decade. Their relative accuracy remains a difficult question to answer, as data on software cost,
schedule, and quality is far from uniformly defined. A significant step forward was made with
the core software metric definitions developed in [SEI, 1992], but there is still about a –15%
range of variation between projects and organizations due to the counting rules for data.
Example sources of variation are the job classifications considered to be directly charging to a
software project, the way an organization counts overtime, and the rules for distinguishing a
defect from a feature
Conclusions
The software field exists because processed information has value. If people were not willing to
pay for software development in the expectation of enhanced value, all of us in the software field
would be out of jobs. Given that we live in and benefit from this value-determined situation, it
is in our enlightened self-interest to increase our understanding of and ability to deal with the
economic aspects of software and its development. The results chain of initiatives,
contributions, and outcomes in Figure 1 is indeed a roadmap for how we can progress from our
current barely-coping stage of software economics mastery to a world in which more informed
software and information technology decisions lead to much greater value creation and quality of
life for all of us. However, as with other results chains, we must be careful to ensure that
the assumptions underlying the achievement of the outcomes are valid. The biggest assumption
underlying the roadmap in Figure 1 is that there are enough people with a sufficient
understanding of both software and economic phenomena to enable the contributions and
outcomes to be realized.

You might also like