1. Methods: Deciding What to Design In-Young Ko iko.AT. icu.ac.kr Information and Communications University (ICU) iko.AT. icu.ac.kr Fall 2005 ICE0575 Lecture #21 Business Value Concepts III

2. Fall 2005 2 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Announcements Rescheduling of the class on December 9 th Rescheduling of the class on December 9 th Starting from 9:00AM (Switching the time with the CS for SE) Starting from 9:00AM (Switching the time with the CS for SE)

3. Fall 2005 3 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Picture of the Day: 5 th & Craig St.

4. Fall 2005 4 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Plan for this Unit Internationalization Internationalization Data Privacy Data Privacy Basic business concepts: Value and the elements that define it; applications to software design Basic business concepts: Value and the elements that define it; applications to software design Utility: Value of outputs, tradeoffs in producing outputs Utility: Value of outputs, tradeoffs in producing outputs Competition and intellectual property: EVR reports Competition and intellectual property: EVR reports Group reports: How business and policy issues affect your designs Group reports: How business and policy issues affect your designs The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

5. Fall 2005 5 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Costs, Commitment, and Uncertainty Software engineering involves deciding how to make irreversible capital investments in the face of uncertainty Software engineering involves deciding how to make irreversible capital investments in the face of uncertainty money time Usual view: cumulative costs incurred to date Risk-aware view: costs committed to date The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

6. Fall 2005 6 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Managing Future Uncertainty Flexibility is valuable; it ’ s ok to pay for it Flexibility is valuable; it ’ s ok to pay for it Finance offers a way to buy and sell these risks Finance offers a way to buy and sell these risks Call option Call option Confers, for a period of time, the right but not the obligation to purchase, at a given price, an asset whose future value may be unknown. Confers, for a period of time, the right but not the obligation to purchase, at a given price, an asset whose future value may be unknown. money time now expiration asset value option price strike price The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

7. Fall 2005 7 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Application to Software Decisions Reuse Reuse Option price is cost now to make component reusable Option price is cost now to make component reusable Strike price is cost later to reuse the component Strike price is cost later to reuse the component Value is cost to implement from scratch later Value is cost to implement from scratch later Domain-specific program generators Domain-specific program generators Option price is cost to create generator now Option price is cost to create generator now Strike price is cost of easy-to-write input for generator Strike price is cost of easy-to-write input for generator Value is value of generated code plus option to enhance Value is value of generated code plus option to enhance The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

8. Fall 2005 8 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Ideas from Options Options let you wait to resolve uncertainties before deciding whether to invest Options let you wait to resolve uncertainties before deciding whether to invest Options can be created through capital investments Options can be created through capital investments Options themselves can have considerable value Options themselves can have considerable value The value of an option increases with the level of uncertainty about the value of the underlying asset The value of an option increases with the level of uncertainty about the value of the underlying asset Uncertainty creates incentives to create and hold options Uncertainty creates incentives to create and hold options Not to exercise an option can incur considerable opportunity cost Not to exercise an option can incur considerable opportunity cost The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

9. Fall 2005 9 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Context Client Requirements Software Design Here a Miracle Happens Technical rqts Architecture Biz, policy, reg Engineering Usability The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

10. Fall 2005 10 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Technical Requirements and Constraints Design Fast Small Reliable Secure Cost-effective Usable Portable Compatible The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

11. Fall 2005 11 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Distinguishing Constraint Priority Design Fast Small Reliable Usable Portable Compatible Secure Cost-effective The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

12. Fall 2005 12 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Business Requirements and Constraints Design Business Fit Personnel Acquisition Cost Competition Technical Training Opportunity Cost Marketability Cost of Ownership The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

13. Fall 2005 13 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Business Priorities Design Business Fit Personnel Acquisition Cost Competition Technical Training Opportunity Cost Marketability Cost of Ownership The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

14. Fall 2005 14 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Levels of Software Process The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

15. Fall 2005 15 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Levels of Software Process The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

16. Fall 2005 16 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Hierarchical Organization Work Unit / Team Assignment Activity Task Organization tends to match work structure The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

17. Fall 2005 17 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Programming clerk Chief Programmer Team Organization Surgeon Administrator Editor Secretary Toolsmith Tester Language Lawyer Copilot The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

18. Fall 2005 18 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Levels of Software Process The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

19. Fall 2005 19 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Temporal Communication Boundaries Project Management Project Management Proposal Team Proposal Team Definition Team Definition Team Development Team Development Team Delivery Team Delivery Team Maintenance Team Maintenance Team Plan Specify reqts. Analyze reqts. Define functions Design Build Test Accept Install Train Customize Evolve Fix The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

20. Fall 2005 20 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Levels of Software Process The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

21. Fall 2005 21 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Middletown Mutual: The Setting President B Hayes Chief Info Officer D Deveraux VP Info Sys Plan’g M Vargo Chief $$ officer H Atkins P&C Underwriting L Peterson Secretary J Parker Producer/Supplier Consumer/Client The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

22. Fall 2005 22 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Levels of Software Process The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

23. Fall 2005 23 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Market Impacts Requirements Fluctuation & Conflict Company Impacts Required Documents _________ Hidden Impacts Customers Customized needs Changing needs Add-ons Technology Technology advances Competitor products Regulation Regulatory agencies Standards comm’s Approvals Marketing & legal Financial Technology R & Dresults Other prod lines Implementors Creeping elegance Skunkworks The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

24. Fall 2005 24 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Organizational Communication Sources The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

25. Fall 2005 25 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Communicating with Users The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

26. Fall 2005 26 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Communication Buffers The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

27. Fall 2005 27 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Communicating with Users The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

28. Fall 2005 28 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Levels of Software Process The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

29. Fall 2005 29 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University US Intellectual Property Basis Basis The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries; The Congress shall have Power … To promote the Progress of Science and useful Arts, by securing for limited Times to Authors and Inventors the exclusive Right to their respective Writings and Discoveries; -- US Constitution, Article I, Sec 8 clause 8 Rationale Rationale This embodies “ the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors ” This embodies “ the conviction that encouragement of individual effort by personal gain is the best way to advance public welfare through the talents of authors and inventors ” -- Mazer v Stein. 347US202 at 219 (1953) The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

30. Fall 2005 30 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Intellectual Property What it IS What it IS Protection of the public interest: Protection of the public interest: Encouraging innovation for use by the public Encouraging innovation for use by the public Providing incentives for creators – limited-time exclusive right to exploit the creation Providing incentives for creators – limited-time exclusive right to exploit the creation Providing public with description of innovation and access (at a price) Providing public with description of innovation and access (at a price) Incentive for creativity via protection of its value Incentive for creativity via protection of its value Mechanism to allocate benefits fairly in fair marketplace Mechanism to allocate benefits fairly in fair marketplace What it IS NOT What it IS NOT Guarantee of profit for hard work Guarantee of profit for hard work Indefinite monopoly Indefinite monopoly Eliminator of risk for investors Eliminator of risk for investors The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

31. Fall 2005 31 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Forms of Intellectual Property Protection Public domain (the default) Public domain (the default) No one owns exclusive rights; freely available for use No one owns exclusive rights; freely available for use Copyright Copyright Covers expressions of ideas; ideas can be used freely Covers expressions of ideas; ideas can be used freely Patent Patent Covers useful novel nonobvious innovations; ideas protected Covers useful novel nonobvious innovations; ideas protected Trade secret Trade secret Business secrets used for competitive advantage Business secrets used for competitive advantage Contract (and license) Contract (and license) Agreements between individuals Agreements between individuals Others less relevant to software Others less relevant to software The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

32. Fall 2005 32 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Copyright vs. Patent CopyrightPatent Expression of ideas Ideas incorporated in things, processes Any expressionMust be novel, nonobvious Non-utilitarianMust be useful Expression only protectionIdea and its use protected Not subject to challengeSubject to challenge Independent creation OKEquivalent invention not OK Content shows in expressionDisclosure required Does not protect useProtects use; licensing easy Cheap and easy to getCumbersome and expensive The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

33. Fall 2005 33 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Making the Business Case Decisions are choices among alternatives Decisions are choices among alternatives Alternatives are “ where to from here? ” Alternatives are “ where to from here? ” Decisions are based on both costs and benefits Decisions are based on both costs and benefits Sunk costs don ’ t matter much Sunk costs don ’ t matter much Many factors matter Many factors matter Factors may be qualitative and quantitative Factors may be qualitative and quantitative Risks should be quantified if possible Risks should be quantified if possible There will be pressure to convert analysis to $$ There will be pressure to convert analysis to $$ Timing matters Timing matters Timing in business cycle Timing in business cycle Timing of costs and benefits (time value of money) Timing of costs and benefits (time value of money) The content of this slide is adopted from the lecture materials of the Methods course (17-652) at Carnegie Mellon University.

34. Fall 2005 34 ICE 0575 – Methods: Deciding What to Design © In-Young Ko, Information and Communications University Questions??