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The Role of Business Case Analysis in Software Engineering Lecture #1

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1 The Role of Business Case Analysis in Software Engineering Lecture #1
Supannika Koolmanojwong Based on Donald J. Reifer’s lecture Copyright RCI, 2005

2 Copyright RCI, 2005

3 For Software, Change is Constant
Other silver bullets Reuse/patterns Streamlined processes Agile methods Architecture-first COTS-based systems Process paradigms Experience factory Metrics-based management Component-based composition Best engineering practices Extreme programming Product-lines Searching for ways to do the job faster, better and cheaper Copyright RCI, 2005

4 Business Cases Quantify the Impact of Such Changes
As understood by most, engineering decisions involve many options and difficult tradeoffs May be several technical solutions for the problem The best technical solution is determined by evaluating the tradeoffs using a variety of criteria selected for that purpose Software engineering provides you the methods and tools to understand the tradeoffs and select the best answer (typically under constraints) Management rejects many of these recommendations because the business benefits are not quantified Copyright RCI, 2005

5 Pervasive Issues When Developing Business Justifications
Common definition of costs and benefits not widely accepted across the industry Productivity, cost and quality data considered highly confidential and kept secret Common definition of the justification processes involved lacking within the engineering community Difficult to attribute resulting numbers to one cause or another Hard to communicate results - engineers talk technical, decision-makers talk business Goal of the lecture is to help you communicate better Copyright RCI, 2005

6 Justifying Improvement Initiatives to Address Change
Reduce Avoid/Cut Improve Customer Satisfaction Time to Market Cost Productivity Quality Increase Improve There needs to be some compelling business reason for making an improvement, else it won’t be approved Copyright RCI, 2005

7 So now, you want to make some improvement.
How can we introduce the changes / improvement to the organization ? Will they believe my idea? Are they going to listen to me?


9 Technology Adoption Life Cycle Model
Stage in Life Cycle Organizations’ Characteristics Innovators Risk takers Develop new technology Push the envelope Early adopters Trend setters Advance technology Will take high risks when justified Early majority Take moderate risks Late majority Followers Exploit technology Take limited risks Laggards Critics Use proven technology Risk averse Copyright RCI, 2005

10 Example: CMMI Level 5 - Technology Innovation Seven-Step Process
Establish improvement objectives Improvement proposal collection & analysis Identify innovations Perform cost/benefit analysis Perform pilot Select candidate improvements Provide feedback Source: Ahern, CMMI Distilled Copyright RCI, 2005

11 Challenges Associated with Making Organizational Changes
Lack of incentives “Good of the firm” versus “Good of the project” Infrastructure shortfalls Few meaningful metrics Limited cash available Reward system must be altered Reward system must be altered to emphasize “good of firm” Policies, processes and decision making structure changes Must collect data to quantify impact of changes To get funded, must make compelling business case Copyright RCI, 2005

12 Why Change - Five Good Reasons?
Keeping up with the competition Playing catch-up is always a motivation for change Achieving economic benefits Having a compelling business reason also works Supporting new product needs Tying change to a product need justifies investment Avoiding legal entanglements Sometimes changes are needed to comply with the law Achieving efficiencies Streamlining/simplifying process also justifies change Copyright RCI, 2005

13 Overcoming Resistance to Change

14 Are You Ready for Change?
Examine the following: Consistency with business goals/cycle Compatibility with level of process maturity Consistency with corporate culture Compatibility with investment strategies Achievability within desired timetable If warranted, be willing to take the risk The opportunity should be justifiable in terms of the risk/returns Copyright RCI, 2005

15 Changing Corporate Cultures
Entrepreneurial Culture Old-Fashioned Culture Seeks opportunity for improvement Action-oriented and willing to take risks Team-oriented Rewards innovation Learns from failure Creative, imaginative, pliant and flexible Prefers the status quo Avoids change and risk Territorial by nature Rewards followers, not innovators Penalizes failure Persistent, authoritative and rigid Copyright RCI, 2005

16 Making Changes: Eight Lessons Learned the Hard Way
Tie improvement to organizational goals Emphasize making product-oriented improvements Demonstrate value that justifies improvements Make your new processes the way you do business Recognize major barriers to change are primarily political and psychological Change your culture to one that rewards risk-taking If you don’t have the talent, buy it Use numbers to overcome post-decision dissonance Copyright RCI, 2005

17 Success is a Numbers Game
Answer Basic Business-Related Questions Will this proposal save money, cut costs, increase productivity, speed development or improve quality? Have you looked at the financial and tax implications of the proposal? What’s the impact of the proposal on the bottom line? Are our competitors doing this? If so, what are the results they are achieving? Who are the stakeholders and are they supportive of the proposal? Many more tough questions Copyright RCI, 2005

18 Business Cases Supply You with the Winning Numbers
Business Case = the materials prepared for decision-makers to show that the proposed idea is a good one and that the numbers that surround it make sound financial sense Most software engineers prepare detailed technical rather than business justifications Many of their worthwhile proposals are rejected by management as a consequence Use of business cases to complement the technical case can greatly increase their chances of success Copyright RCI, 2005

19 Business Versus Technical Cases
Factors (5 is best) Java C/C++ - Core language features - Degree of standardization & portability 3 4 - Object-oriented support - Reuse facilities (library, browser, etc.) 3 4 - Web programming support - Optimizing compilers available 4 5 - Bindings available - Rich libraries available - Compiler support tools available 4 5 - Inexpensive visual tools available 5 3 - Oriented toward your products 5 3 Score Copyright RCI, 2005

20 Business Versus Technical Cases
Factors (5 is best) Java C++ - Popularity - improve resumes - Training opportunities available - Literature and books available - Consultants & subcontractors available with language skills - Staff maintains competency in language/tools - Retooling and retraining costs - Transition costs associated with learning curve (bring staff up to speed) ___ ___ Subtotal 24 33 Combined Score 67 77 Copyright RCI, 2005

21 The Business Planning Process
GQM Results Idea or proposal 7. Get ready to execute 1. Prepare white paper 2. Demonstrate technical feasibility 6. Sell the idea and develop support base 3. Conduct market survey 5. Prepare business case Proof of Concept 4. Develop business plan Approval to go-ahead Copyright RCI, 2005

22 Aligning with Goals - Your First Step
Goal - successful technology transition Q1 - ready for use? Q2 - benefits quantified? Q3 - costs of use understood? M1 - availability of tools M1 - cost avoidance in $ M1 - startup costs M2 - availability of M2 - time-to-market delta M2 - operational training M3 - quality delta costs M3 - availability of M3 - opportunity methods costs M4 - availability of infrastructure Use the G-Q-M Paradigm Copyright RCI, 2005

23 Stepping Through the Process
Prepare white paper State what you are trying to do crisply Demonstrate technical feasibility Let’s you prove the idea’s value Provide management with early evidence that you can deliver what you promised them Conduct market survey Determine the market need for your idea Understand what the competition is doing and what your customers want Focus on market creation, not sharing Get to market first, be agile and take risks that allow you to seize the opportunity Copyright RCI, 2005

24 More on the Process Develop business plan Prepare business case
Needed before idea will be funded Such plans summarize how you will make or save money, not how you’ll get the job done Prepare business case Convince sponsor idea makes both good technical and business sense and provides value Sell the idea Package for sales/champion Get ready to execute Plan the project thoroughly (your project plan) Start recruiting key staff Work communications and outreach up front Search out facilities to co-locate team and for conducting demos Prepare your operational concepts (support, etc.) Copyright RCI, 2005

25 Business Process Framework
Process The business planning process proceeds in parallel Framework and interfaces with the software development process “Principles, Rules and Tools for Business Case Development” Business Planning Process Tradeoff and Analysis Processes Software Development Process Analytical Methods Models Guidelines for Decision-Making Copyright RCI, 2005

26 Assume you are moving towards java, but no one knows java You need to improve their skills What are the choices do we have here? Copyright RCI, 2005

27 Let say you are thinking about running a seminar
Let say you are thinking about running a seminar. How can you make a business case on this? Copyright RCI, 2005

28 Nine Business Case Principles
thinking about running a seminar. Nine Business Case Principles Decisions should be made relative to alternatives If possible, use money as the common denominator Sunk costs are irrelevant (Engineering Econ 101) Investment decisions should recognize the time value of money Separable decisions must be considered separately Decisions should consider both quantitative and qualitative factors The risks associated with the decision should be quantified if possible The timing associated with making decisions is critical Decision processes should be periodically assessed and continuously improved Do nothing, learn by themselves On-the-job training Bring in seminar / hands-on training How can a training seminar save costs / save time / improve quality ? Calculate that in $$ What happened in the past, stay in the past. Already ran a java seminar last year ? it does not matter. New staff $10 today = $8 next year Save in the bank, %6 interest Any better option ? If you need select a training firm, use different criteria, don’t mix them up. Copyright RCI, 2005

29 Nine Business Case Principles
thinking about running a seminar. Nine Business Case Principles Decisions should consider both quantitative and qualitative factors The risks associated with the decision should be quantified if possible The timing associated with making decisions is critical Decision processes should be periodically assessed and continuously improved Training seminar might improve image and morale. What if no trainer available , any back up plan ? What is the extra cost? Time your decision carefully. Any budget cycle ? Propose when there is money available. Keep your eyes open, look for possible improvement. Copyright RCI, 2005

30 Success Tactics Address the cultural issues first - they’re the hardest Keep senior management informed of your progress Build alliances with both projects and people Publicize successes and spread the word widely Mix it with the middle managers and critics Don’t be afraid to change horses in mid-stream Deliver something that you can brag about Be perceived as successful by others (perception is reality) Work continuously to improve the infrastructure you’ve set up to manage the initiative and transfer the technology Copyright RCI, 2005

31 Use Engineering Economics as its Analytical Basis
FW = P (1 + i)N PV = FW/(1 + i)N Future Worth Present Value Takes cost of money into account A $$ today is worth more than tomorrow due to inflation Takes compounding into account Normalizes future expenditures using current year dollars as a basis for comparison Lets you establish a minimum attractive rate of return Copyright RCI, 2005

32 Present Value Calculation for Training Example
Cost of Money or Interest rate = 8% Assuming that the training will reduce the personnel turnover by from 6% to 3% Reduce lost in productivity $35K a year Year Training Cost Benefits Net Benefits 1/(1+i)N Present Value 1 $25K $35K $10K 0.9259 $9259 2 0.8573 $8753 3 0.7938 $7938 4 0.7350 $7350 $40K $33120 Copyright RCI, 2005

33 Then calculate ROI Good choice ? ROI = net benefit / investment
Year Training Cost Benefits Net Benefits 1/(1+i)N Present Value 1 $25K $35K $10K 0.9259 $9259 2 0.8573 $8753 3 0.7938 $7938 4 0.7350 $7350 $40K $33120 ROI = net benefit / investment = $40,000 / $100,000 = 40% or 10% annually Good choice ? 10% annually for manager – may not be a good idea Put in the bank, no risks – get 8% What can we do ? Copyright RCI, 2005

34 Use Other Available Techniques
Analysis Techniques Balanced scorecard Break-even analysis Cause and effect analysis Cost/benefit analysis Opportunity tress Pareto analysis Payback analysis Portfolio analysis Real options theory Return-on-Investment/Capital Risk analysis (exposure) Sensitivity analysis Trend analysis Value chains Source: Boehm, Software Engineering Economics Copyright RCI, 2005

35 Balanced Score Card Used by managers to keep track of the execution of activities by the staff within their control and to monitor the consequences arising from these actions

36 Breakeven Analysis

37 Payback Analysis Year Training Cost Benefits Net Benefits 1/(1+i)N Present Value 1 $25K $35K $10K 0.9259 $9259 2 0.8573 $8753 3 0.7938 $7938 4 0.7350 $7350 $40K $33120 To determine the number of periods required to recover one’s investment Payment period = investment /net savings =($25K) / ($10K/year) = 2.5 years = the payback period for the first year’s investment is 2.5 years Copyright RCI, 2005

38 Example – Cost/Benefit Analysis
Want to bring in training to support PSP/TSP initiative How would you justify the investment? Should you use cost/benefits, quality improvement or some other approach? How would you pay for the training? Is this a capital, project or customer expense? What are the windows of opportunity and how would you take advantage of them? Can you influence next year’s training budget? Is there State funds available? Can we partner? Is there mid-year or year-end funds available? Copyright RCI, 2005

39 Doing a Cost/Benefit Analysis
Cost/Benefit Ratio = PV (Total costs ($)/Total Benefits ($)) Non-recurring costs Course acquisition ____ Course conduct ____ Recurring costs Course maintenance ____ Continuing education ____ Tangible savings Cost avoidance ____ Cost savings ____ Intangible savings Reduced turnover ____ Less risk exposure____ Total ____ Total ____ Total ____ Total Costs ____ Total ____ Total Benefits ____ Copyright RCI, 2005

40 Quantifying Avoidance: Software Dependability Opportunity Tree
Decrease Defect Risk Exposure Continuous Improvement Impact, Size (Loss) Prob (Loss) Defect Prevention Defect Detection and Removal Value/Risk - Based Defect Reduction Graceful Degradation CI Methods and Metrics Process, Product, People Technology Source: Boehm Copyright RCI, 2005

41 - Loss due to unacceptable dependability
Quantifying Risk Exposure (RE) via a Profile: Time to Ship - Loss due to unacceptable dependability Many defects: high P(L) Critical defects: high S(L) Risk Exposure (RE) Few defects: low P(L) Minor defects: low S(L) Time to Ship (Amount of Testing) Source: Boehm Copyright RCI, 2005

42 Example RE Profile: Time to Ship
- Loss due to unacceptable dependability - Loss due to market share erosion Many defects: high P(L) Critical defects: high S(L) Many rivals: high P(L) Strong rivals: high S(L) RE Few rivals: low P(L) Weak rivals: low S(L) Few defects: low P(L) Minor defects: low S(L) Time to Ship (Amount of Testing) Source: Boehm Copyright RCI, 2005

43 Example RE Profile: Time to Ship
- Sum of Risk Exposures Time to Ship (Amount of Testing) RE Few rivals: low P(L) Weak rivals: low S(L) Many rivals: high P(L) Strong rivals: high S(L) Sweet Spot Many defects: high P(L) Critical defects: high S(L) Few defects: low P(L) Minor defects: low S(L) Source: Boehm Copyright RCI, 2005

44 Getting Management Approval
Why should they invest in training instead of other alternatives? There needs to be a compelling business reason, else why make the effort This must be the most attractive option examined Why invest now instead of some later time? Need to show opportunity is knocking & funds are available What do I have to do if I say “yes” to the proposal? Must show them that their efforts will be minimal; you’ve done all of the leg work and all they have to do is sign Copyright RCI, 2005

45 Many Supportive Tools Software packages Decision support systems
Tax planning and schedules Trade studies and analysis Spreadsheets Comparative analysis Software cost models Parametric analysis Copyright RCI, 2005

46 Including Estimating Models like COCOMO II - Of Course
Sizing Model Risk Model * Benchmark analysis * Parametric analysis * Comparative analysis * Trade studies * Life cycle cost analysis * “What-if” analysis Copyright RCI, 2005

47 Business Case Information Needs
Business cases Recurring costs Non-recurring costs Tangible benefits Intangible benefits Benchmarks Competitive comparisons Industry norms Metrics Management measures Financial data Inflated labor costs Labor categories/rates Overhead/G&A rates Past costs/performance Tax rates/legalities Marketing information Demographic data Market position Sales forecast Copyright RCI, 2005

48 Emphasize Cost Avoidance
Things to Do Things Not to Do Justify using cost avoidance not reduction Keep cost & productivity considerations separate Tap money when it becomes available Know what cost you can control and who controls the others Package numbers for consumption by seniors Don’t assume the numbers won’t be scrutinized Don’t assume you know what your current costs are and how they are allocated to cost centers Don’t confuse management by combining cost and profit in same proposal Don’t mix cost accounts when justifying ideas Copyright RCI, 2005

49 Packaging Business Cases for Management Consumption
Convincingly summarize the numbers at the start Define your terms precisely - communicate meaning using examples Be conservative with your numbers Quantify tangible benefits in monetary terms Don’t mix capital expenditures with project budgets Use ranges for cost/benefits whenever possible Portray the PV of your benefits in this year’s dollars Focus attention on the business, not technical issues Copyright RCI, 2005

50 When Communicating with Senior Managers, Remember
They are like elephants, they never forget a number once uttered They will hear only what they want to hear Simple is better - package charts with at most five bullets Copyright RCI, 2005

51 Final Points So Far Numbers can be your ally when asking for money
When talking money, speak your management’s language not your own Don’t be casual about numbers, be precise To be successful, be perceived as successful Copyright RCI, 2005

52 Chapter 5 - Justifying Process Improvement
Purpose of case Justify investments in process improvement Goals of effort Develop numbers that get management to buy into near- and long-term investment tactics Constraints Deal with the firm’s related process improvement folklore, biases and history Copyright RCI, 2005

53 Organizational Structure
Aerospace firm Senior Management Your home QA Group Process Group Senior Staff Engineering Manufacturing Field Support Program Mgmt * Systems * Fabrication * Field service * Software * Assembly * Training * Digital design * Production * Test & evaluation Line of Business Management * Fund functional groups * Coordinate * Facilitate Project A Copyright RCI, 2005

54 History of Process Improvement
Maturity Level Aim- Reach Level 4 in 2 years Process budget axed 5 4 3 2 1 Acquisition falls through Level 3 - a customer requirement Seniors get serious about process Firm positioned to be acquired Reach Level 3 - corporate goal Process group reformed Now Copyright RCI, 2005

55 The SEI Software CMMI Used by many to characterize the maturity of the processes used to develop software Important because: Employed as a means to benchmark firms Acts as a framework for structuring improvements Shown to have positive effect on productivity, quality and cost Makes it easier to tackle a big software job like the one you are working on Copyright RCI, 2005

56 The Software CMMI 5 4 3 2 Contains: - 5 Maturity Levels
- Defect prevention - Technology change management - Process change management 5 4 - Quantitative process management - Software quality management The Software CMMI - Organization process focus - Organization process definition - Training program - Integrated software management - Software product engineering - Inter-group coordination - Peer reviews 3 - Requirements management - Software project planning - Software project tracking and oversight - Software subcontract management - Software qualify assurance - Software configuration management Contains: - 5 Maturity Levels - 18 Key Process Areas - 318 Key Practices 2 Copyright RCI, 2005

57 CMMI Lessons Learned Takes 18 to 30 months to move a maturity level
From Level 1 to 2 - average of 23 months From Level 2 to 3 - average of 21 months From Level 3 to 4 - average of 28 months Average investment to move up a maturity level is several million The gains attributable to early error detection and correction are substantial (20X cheaper) The average increase in productivity attributable to process improvement is 10 percent Copyright RCI, 2005

58 Software Improvement Strategy
Discipline the Software Process Standardize Products Professional workforce Quicken use of new technology * Proactive, not * Architecture- * Career paths * Project sponsors reactive based * Skill-based for IR&D * Optimizing * Massive reuse education and * Good idea * CMM-based * Open systems training programs * ISO-certified * Product lines * Distance * Technology * Components learning roadmap Copyright RCI, 2005

59 More Background Information
Overall experience Workforce averages 20 years experience Staff capabilities and morale Good - newcomers more open to change Education & training Myriad of training opportunities available World-class facilities and environment Undercapitalized, but making improvements primarily to reduce personnel turnover Technology adoption IR&D for software tripled after major client criticized management Copyright RCI, 2005

60 Rules of Engagement Let the numbers do the talking
Don’t assume that Program Managers understand software (they are clue-less) Justifications must be made at the project level You must address past experience, both pro & con Your plan must focus on near-term results Any software processes must be compatible with your existing management infrastructure You must track/demonstrate accomplishment of goals Copyright RCI, 2005

61 Process Group Organization
Manager (New) Curriculum Developer (Part-Timer) Process Developer (Vacant) Metrics Analyst (New) Project Liaison (Consultant) Process Developer (Vacant) Project Liaison (Consultant) Curriculum Developer (Part-Timer) Copyright RCI, 2005

62 Start - Why Focus on Process?
Why (Goal): Questions: Metrics: Models: Increase Productivity and Meet Customer Requirements Measured What Why this how? option? option? SLOC/hour Do Process Other ROI Nil improvement approach COCOMO SEI Maturity Non-discounted Model ROI Copyright RCI, 2005

63 Recommended Process Vision statement * WBS dictionary * Game plan
Positive public relations 1. Involve the Stakeholders * Expectations * Measures of success 5. Promote the results Pilot results 2. Develop a vision and strategy 4. Build partnerships 3. Define the work to be performed Vision statement * WBS dictionary * Game plan Copyright RCI, 2005

64 Work Breakdown Structure
Process development Education & training Process roll-out/project support Process assessment Promotion & outreach Support environment 1.1 Write processes/practices 1.2 Review processes/practices 1.3 Improve process/practices 2.1 Develop/update courseware 2.2 Conduct courses 3.1 Pilot processes/gather feedback 3.2 Provide support to projects 3.3 Deploy metrics/statistical controls 3.4 Perform statistical analysis 4.1 Conduct periodic assessments 5.1 Promote results 5.2 Publish newsletter, articles, and so on 6.1 Establish web site 6.2 Establish process asset library Copyright RCI, 2005

65 Process Group Budget = $2.4M/year
Process assessment $200K for outside facilitator Promotion and outreach $250K to prepare news-letter, work with clients and attend conferences Support environment $350K for web site development Process development 4 employees ($700K) Education & training 2 part-timers ($200K) $250K for seminars Process roll-out/project support 2 consultants ($450K) Retirees with credibility Copyright RCI, 2005

66 Proposed Operational Concepts
Process development Transition Deployment CM QA Distribution management User support Exploit industry experience by hiring outside assessment firm Pilot to demo feasibility, do things middle managers think important E&T JIT; dedicated project liaisons Steering group CCB; shared/reused assets distinction Use process to assure processes Access via web site FAQ; metrics; dedicated support for users Copyright RCI, 2005

67 Your Justification Approach
Justify process budget by: Showing the impact of accelerating productivity improvement from 10% to 20% annually Looking at impact of early error detection/correction Assessing the impact of COTS usage strategy Evaluating the impact of moving to an architecture-based reuse strategy Show intangibles as added value Copyright RCI, 2005

68 Accelerating Productivity from 10 to 20 Percent Annually
Conservative estimate of savings is $4 million/year Copyright RCI, 2005

69 Productivity Versus Cost
Cost and productivity are related, but are influenced by different factors To increase your productivity, you should address: Staff skills/expertise, process maturity and tools To reduce cost, you should attack: Overhead, scope of the job and efficiencies There are cases where improvements in your productivity result in increased costs Copyright RCI, 2005

70 Early Error Detection/Correction
Benefit of achieving Level 4 is a reduction in errors by a factor of between 20 and 25% Majority caught early in requirements and design phases Cost avoidance associated with early defect removal is $20/defect For the 12 major programs in your firm, you compute cost avoidance is 1.2 million calculated as follows: (12 jobs/year)(10 defects1/KSLOC)(500KSLOC/job) = 60Kdefects/year (60K defects/year)($20/defect (avoidance)) = $1.2 million/year 1 As jobs enter test and evaluation; goal is 0.1 defect/KSLOC on delivery Copyright RCI, 2005

71 Exploitation of COTS Benefits of enterprise-wide licensing can be substantial At the corporate level, this includes major software packages like DBMS At the project level, this includes software tools and specialized software like operating systems As part of your Level 4 initiative, you plan to put in a licensing process that allows you to lever your buying power and save $1 million/year Copyright RCI, 2005

72 COTS Pluses and Minuses
Pluses Minuses Cheaper; but does not come for free Available immediately Known quality (+ or -) Vendor responsible for evolution/maintenance Don’t have to pay for it Can use critical staff resources elsewhere License costs can be high COTS products are not designed to plug & play Vendor behavior varies Performance often poor Vendor responsible for evolution/maintenance Have no control over the product’s evolution Copyright RCI, 2005

73 COTS Critical Success Factors
Successful firms: Make COTS-based system tradeoffs early Try before they buy Avoid modifying COTS at all costs Reconcile products with their architectures Emphasize use of standards and open interfaces Understand that COTS doesn’t come for free Plan to manage parts/technology obsolescence Make the vendor a part of the team, whenever possible Negotiate enterprise-wide licenses for COTS products Influence future paths the vendor will take Address the cultural and process issues Copyright RCI, 2005

74 COTS Success Strategies
Process Merge COTS life cycle into your organizational framework Make needed tradeoffs Think both technical and business issues Products Fit COTS components into product line strategies Maintain open interfaces Manage technology refresh People Make COTS vendors a part of your team Increase awareness of COTS experience Provide workforce with structure and information Institutional Improve purchasing and licensing processes Maintain market watch Capture past performance Copyright RCI, 2005

75 Architecture-Based Reuse
Architectures are the framework you use to pull your product lines together They are domain-specific and standards-based They encapsulate generality and variability They guide selection and use of high-leverage assets The 20% responsible for 80% of the reuse They allow you to take full advantage of both COTS components and reusable assets Cost to build for reuse must be factored into analysis Benefits of reuse adhere to the 3 times rule Copyright RCI, 2005

76 Three Views of an Architecture
Operational Architecture - Information needs - User functions - Performance bounds System Architecture - Components and topology - Networks and connectivity - Capacity/performance Technical Architecture - Information processing standards - Human-computer interface standards Copyright RCI, 2005

77 Radar Architecture Example
Mathematical libraries Activity Managers Measurement Functions Sensor Manager Inputs Libraries Posix kernel Multi-threading executive Platform Copyright RCI, 2005

78 Reuse-Based Development Paradigm
Purchased products Domain Model Domain Analysis Asset Development Products for sale Domain Design Scope Assets Domain Engineering Software Reuse Library Requirements Architecture Assets Requirements Software Integration Operations & Analysis Development & Test Maintenance Applications Engineering Project-specific deliverables Copyright RCI, 2005

79 COCOMO II Reuse Model ESLOC = ASLOC [AA + AAF( (SU)(UNFM))] AAF < 0.5 100 ESLOC = ASLOC [AA + AAF + (SU)(UNFM)] AAF > 0.5 Where: AAF = 0.4 (DM) (CM) (IM) SU = Software Understanding (zero when DM = 0 & CM = 0) UNFM = Programmer Unfamiliarity AA = Assessment and Assimilation ASLOC = Adapted SLOC ESLOC = Equivalent new SLOC Copyright RCI, 2005

80 The Impact of Reuse Conservative estimate of savings is $10 million/year Copyright RCI, 2005

81 Reuse Cost/Benefit Worksheet
Non-Recurring Costs Domain engineering - done on IR&D Reusable assets - project funded Infrastructure development - done by process group Recurring Costs (per year) Architecture maintenance $200K Asset maintenance K Process updates K Tangible Benefits Cost avoidance $10 million Intangible Benefits Deliver 12 months earlier than the norm 10 times reduction in efforts at delivery Architecture stable, proven and can be demonstrated to clients Scheduling algorithms can be optimized and improved Total Costs $800K Total Benefits $10 million Copyright RCI, 2005

82 Strategy Yields Positive Returns
Early Error Reduction Cost avoidance = $1.2M/year Increased customer satisfaction based on quality Systematic Reuse Cost avoidance = $10M/year Faster to market 10X quality Just starting – expect to reap benefits within 3 years Process can be built with reuse in mind Exploitation of COTS Cost avoidance = $1M/year Improved maintenance and license leverage with vendors Productivity Improvement Cost avoidance = $4M/year Improved capabilities & capacity Copyright RCI, 2005

83 Return-On-Investment Is High
Tangibles ROI = Annual Benefits Investment ROI = $6.2M $2.4M ROI > 250% per year Assumptions: cost avoidances on page 3 realized with exception of reuse which kicks in after we reach CMM level 4. Intangibles Better product quality Quicker to market Increased customer satisfaction Improved employee morale Responds directly to customer requirements Copyright RCI, 2005

84 When Briefing Management - Always Ask For Help
Reaching Level 4 will take 2 years assuming things go as planned The major challenge is to get those in the middle on our side (bonus is a good start) There are a number of operational challenges Need help in staffing process group – getting requisitions through the system is tedious Need help in licensing – buyer, legal and staff support Must keep the momentum moving Copyright RCI, 2005

85 Case Study - Final Thoughts
Process improvement is a good investment To get management support, a good action plan and solid business case is needed When justifying initiatives, cost avoidance is preferred to cost reduction When determining benefits, categorize them as tangibles and intangibles Be conservative, but make your case using the numbers to justify the investments Copyright RCI, 2005

86 Final Points Before We Adjourn
Numbers can be your ally when asking for money When asking for money, talk your management’s language not yours Don’t be casual about numbers, be precise To be successful, be perceived as successful Copyright RCI, 2005

87 You Can Be Successful Guidelines
Change only if it makes good business sense Don’t become enamored with the technology Get everyone involved - but not too involved Focus changes on product developments Look to the future, not the past (sunk costs) Be patient and don’t reinvent the wheel Do the easy things first to establish credibility Be satisfied with a 90 percent solution The sum of many small successes is a big success Copyright RCI, 2005

88 Most Importantly – Talk and Think Like a Business-Person
Talk like a business-person Translate technical jargon into business goals Act as a business-person Assess both the business and technical aspects of the proposal Show your bosses you can run a business operation Be a business-person Focus on the bottom-line using the numbers when you can to make decisions that are good for the firm Copyright RCI, 2005

89 Lots of Available Web Resources
Copyright RCI, 2005

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