Software Process & Quality Management: Estimating ROI
Software Process & Quality Management: Estimating ROI
Software Process & Quality Management: Estimating ROI
Estimating ROI
© 2018 CMU-ISR 2
Cost of Quality
• Concept originated in the 1960’s
• Deming, Juran and Crosby “Quality is free”
• Primarily applied to manufacturing
• Heavily adopted by the Japanese
• Now being applied to Software and
therefore IT
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Process to Calculate ROI for IT
Process Improvement
• Steps
1. Identify opportunities where process
improvement can be measured and quantified.
2. Devise a coherent plausible formula for
calculating a cost savings for each process
improvement opportunity.
3. Reduce those calculations to a number that
becomes the ROI for the improvement effort
over time.
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A Framework for Thinking About
Trends in IT
• Process-oriented management
• Rapid and continuous change
• Decentralization and globalization
• ERP Applications • Groupware
• Cheaper networking • Workflow
• Powerful PC •Intranets
• Universal standards •Knowledge mgmt
Enables
(TCP/IP, Web) •Organization CAD tools
Infrastructure Applications
Requires
• Middleware
• Component software • Technologies for enterprise integration
• New network technologies • IT infrastructure to support agile bus. Proc.
• Better, Faster, Cheaper networks and UI’s
* Michael A. Cusumano
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Value of Improvement
or The Cost of Quality
Philip Crosby
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Internal Failure
•Rework •Re-testing
•Delays •Downgrading
•Re-designing •Downtime
•Shortages •Lack of flexibility
and adaptability
•Failure analysis
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External Failure
• Complaints
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Prevention Costs
• Quality planning
• Supplier evaluation
• New product review
• Error proofing
• Capability evaluations
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So These Are Some of the Sources
for Estimating ROI
• The cost of doing business
• Prevention and checking what’s happening
• The cost of failing to do it right
• Internal and external failures in quality
• Therefore
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Other Things to Consider
• The business of quality.
• The impact of decisions and choices we
make on the business we do.
• It is not that we have to fix what didn’t do
right which is paying twice for the job.
• …but the impact on our customer and the
market of bad quality.
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The Iceberg Model of Cost of Quality
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Homework Assignment