Computing the Value of Incomplete Software
IBM’s Murray Canter published an interesting article in the communications of the ACM covering calculating and improving the ROI in software systems. Murray shows how to compute the “investment value” of incomplete software and illustrates why it does have value showing how to compute the net present value and the return on investment of this in process work, using Monte Carlo simulation. Murray states two axioms:
- Costs and benefits occur over time, so their present values are found through NPV equations
- The future values of costs and benefits are random variables, described as a statistical distribution
I should note this requires a subscription to ACM digital content.
Its abstract states:
“Constrained by limited budgets, most enterprises find it essential to apply unprecedented business discipline to the business function of software and system delivery (SSD) across entire software and system life cycles. For this reason, the CIO, CTO, or VP of software or systems development may be under increased scrutiny from the corporate chief finance office (CFO). When conversing with the CFO, money talks, so only one of two sorts of conversations can take place: software and systems as cost center or software and systems as value-creation center.”
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Project Prediction by SEER – Infographic
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Project Projection Infographic
by SEER®
Demystifying Parametric Cost Estimation
Think of an ideal world where even the largest project can be defined and described using just few, simple steps. Now think of how powerful it would be to change project variables and in seconds, see how that affects the project outcome. Imagine having a solution which will identify and assign highly accurate risk levels for achieving project deliverables.
This is Project Management using SEER by GALORATH
What is SEER?
SEER is a “Parametric Cost Estimation” solution for project management – “parametric” is just a fancy word for “variable”.
SEER is:
- A predictive mathematical algorithm, which does the “heavy lifting” involved with analyzing project variables, how they interact with one another and how they contribute to costs and timescales;
- A risk determination solution which will calculate the risk associated with the range of project outcomes based upon changing project parameters; and
- A proprietary database of information on a very large number of completed, real-world projects.
SEER is NOT a traditional Project Management Tool rooted in historical data and relying upon workflows.
What Makes SEER Different?
- SEER is predictive.
- SEER is top down.
- SEER can be used at a relatively early stage.
- SEER is a trusted third party.
- SEER estimates capture the complex dynamics of the software development process.
- SEER is able to handle a very wide range of project circumstances and contingencies.
- SEER estimates are probabilistic, permitting a more nuanced, risk-based perspective.
SEER is trusted by the U.S. Department of Defense, Boeing, Ford Motor Company, Northrop Grumman, Lockheed Martin, NASA, IRS, US Social Security Administration, Raytheon, National Security Agency (NSA), Honeywell, General Dynamics, UnitedHealth Care, Oracle, Bank of Canada, Bank of Montreal, Euroclear, BAE Systems and many more.
What Does SEER Do?
SEER’s highly interactive design let’s project managers “work” project estimates and explore tradeoffs for the optimal project mix, or you can simply obtain an estimate in seconds.
SEER will:
- Quickly describe your project – no matter how big or complicated;
- Analyze and test tradeoffs between parameters; and
- Establish a risk profile for project variables and their impact on the project.
In business terms, this means:
- Cost reduction
- Accurate TOTAL COST OF OWNERSHIP (TCO) estimates;
- Accurate MINTENANCE COSTS; and
- Defendable and substantiated “SHOULD COST” estimates.
In business terms this means:
- Reduced Costs
- Reduced Risks
- Effective Resource Planning
- Projects Delivered on Time
SEER by GALORATH delivers Business Competitive Advantage
Examples
Lockheed Martin Mission Systems Saves 6 Man-Months per Proposal with SEER for Software
Lockheed Martin Mission Systems was tasked with delivering the Range Standardization and Automation(RSA) Program in 1995 for the U.S. DOD and the modernization of the two spacelift sites in the US. This required the submission of multiple proposals, incurring a significant cost and taking valuable time. Using SEER-SEM, Lockheed Martin was able to save SIX MAN-MONTHS per Proposal in the estimation process.
Improved Commercial-off-the-Shelf (COTS) Integration Estimates
Northrop Grumman Mission Systems is a leading global integrator of complex, mission-enabling systems and services for federal agencies engaged in defense and intelligence activities, as well as federal civilian organizations, state and local governments and commercial clients.
A Northrop Grumman Mission Systems project involved building the software system for a ground station. The purpose was to improve launch and control services of military satellites by increasing automation and simplifying launch operation. The system supported the Air Force’s day-to-day mission of providing command and telemetry data via the Air Force Control Network.
Northrop Grumman Mission System’s original proposal was based largely on internal research and development efforts undertaken at the company’s own expense. The cost of the project was estimated using Galorath Incorporated’s SEER for Software estimation model, a parametric model that is a standard for software cost prediction and modeling at Northrop Grumman Mission Systems.
The project was completed on schedule, met the customer’s expectations, and declared a success. Upon completion, the work analysis was put through SEER-SEM and the results fell within seven percent of the actuals.
The job stood out because of its high COTS content. The COTS integration costs were not separately identified or estimated on the project so analysts wanted to see if they could get closer by dissecting the COTS elements. They decided to revisit the estimate to determine whether it could have been improved by a new method of estimating COTS integration costs that had been developed recently for SEER, but had not been used on an actual project.
Seven of the eight products were significantly closer to reality using the modified modeling methods. The overall effort and schedule predicted were within two percent of the program actuals. Based on these results, Northrop Grumman Mission Systems estimators plan to use this same approach to verify the process and productivity profiles of on-going COTS integration programs nearing delivery. The results will be used to better determine intermediate milestones and help quantify the effects of mid-term COTS fallout.
General Dynamics Banishes Voodoo Economics with SEER
General Dynamics grappled with the “voodoo economics” of estimating costs in software development projects, and controlling them in the face of escalating cost overruns. The major challenge was in estimating software costs, widely considered to be a “black art” where a 100% margin of error was standard for cost. Even then, estimating lifecycle costs and identifying the fundamental drivers for project deliverables was beyond the ability of many companies. SEER for Software provides General Dynamics with the ability to quickly and accurately estimate costs and the resources required, including estimates on developer experience levels, to meet software development deliverables on budget and on time.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Measurement and Providing Value to the Business ISMA Keynote 2011
Here is a copy of my keynote talk at the 2011 ISMA measurement conference, Measurement and Management and Business Value. The real point is the IT and measurement personnel have the information, knowledge and skill set to provide value to the business, far beyond the costs generate. But the information needs to be communicated in terms leaders can understand rather than the techie language we all think and speak in… AND if IT starts showing how it contributes to the business and becomes a profit center instead of a cost center IT will get more money to apply to more valuable things.
UPDATE: Someone also asked for a reference communicating the language of management. I believe this publication on business case analysis to be helpful in that regard.
PS In my talk I referred to software and measurement people as geeks. To many the term geek is a source of pride. One person in the talk was offended by being called a geek. My sincere apologies. However modern vernacular often defines a geek as a lover of technology, a software developer or someone with an intense love of mathematics. I consider myself a geek. And my friend Paul Glen makes his living by “leading geeks.”
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
The Planning Fallacy Revisited
This article is definitely worth a look: continuing studies that people underestimate the time and effort to perform all kinds of tasks.
This causes no end to issues in all kinds of systems: software, hardware, IT, manufacturing, student homework, you name it. One study did find that if people optimistically estimated the effort for a task and that task could be done in a single session, that productivity could increase.
Several factors reduce this planning fallacy. Preparing a risk management matrix can improve the underestimation of tasks. But planning fallacy is more prevalent in teams than with individuals.
The tendency to underestimate can be mitigated with estimation models.. so long as ranges and risks are defined.
Of course the reason we continue to study optimism in planning is to help ensure that people get good credible estimates from models – and when models and individual thinking disagree, that they are reconciled.
The paper covering procrastination and the planning fallacy is also a classic and worth a read.
Thank you for reading “Dan on Estimating”, if you would like more information about Galorath’s estimation models, please visit our contact page or call us at +1 310 414-3222.
Project Prediction Infographic
