Homework 9, CS510, Fall 2002
Due Monday Noon, Nov. 4, 40 points.
Business Case Analysis
Precision Products, Inc.(PPI) has a software
staff of 205 people supporting its product line of industrial
electronic devices. It has been exploring the use of the software
Capability Maturity Model to improve its software performance.
An initial assessment has indicated that the company has just reached
a nominal level (CMM level 2) on the COCOMO™ II rating scale for Process
Maturity(PMAT). Some other characteristics of its average project are:
Size : 100 KSLOC
Scale exponent E : 1.10 (Including the effect of a Nominal PMAT rating)
Effort Adjustment factor EAF : 1.30
Cost per person-year : $150K
PPI is considering a process maturity investment effort to bring its
CMM Level up to 3 and benefit from the project effort reduction
estimation by COCOMO™ II via the reduction in the scale exponent E for its projects.
The process maturity investment will require two years at an annual expenditure of :
A 5-person software Engineering Process Group (SEPG)
An extra week of training per person (roughly 2% of a person-year)
An additional $250K/year for assessments, trainers. etc.
Assuming that all PPI software projects and people have the average characteristics
above, and assuming that all 200 of the project staff are always fully employed on projects, perform a simple business case analysis (excluding present value effects) for the process maturity investment, including:
A breakeven analysis of the number of years it will take to recover the
2-year investment. Assume conservatively that the project cost savings begin to be
realized after level 3 is achieved at the end of the two years.
A 5-year Return on Investment (ROI) calculation of the net benefits (savings
minus investments) per dollar invested in the initiative. ROI = (Savings - Investments)/Investment
If future costs and savings were discounted at a rate of D=0.95 per year, would the
following increase or decrease:
a. Length of time to the breakeven point?
b. Size of the ROI?