• Precision Products, Inc.(PPI) has a software staff of 200 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 Low level (Upper level 1) on the COCOMO™ II rating scale for Process Maturity(PMAT). Some other characteristics of its average project are:

  • Size : 45 KSLOC
  • Scale exponent E : 1.12 (including its Low PMAT level)
  • Effort Adjustment factor EAF : 1.30
  • Cost per person-year : $180K

  PPI is considering a process maturity investment effort to bring its CMM Level up to 2 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 4-person software Engineering Process Group (SEPG) (They are NOT included in the 200 person staff as mentioned above)
  • An extra week of training per person (roughly 2% of a person-year)
  • An additional $200K/year for assessments, trainers. etc.

  Assuming that all PPI software projects and people have the average characteristics above, perform a simple business case analysis (exculding present value efforts) 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 2 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.

  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?