SOFTWARE ENGINEERING

ECONOMICS
BARRY W. BOEHM

SUMMARY

The primary learning objectives of Software Engineering

Economies by Barry W. Boehm are to: identify the factors most
strongly influencing software costs and use them to determine
the estimated costs of a software project; understand the
concepts of microeconomics as they apply to software
engineering; and apply economic analysis techniques to
software engineering decision situations.

Among its special features, the book

explains the fundamental concepts of microeconomics

and demonstrates thelr utility through a practical,
singlethread software engineering example.

presents the COnstructive COst MOdel (COCOMO): the most advanced, thoroughly calibrated software cost
estimation model available today.

provides extensive case-study examples of the use of the COCOMO model for software life-cycle cost-benefit
analysis and for software project planning and control.

CONTENTS
PREFACE xix

PART I INTRODUCTION: MOTIVATION AND CONTEXT 1

Chapter 1 Case Study 1: Scientific American Subscription Processing 3

1.1 The Old System 3

1.2 The Programming Solution: Top-Down Stepwise Refinement 4
1.3 The Programming Solution: Results 5
1.4 The Economic-Programming Approach 6
1.5 Results of the Economic-Programming Approach 7
1.6 General Discussion 8
1.7 Questions 8

Chapter 2 Case Study 2: An Urban School Attendance System 10

2.1 Programming Aspects 10
2.2 Economie Aspects 10
2.3 Ruman Relations Aspects 11
2.4 Lessons Learned 11
2.5 General Discussion 12
2.6 Questions 13

Chapter 3 The Goals of Software Engineering 14

3.1 Introduction 14
3.2 Software Engineering: A Definition 16
3.3 Software Trends: Cost 17
 3.4 Software Trends: Social Impact 18
3.5 The Plurality of Goals 20
3.6 An Examp1e: Weinberg's Experiment 20
3.7 The Plurality of Software Engineering Means 21
3.8 The Software Engineering Goal Structure 23
3.9 The GOALS Approach to Software Engineering 23
3.10 Questions 26

PART Il THE SOFTWARE LIFE-CYCLE: A QUANTITATIVE MODEL 29

Chapter 4 The Software Life-Cycle: Phases and Activities 35

4.1 Introduction 35
4.2 The Waterfall Model 35
4.3 Economie Rationale for the Waterfall Model 38
4.4 Refinements of the Waterfall Model 41
4.5 Detailed Life-Cycle Phase Definitions 46
4.6 Detailed Phase- Activity Definitions 46
4.7 The Software Work Breakdown Structure (WBS) 47
4.8 Software Maintenance 54
4.9 Questions 55

Chapter 5 The Basic COCOMO Model 57

5.1 Introduction 57
5.2 Definitions and Assumptions 58
5.3 Development Effort and Schedule 61
5.4 Phase Distribution 64
5.5 Nominal Project Profiles 65
5.6 The Rayleigh Distribution 67
5.7 Interpolation 69
5.8 Basic Software Maintenance Effort Estimation 71
5.9 Questions 71

Chapter 6 The Basic COCOMO Model: Development Modes 74

6.1 Introduction 74
6.2 Basic Effort and Schedule Equations 75
6.3 The Three COCOMO Modes of Software Development 78
6.4 Discussion of the Basic COCOMO Effort and Schedule Equations 83
6.5 Phase Distribution of Effort and Schedule 89
6.6 Questions 94

Chapter 7 The Basic COCOMO Model: Activity Distribution 97

7.1 Introduction 97
7.2 Activity Distribution by Phase 98
7.3 Basic COCOMO Case Study: The Hunt National Bank EFT System 103
7.4 Deriving Basic Project Organization Charts 104
7.5 Discussion of Basic COCOMO Phase and Activity Distributions 110
7.6 Limitations of Basic COCOMO 111
7.7 Questions 111

Chapter 8 The Intermediate COCOMO Model: Product Level Estimates 114

8.1 Introduction 114
8.2 Intermediate COCOMO: Software Development Effort Estimation 117
8.3 A Pricing Example: Microprocessor Communications Software 125
8.4 A Management Example: Reduced Cost-to-Complete 127
8.5 Adjusted Estimate of Annual Maintenance Effort 129
8.6 Example: Microprocessor Communications Software Maintenance 130
8.7 Interpolation and Extrapolation 132
8.8 Estimating the Effects of Adapting Existing Software 133
8.9 Discussion of the Intermediate COCOMO Effort Equations 138
8.10 Questions 141

Chapter 9 Intermediate COCOMO: Component Level Estimation 145

9.1 Introduction 145
9.2 The Component Level Estimating Form (CLEF) 146
9.3 Using the CLEF with Adapted Software 151
9.4 Transaction Processing System (TPS) Example: Basic Development Estimate 153
9.5 TPS Component Level Maintenance Estimate and Phase Distribution 156
 9.6 Questions 160

PART III FUNDAMENTALS OF SOFTWARE ENGINEERING ECONOMICS 165

PART IlIA COST-EFFECTIVENESS ANALYSIS 169

Chapter 10 Performance Models and Cost-Effectiveness Models 170

10.1 Performance Models 170
10.2 Optimal Performance 173
10.3 Sensitivity Analysis 176
10.4 Cost-Effectiveness Models 178
10.5 Questions 181

Chapter 11 Production Functions: Economies of Scale 187

11.1 Example 187
11.2 General Discussion: Definitions 188
11.3 Discrete Production Functions 189
11.4 Basic Production Functions for Software Development 189
11.5 Economies and Diseconomies of Scale 189
11.6 Diseconomies of Scale on Large Software Projects 190
11.7 The Best Way to Combat Diseconomies of Scale 191
11.8 Questions 195

Chapter 12 Choosing Among Alternatives: Decision Criteria 197

12.1 Example: Minimum Available Budget 197
12.2 Minimum Performance Requirement 198
12.3 Maximum Effectiveness-Cost Ratio 199
12.4 Maximum Effectiveness-Cost Difference 199
12.5 Composite Options 201
12.6 General Discussion 202
12.7 Questions 202

PART IIIB MULTIPLE-GOAL DECISION ANALYSIS 205

Chapter 13 Net Value and Marginal Analysis 207

13.1 Example 207
13.2 General Discussion: Marginal Analysis 208
13.3 Illustration 210
13.4 Sorne Caveats in Dealing with Net Value and Profit 212
13.5 Value of Information Processing Products 212
13.6 Questions 213

Chapter 14 Present versus Future Expenditure and Income 215

14.1 Example: An Oversimplified Cost Analysis 215
14.2 Interest Calculations 216
14.3 Present Value Calculations 216
14.4 Present Value of a Series of Cash Flows 217
14.5 Summary of Rental versus Purchase Analysis 218
14.6 General Discussion: Summary of Present Value Concepts and Formulas 219
14.7 Present Value Characteristics 220
14.8 Sensitivity to Interest Rate or Discount Rate 220
14.9 Applications to Software Engineering 221
14.10 Questions 221

Chapter 15 Figures of Merit 223

15.1 Example: Software Package Selection 223
15.2 Net Value Analysis 224
15.3 Figure of Merit Analysis 255
15.4 General Discussion: A Weighted Sum Analysis for Hardware and Software
Selection: A Case Study 227
15.5 Case Study: Activity Description 228
15.6 Case Study: Problems with the Evaluation Function 234
15.7 Case Study: Problems with Weights and Ratings 235
15.8 Case Study: Summary 236
15.9 The Delivered System Capability (DSC) Figure of Merit 236
15.10 Properties of the DSC Figure of Merit 237
15.11 The TPS Example Revisited 238
 15.12 Comparison of Weighted-Sum and DSC Figures of Merit 239
15.13 Questions 241

Chapter 16 Goals as Constraints 243

16.1 Example: TPS Option A Failure Modes 243
16.2 System Reliability and A vailability 243
16.3 Figure of Merit Evaluation 244
16.4 Expressing Goals as Constraints 245
16.5 Goals as Constraints: Feasible Sets and Cost-Value Contours 246
16.6 General Discussion: Decision Problems with Constraints 248
16.7 Software Engineering Applications 250
16.8 Mathematical Optimization Techniques 250
16.9 Capabilities and Limitations of Mathematical Optimization Techniques 255
16.10 Questions 256

Chapter 17 Systems Analysis and Constrained Optimization 258

17.1 Example 258
17.2 General Discussion 262
17.3 Questions 263

Chapter 18 Coping with Unreconcilable and Unquantifiable Goals 265

18.1 Example: TPS Option B: Special-Purpose Operating System Development 266
18.2 In-House versus Vendor Development Considerations 266
18.3 Presentation Methods 267
18.4 General Discussion: Unquantifiable Criteria 269
18.5 Presentation Techniques for Unquantifiable Criteria 270
18.6 Presentation Techniques for Mixed Quantifiable and Unquantifiable Criteria 272
18.7 Some Cautions in Presenting and Interpreting Multivariate Data 275
18.8 Questions 276

PART IIIC DEALING WITH UNCERTAINTIES, RISK, AND THE VALUE OF INFORMATION 278

Chapter 19 Coping with Uncertainties: Risk Analysis 279

19.1 Example: Operating System Development Options 279
19.2 Decision Rules for Complete Uncertainty 280
19.3 Subjective Probabilities 282
19.4 General Discussion: Decision Rules Under Complete Uncertainty 283
19.5 The Value of Information 283
19.6 Subjective Probabilities 284
19.7 Utility Functions 284
19.8 Software Engineering Implications 285
19.9 Questions 286

Chapter 20 Statistical Decision Theory: The Value of Information 289

20.1 Example: The Prototype Approach 289
20.2 Expected Value of Perfect Information 290
20.3 Working with Imperfect Information 290
20.4 Example 291
20.5 Bayes' Formula 291
20.6 Maximizing the Net Expected Value of the Prototype 293
20.7 General Discussion: Expected Value of Perfect Information 294
20.8 Expected Value of Imperfect Information 295
20.9 The Value-of-Information Procedure 296
20.10 Use of the Value-of-Information Procedure in Software Engineering 297
20. 11 Value-of-Information Decision Guidelines 298
20.12 PitfaIIs Avoided by Using the Value-of-Information Approach 299
20.13 Value of Information: Wrap-Up 300
20.14 Questions 300

PART IV THE ART OF SOF1WARE COST ESTIMATION 305

PART IVA SOF1WARE COST ESTIMATION METHODS AND PROCEDURES 308

Chapter 21 Seven Basic Steps in Software Cost Estimation 309

21.1 Step 1: Establish Objectives 310
21.2 Step 2: Plan for Required Data and Resources 313
21.3 Step 3: Pin Down Software Requirements 315
 21.4 Step 4: Work Out as Much Detail as Feasible 316
21.5 Step 5: Use Several Independent Techniques and Sources 323
21.6 Step 6: Compare and Iterate Estimates 323
21.7 Step 7: FoIIowup 326
21.8 Questions 328

Chapter 22 Alternative Software Cost Estimation Methods 329

22.1 AIgorithmic Models 330
22.2 Expert Judgment 333
22.3 Estimation by Analogy 336
22.4 Parkinsonian Estimation 336
22.5 Price-to-Win Estimating 337
22.6 Top-Down Estimating 337
22.7 Bottom-Up Estimating 338
22.8 Summary Comparison of Methods 341
22.9 Questions 342

PART IVB THE DETAILED COCOMO MODEL 344

Chapter 23 Detailed COCOMO: Summary and Operational Description 347

23.1 Introduction 347
23.2 The Software Hierarchy Estimating Form (SHEF) 348
23.3 The Software Hierarchy Estimating Form (SHEF) Procedures 351
23.4 Detailed COCOMO Example: Student Job Information System 355
23.5 Schedule Adjustment Calculations 359
23.6 Discussion 361
23.7 Questions 367

Chapter 24 Detailed COCOMO Cost Drivers: Product Attributes 371

24.1 RELY: Required Software Reliability 372
24.2 DATA: Data Base Size 386
24.3 CPLX: Software Product Complexity 390
24.4 Questions 395
24.5 Topics of Research 397

Chapter 25 Detailed COCOMO Cost Drivers: Computer Attributes 400

25.1 TIME: Execution Time Constraint 400
25.2 STOR: Main Storage Constraint 410
25.3 VIRT: Virtual Machine Volatility 413
25.4 TURN: Computer Turnaround Time 415
25.5 Questions 421
25.6 Topics for Further Research 424

Chapter 26 Detailed COCOMO Cost Drivers: Personnel Attributes 426

26.1 ACAP: Analyst Capability 427
26.2 AEXP: Applications Experience 431
26.3 PCAP: Programmer Capability 435
26.4 VEXP: Virtual Machine Experience 439
26.5 LEXP: Programming Language Experience 442
26.6 General Discussion of Personnel Attributes 444
26.7 Questions 448
26.8 Topics for Further Research 449

Chapter 27 Detailed COCOMO Cost Drivers: Project Attributes 451

27.1 MODP: Modem Programming Practices 551
27.2 TOOL: Use of Software Tools 559
27.3 SCED: Schedule Constraint 466
27.4 Questions 472
27.5 Topics for Further Research 473

Chapter 28 Factors Not Included in COCOMO 475

28.1 Type of Application 476
28.2 Language Level 477
28.3 Other Size Measures: Complexity, Entities, Specifications 479
28.4 Requirements Volatility 484
28.5 Personnel Continuity 486
28.6 Management Quality 486
 28.7 Customer Interface Quality 488
28.8 Amount of Documentation 488
28.9 Hardware Configuration 489
28.10 Security-Privacy Restrictions 489
28.11 Topies for Further Research 490

Chapter 29 COCOMO Evaluation 492

29.1 Introduction 492
29.2 The COCOMO Project Data Base 494
29.3 COCOMO Estimates versus Actuals: Development Effort 495
29.4 COCOMO Estimates versus Actuals: Development Schedule 495
29.5 COCOMO Estimates versus Actuals: Phase Distribution 504
29.6 COCOMO Estimates versus Actuals: Activity Distribution 507
29.7 Other Software Cost-Estimation Models 510
29.8 COCOMO Evaluation with Respect to Model Criteria 520
29.9 Tailoring COCOMO to a Particular Installation 524
29.10 Topics for Further Research 530

PART IVC SOFTWARE COST ESTIMATION AND LIFE-CYCLE MANAGEMENT 532

Chapter 30 Software Maintenance Cost Estimation 533

30.1 Introduction 533
30.2 The COCOMO Software Maintenance Model 534
30.3 Comparison with Project Results 539
30.4 Other Software Maintenance Cost-Estimation Models 540
30.5 Software Maintenance Phenomenology 545
30.6 Software Maintenance Project Data 550
30.7 Questions 553
30.8 Topics for Further Research 554

Chapter 31 Software Life-Cycle Cost Estimation 556

31.1 Introduction 556
31.2 Software Conversion Cost-Estimating Relationships 557
31.3 Software Conversion Estimates versus Actuals 561
31.4 Software Installation and Training Cost Estimation 565
31.5 Computer Cost Estimation for Software Development 566
31.6 Amount of Software Documentation 571
31.7 Other Software- Related Life-Cycle Costs 576
31.8 An Example Software Life-Cycle Cost-Benefit Analysis 577
31.9 Topics for Further Research 590

Chapter 32 Software Project Planning and Control 591

32.1 Introduction 591
32.2 A Software Project Planning and Control Framework 594
32.3 Project Scheduling Techniques 597
32.4 Detailed Software Planning and Control: The Unit Development Folder 607
32.5 Monitoring Project Expenditures versus Progress: The Eamed Value System 612
32.6 Software Project Planning and Control Example 618
32.7 Building a Software Cost Data Base 637
32.8 Software Planning and Control: Summary Discussion 638
32.9 Questions 638

Chapter 33 Improving Software Productivity 641

33.1 Introduction 641
33.2 Non-Programming Options: Software Packages 647
33.3 Non-Programming Options: Program Generators 654
33.4 Software Productivity Controllables: Product Attributes 658
33.5 Software Productivity Controllables: Computer Attributes 662
33.6 Software Productivity Controllables: Personnel Attributes 666
33.7 Software Productivity Controllables: Project Attributes 676
33.8 Establishing a Software Productivity Improvement Program 682
33.9 Conclusions 688

INDEX 751
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