regarding software costs

1. Strategies for Controlling Software Costs
LAB-01
SOFTWARE Engineering
CSC-6160-1
INSTRUCTOR
- DR VICTOR GOVINDASWAMY
Presented by Lenin Chowdary Gogineni

2. PART -1

3. Define SOFTWARE COST?
 Software cost encompasses all expenses
related to developing, maintaining, and retiring
software. Managing software costs effectively is
vital for staying on budget and maximizing
returns.

5. Factors Affecting Software Cost?
COMPLEXITY OF
REQUIREMENTS: UNCLEAR
OR CHANGING
REQUIREMENTS CAN LEAD
TO MORE WORK AND
HIGHER COSTS.
DEVELOPMENT TEAM
EXPERTISE :A SKILLED TEAM
CAN WORK MORE
EFFICIENTLY AND REDUCE
LABOR COSTS.
TECHNOLOGY STACK :THE
CHOICE OF TECHNOLOGY
CAN IMPACT COSTS, WITH
SOME OPTIONS HAVING
LICENSING FEES.
PROJECT SIZE AND SCOPE:
LARGER PROJECTS
TYPICALLY REQUIRE MORE
RESOURCES AND HAVE
HIGHER COSTS.
QUALITY ASSURANCE AND
TESTING: NEGLECTING
TESTING CAN RESULT IN
COSTLY BUG FIXES AND
MAINTENANCE

7. Cost Reduction Strategies?
 Agile Development : Agile methodologies for iterative development and
adapting to changing requirements.
 Examples: If a software company wants to develop a new mobile app. They
decide to use Agile methodology to manage the project. Here are some
principles can be applied are User Stories, Product Backlog, Sprints, Daily
Standup Meetings, Iterative Development, Review and Retrospective, Adaptation,
Continuous Improvement.

8. Cost Reduction Strategies?
 Continuous Integration and Deployment (CI/CD): Automate processes to save time,
reduce errors, and speed up development.
 Examples: Imagine a company that is developing a new e-commerce website to sell its
products online. They decide to implement a CI/CD pipeline to manage the development,
testing, and deployment of their website. Here are some principles can be applied are
 Continuous integration(CI): Code Repository, Frequent Code Commits, Automated Build.
 Continuous Deployment (CD): Staging Environment, User Acceptance Testing (UAT), Automated
Deployment

9. Cost Reduction Strategies?
 Outsourcing and Offshoring: Consider outsourcing non-core tasks to reduce
labor costs.
 Example: Imagine a large multinational corporation based in the United States
that needs to develop a new software product to manage its global supply
chain operations. The corporation decides to leverage outsourcing and
offshoring to efficiently develop this software. These are the important steps
Outsourcing, Offshoring, Project Management, Development Process, Cost Savings,
Scalability, Quality Assurance, Delivery.

11. Metrics and Measurement?
 A metric is a measurement of the level at which any impute belongs to a
system product or process.
 Software metrics will be useful only if they are characterized effectively and
validated so that their worth is proven. There are four functions related to
software metrics they are Planning, Organizing, Controlling, Improving.

12. Metrics and Measurement?
 Importance of metrics: Metrics provide visibility into project progress and
potential cost issues.
 Key Metrics Cost Variance (CV): Compares actual and planned costs.
 Schedule Variance (SV): Measures progress against the schedule.
 Earned Value (EV): Evaluates completed work compared to the plan.

14. PART -2

15. Case Study 1 - XYZ Corporation
Title: Addressing Budget Overruns in the E-
commerce Platform Project

16. Introduction
 XYZ Corporation is a software development company that
has recently experienced budget overruns in a critical
project. The project involves developing a new e-commerce
platform. The initial budget was $5 million, but the project
is now estimated to cost $7.5 million Identify the factors
contributing to the cost overrun and propose specific cost
reduction strategies to bring the project back within
budget.

17. Factors Contributing to Cost
Overruns:
Factors Leading to Overruns are:
 1. Scope Creep
 2. Inadequate Resource Allocation
 3. Poor Risk Management
 4. Vendor or Outsourcing Costs
 5. Unexpected Technical Challenge

18. Factors Contributing to Cost Overruns?
SCOPE CREEP:
EVOLVING
REQUIREMENT
RESULTED IN
ADDITIONAL
DEVELOPMENT
WORK.
INADEQUATE
RESOURCE
ALLOCATION:
THE PROJECT
MIGHT NOT
HAVE HAD THE
NECESSARY
EXPERTISE OR
RESOURCES.
POOR RISK
MANAGEMENT:
UNFORESEEN
RISKS AND
ISSUES WEREN'T
ADEQUATELY
ADDRESSED.
UNEXPECTED
TECHNICAL
CHALLENGE:
UNFORESEEN
TECHNICAL
COMPLEXITIES.
VENDOR OR
OUTSOURCING
COSTS: HIGH
COSTS
ASSOCIATED
WITH
OUTSOURCING.

19. Cost Reduction Strategies?
Strategies to Bring Project Back Within
Budget:
 1. Strict Change Control
 2. Resource Optimization
 3. Risk Mitigation
 4. Vendor Contract Renegotiation
 5. Reestimate and Refine

20. Cost Reduction Strategies?
 Strict Change Control:
 Implement a change management process to
control scope changes and assess their impact
on costs. Prioritize and approve only essential
changes.
 Example: XYZ Corporation implemented strict
change control procedures in their software
development project to prevent unauthorized
scope expansions, ensuring project stability and
budget adherence.

21. Cost Reduction Strategies?
 Resource Optimization:
 Reassess the project team's skills and
allocate resources effectively. Consider
outsourcing specific tasks if expertise is
lacking internally.
 Example: By optimizing workforce
scheduling and task prioritization, XYZ
Company reduced labor costs by 15%
while maintaining productivity levels.

22. Cost Reduction Strategies?
 Risk Mitigation:
 Identify potential risks early and develop
contingency plans. For example, establish a
risk register and allocate budget reserves.
 Example: By identifying potential supply
chain disruptions and establishing alternative
suppliers, XYZ Corporation mitigated the risk
of production delays during a global crisis.

23. Cost Reduction Strategies?
 Vendor Contract Renegotiation
 Reevaluate vendor contracts and
terms.
 Example: XYZ Corporation
renegotiated their IT service contract,
securing a 15% cost reduction and
improved service levels from their
existing vendor

24. Cost Reduction Strategies?
 Reestimate and Refine
 Example: Through a comprehensive
reevaluation of project requirements and
costs, XYZ Corporation reduced its
budget by 10% by eliminating
unnecessary features and improving cost
estimates.

25. Strategies to limit budget overruns in general
include.
 Comprehensive Planning: Develop a detailed project plan
with realistic cost estimates and timelines.
 Risk Management: Identify potential risks and create
contingency plans.
 Regular Monitoring: Continuously monitor project
progress and financial metrics. –
 Change Control: Implement a formal change control
process to evaluate and approve modifications to the
project scope.

26. Strategies to limit budget overruns in
general include.
 Stakeholder Communication: Maintain open communication
with stakeholders to address concerns and expectations.
 Vendor Management: If outsourcing, manage vendors closely
and negotiate contracts that include penalties for cost
overruns.
 Benchmarking: Compare project performance to industry
benchmarks and historical data. –
 Continuous Improvement: Analyze past projects for lessons
learned and continuously improve project management
processes. These strategies can help companies minimize cost
overruns and deliver projects within budget.

27. CONCLUSION:
 In short, software cost overruns are a regular
challenges in project management, though they
are not impossible. Organizations can
successfully manage their software projects and
stay within budget by understanding the primary
factors that contribute to cost overruns and
applying effective cost-cutting techniques.

28. Case Study 2 – project Alpha
Title: Optimizing Costs in Project Alpha -
Challenges and Strategies

29. Introduction
 Project Alpha is a large-scale government software project intended to
streamline public services. This project has faced both cost and schedule
delays due to changing requirements and unforeseen technical
challenges. Analyze the situation, highlight the cost-related issues, and
propose strategies to mitigate these issues and optimize the project's
cost-effectiveness Provide real-world examples of similar projects that
successfully managed their costs

30. Project Challenges: Cost and Schedule
Delays
 Changing Requirements:
 Issue: The rapid change in project requirements is a key problem for Project Alpha.
Government software projects often involve multiple stakeholders with shifting demands,
leading to scope changes and additions.
 Impact on Costs: Frequent requirement changes can lead to increased development and
testing efforts, resulting in higher labor costs and extended project timelines.
 Impact on Schedule: As requirements change, project schedules may be disrupted,
leading to delays in delivering promised functionalities.
 Mitigation: To address this issue, Project Alpha can implement a rigorous change control
process to evaluate and approve scope changes, ensuring that each change is justified and its
impact on costs and schedules is well-documented.

31. Project Challenges: Cost and Schedule
Delays
 Unforeseen Technical Challenges:
 Issue: Software development projects, especially large-scale ones, often encounter unforeseen
technical complexities. Project Alpha may face issues like integration challenges, performance
bottlenecks, or security vulnerabilities that were not anticipated during the initial planning.
 Impact on Costs: Addressing unexpected technical challenges can consume additional
resources, increase development time, and require specialized expertise, all of which contribute
to higher costs.
 Impact on Schedule: Dealing with technical challenges can result in schedule delays as
development teams work to find solutions.
 Mitigation: Project Alpha can adopt agile methodologies that allow for flexibility and quick
adaptation to technical challenges. Regular technical risk assessments and contingency plans
can also help in addressing unforeseen issues promptly.

32. Project Challenges: Cost and Schedule
Delays
 Budget Overruns:
 Issue: Project Alpha could face budget overruns due to shifting requirements
and unexpected technological advances challenges. The initial budget for the
project may be insufficient.
 Impact on Costs: Budget overruns directly impact project costs, leading to
financial strain for the government agency overseeing the project.
 Impact on Schedule: Budget overruns can cause delays in completing tasks as it
takes longer to deliver the intended advantages to the public.
 Mitigation: Project Alpha should establish a robust budget management system
that includes contingency funds for unforeseen challenges. Regular financial
reviews and reporting can help in tracking and controlling costs effectively.

33. Mitigation Strategy 1 - Comprehensive Requirements Analysis
 Comprehensive requirements analysis is instrumental in identifying and addressing
changing requirements early in a project. It fosters effective communication with
stakeholders, allows for the prioritization of critical features, and establishes a
structured change control process. By embracing these practices, project teams can
proactively manage changing requirements, reducing the risk of scope creep,
budget overruns, and project delays.
 Real-World Example: One of the best examples of a project for cost savings is the
"Denver International Airport (DIA) Baggage System Project."

34. Mitigation Strategy 2 - Agile Development
 Agile methodologies offer the benefit of flexibility and responsiveness,
allowing project teams to swiftly address unforeseen technical challenges
and accommodate evolving requirements, ultimately enhancing project
adaptability and success.
 Real-World Example: The best examples for Agile development principles
is the creation of the online marketplace platform, Etsy.

35. Mitigation Strategy 3: Continuous Risk Assessment
 Ongoing risk assessment is critical for proactive risk management,
especially when dealing with technical challenges in complex projects. It
empowers project teams to anticipate, prioritize, and prepare for potential
issues, ultimately improving project outcomes, reducing costs, and
enhancing stakeholder satisfaction.
 Real-World Example: Real world NASA's Mars Curiosity Rover project,
which conducted continuous risk assessments to navigate through
unforeseen obstacles and remain on budget.

36. Mitigation Strategy 4 - Contingency Planning
 The importance of having contingency plans and budgets in place is
based on a company's ability to prepare for effectively respond to
unexpected events. These strategies not only protect against financial
losses, but they additionally increase company resilience, stakeholder
confidence, and flexibility to changing conditions.
 Real-World Example: Panama Canal Expansion project used contingency
planning to manage cost overruns due to geological challenges

37. Cost-related issues:
 Changing Requirements: Frequent requirement changes led to extra
development work.
 Technical Challenges: Unforeseen technical issues increased development
time and costs.
 Lack of Benchmarking: Not comparing with similar projects led to cost
estimation inaccuracies

38. COCNCLUSION:
 In conclusion, managing software costs effectively is crucial for
project success. Understanding cost factors, implementing cost
reduction strategies, and using key metrics are essential
components of cost optimization in software engineering. Real-
world case studies provide valuable insights into applying these
principles to resolve cost-related challenges.

39. THANKYOU