Software Engineering Economics

(SE-231)
(Lecture 3-4)

Instructor:
Gul Sher Ali

Department of Software Engineering

______________________________________________________
University of Gujrat – Hafiz Hayat Campus

1
Fundamental estimation questions

How much effort is required to complete an

activity?
How much calendar time is needed to complete
an activity?
What is the total cost of an activity?
Project estimation and scheduling are
interleaved management activities.
Software cost components

 Hardware and software costs.

 Travel and training costs.
 Effort costs (the dominant factor in most
projects)
The salaries of engineers involved in the project;
Social and insurance costs.
 Effort costs must take overheads into account
Costs of building, heating, lighting.
Costs of networking and communications.
Costs of shared facilities (e.g library, staff restaurant, etc.).
Costing and pricing

Estimates are made to discover the cost, to the

developer, of producing a software system.
There is not a simple relationship between the
development cost and the price charged to the
customer.
Broader organisational, economic, political and
business considerations influence the price
charged.
Software pricing factors
Market A d evelopment organisation may quote a low price because it
opportunity wishes to move into a new segment of the software market.
Accepting a low profit on one project may give the opportunity
of more profit later. The experience gained may allow new
products to be developed.
Cost estimate If an o rganisation is unsure of its cost estimate, it may increase
uncertainty its price by some contingency over and above its normal profit.
Contractual terms A c ustomer may be willing to allow the developer to retain
ownership of the source code and reuse it in other projects. The
price charged may then be less than if the software source code
is handed over to the customer.
Requirements If the requirements are likely to change, an organisation may
volatility lower its price to win a c ontract. After the contract is awarded,
high prices can be charged for changes to the requirements.
Financial health Developers in financial difficulty may lower their price to ga in
a c ontract. It is better to make a sm aller than normal profit or
break even than to go out of business.
Software productivity

A measure of the rate at which individual

engineers involved in software development
produce software and associated
documentation.
Not quality-oriented although quality assurance
is a factor in productivity assessment.
Essentially, we want to measure useful
functionality produced per time unit.
Productivity measures

Size related measures based on some output

from the software process. This may be lines of
delivered source code, object code instructions,
etc.
Function-related measures based on an
estimate of the functionality of the delivered
software. Function-points are the best known of
this type of measure.
Lines of code

 What's a line of code?

The measure was first proposed when programs were typed on
cards with one line per card;
 What programs should be counted as part of the
system?
 This model assumes that there is a linear relationship
between system size and volume of documentation.
Productivity comparisons

 The lower level the language, the more

productive the programmer
The same functionality takes more code to implement in a
lower-level language than in a high-level language.
 The more verbose the programmer, the higher
the productivity
Measures of productivity based on lines of code suggest that
programmers who write verbose code are more productive than
programmers who write compact code.
System development times

Analysis Design Coding Testing Documentation

Assembly code 3 weeks 5 weeks 8 weeks 10 2 weeks
High-level language 3 weeks 5 weeks 4 weeks weeks 2 weeks
6 weeks

Size Effort Productivity

Assembly code 5000 lines 28 weeks 714 lines/month
High-level language 1500 lines 20 weeks 300 lines/month
Function points
 Based on a combination of program characteristics
external inputs and outputs;
user interactions;
external interfaces;
files used by the system.
 A weight is associated with each of these and the
function point count is computed by multiplying each
raw count by the weight and summing all values.

UFC = (number of elements of given type)  (weight)

Function points

 The function point count is modified by complexity of

the project
 FPs can be used to estimate LOC depending on the
average number of LOC per FP for a given language
LOC = AVC * number of function points;
AVC is a language-dependent factor varying from 200-300 for
assemble language to 2-40 for a 4GL;
 FPs are very subjective. They depend on the estimator
Automatic function-point counting is impossible.
Object points

 Object points (alternatively named application points)

are an alternative function-related measure to function
points when 4Gls or similar languages are used for
development.
 Object points are NOT the same as object classes.
 The number of object points in a program is a weighted
estimate of
The number of separate screens that are displayed;
The number of reports that are produced by the system;
The number of program modules that must be developed to
supplement the database code;
Object point estimation

Object points are easier to estimate from a

specification than function points as they are
simply concerned with screens, reports and
programming language modules.
They can therefore be estimated at a fairly early
point in the development process.
 At this stage, it is very difficult to estimate the
number of lines of code in a system.
Productivity estimates

Real-time embedded systems, 40-160

LOC/P-month.
Systems programs , 150-400 LOC/P-month.
Commercial applications, 200-900
LOC/P-month.
In object points, productivity has been
measured between 4 and 50 object
points/month depending on tool support and
developer capability.
Factors affecting productivity

Application Knowledge of the application domain is essential for effective

domain software development. Engineers who already understand a
experience domain are likely to be the most productive.
Process quality The development process used can have a s ignificant effect on
productivity. This is covered in Chapter 28.
Project size The larger a project, the more time required for team
communications. Less time is available for development so
individual productivity is reduced.
Technology Good support technology such as C ASE tools, configuration
support management systems, etc. can improve productivity.
Working As I discussed in Chapter 25, a q uiet working environment with
environment private work areas contributes to improved productivity.
Quality and productivity

 All metrics based on volume/unit time are

flawed because they do not take quality into
account.
 Productivity may generally be increased at the
cost of quality.
 It is not clear how productivity/quality metrics
are related.
 If requirements are constantly changing then an
approach based on counting lines of code is not
meaningful as the program itself is not static;
Estimation techniques

 There is no simple way to make an accurate estimate of

the effort required to develop a software system
Initial estimates are based on inadequate information in a user
requirements definition;
The software may run on unfamiliar computers or use new
technology;
The people in the project may be unknown.
 Project cost estimates may be self-fulfilling
The estimate defines the budget and the product is adjusted to
meet the budget.
Changing technologies

 Changing technologies may mean that previous

estimating experience does not carry over to new
systems
Distributed object systems rather than mainframe systems;
Use of web services;
Use of ERP or database-centred systems;
Use of off-the-shelf software;
Development for and with reuse;
Development using scripting languages;
The use of CASE tools and program generators.
Estimation techniques

Algorithmic cost modelling.

Expert judgement.
Estimation by analogy.
Parkinson's Law.
Pricing to win.
Estimation techniques
Algorithmic A m odel based on historical cost information that relates some software
cost modelling metric (usually its size) to the project cost is used. An estimate is made
of that metric and the model predicts the effort required.
Expert Several experts on the proposed software development techniques and
judgement the application domain are consulted. They each estimate the project
cost. These estimates are compared and discussed. The estimation
process iterates until an agreed estimate is reached.
Estimation by This technique is applicable when other projects in the same application
analogy domain have been completed. The cost of a new project is estimated by
analogy with these completed projects. Myers (Myers 1989) gives a
very clear description of this approach.
ParkinsonÕs ParkinsonÕsLaw states that work expands to fill the time available. The
Law cost is determined by available resources rather than by objective
assessment. If the software has to be delivered in 12 months and 5
people are available, the effort required is estimated to be 60 person-
months.
Pricing to win The software cost is estimated to be whatever the customer has
available to spend on the project. The estimated effort depends on the
customerÕs budget and not on the software functionality.
Pricing to win

The project costs whatever the customer has to

spend on it.
Advantages:
You get the contract.
Disadvantages:
The probability that the customer gets the system he
or she wants is small. Costs do not accurately reflect
the work required.
Top-down and bottom-up
estimation

Any of these approaches may be used top-down

or bottom-up.
Top-down
Start at the system level and assess the overall
system functionality and how this is delivered
through sub-systems.
Bottom-up
Start at the component level and estimate the effort
required for each component. Add these efforts to
reach a final estimate.
Top-down estimation

Usable without knowledge of the system

architecture and the components that might be
part of the system.
Takes into account costs such as integration,
configuration management and documentation.
Can underestimate the cost of solving difficult
low-level technical problems.
Bottom-up estimation

Usable when the architecture of the system is

known and components identified.
This can be an accurate method if the system
has been designed in detail.
It may underestimate the costs of system level
activities such as integration and
documentation.
Estimation methods

 Each method has strengths and weaknesses.

 Estimation should be based on several methods.
 If these do not return approximately the same result,
then you have insufficient information available to make
an estimate.
 Some action should be taken to find out more in order
to make more accurate estimates.
 Pricing to win is sometimes the only applicable method.
Pricing to win

 This approach may seem unethical and un-businesslike.

 However, when detailed information is lacking it may be
the only appropriate strategy.
 The project cost is agreed on the basis of an outline
proposal and the development is constrained by that
cost.
 A detailed specification may be negotiated or an
evolutionary approach used for system development.
Algorithmic cost modelling

 Cost is estimated as a mathematical function of

product/project, people and process attributes whose
values are estimated by project managers:
Effort = A  SizeB  M
A is an organisation-dependent constant, B reflects the
disproportionate effort for large projects and M is a multiplier
reflecting product, process and people attributes.
 The most commonly used product attribute for cost
estimation is code size.
 Most models are similar but they use different values for
A, B and M.
Estimate uncertainty

4x

2x

x
Feasib ility Requirements Design Co de Deliv ery

0.5 x

0.2 5 x