Software Inspections Return on Investment

Managers are interested in knowing the return on investment to be derived from software process improvement actions. The Software Inspections Process gathers the data needed to determine this.

The Return on Investment for Software Inspections is defined as Net Savings divided by Detection Cost, where Net Savings is Cost Avoidance less Cost to Repair Now and Detection Cost is the cost of preparation effort and the cost of conduct effort. Savings result from early detection and correction avoiding the increased cost that comes with detection and correction of defects later in the life cycle.

An undetected major defect that escapes detection and leaks to the next phase may cost ten times to detect and correct. A minor defect may cost two to three times to detect and correct. The Net Savings then are nine times for major defects and one to two times for minor defects. The defined measurements collected in the Software Inspections Lab may be combined in complex ways to form this derived metric.

Reasoning About ROI

ROI: Net Savings/Detection Cost

Reasoning About Net Savings

The following model illustrates that defects are detected in Development (DD) and Test (TD), and defects leak from Development (DL) and Test (TL).

Net Savings: Cost Avoidance-Cost to Repair Now

Net Savings:
Major Defects * {(M1 * DD)+(M1 * DD) * (M2 * TL)*C1-C1}+Minor Defects * (M3-C2)

Where:

M1: (2,10) Additional Cost to Repair Multiplier for Development to Test Major Defect Leakage

M2: (2,10) Additional Cost to Repair Multiplier for Test to Customer Use Major Defect Leakage

M3: (2-4) Additional Cost to Repair for Minor Defect Leakage

DD: (.50-.95) Defect Detection Rate for Development to Test

TL: (.025-.25) Test Leakage Rate for Test to Customer Use

C1: Average Cost to Repair Major Defect

C2: Average Cost to Repair Minor Defect

Reasoning About Detection Cost

Detection Cost:
Preparation Effort + Conduct Effort

Detection Cost:
{Minutes of Preparation Effort + (Minutes of Conduct Time * P)}/60

Where:

P: (4-6) Number of participants

60 minutes per hour

This model for Return on Investment bases the savings on the cost avoidance associated with detecting and correcting defects earlier rather than later in the product evolution cycle. A Major Defect that leaks from Development to Test may cost five to ten times to detect and correct. Some of these defects leak further from Test to Customer Use and may cost an additional five to ten times to detect and correct. A Minor Defect may cost two to three times to correct later.

The Return on Investment is determined by using the expression for Net Savings specified above and setting the parameters for Cost to Repair Multiplier, Defect Detection, and Defect Leakage.

For example, to determine the expression for ROI to be used in a project spreadsheet, the following example is offered:

Where:

M1: 5
M2: 10
M3: 2
DD: .6
TL: .25
C1: 1
C2: 1

Net Savings:
Major Defects * {(M1 * DD)+(M1 * DD) * (M2 * TL)*1-1}+Minor Defects * (M3-1)

Net Savings:
Major Defects * {(5 * .6)+(5 * .6) * (10 * .25)*1-1}+Minor Defects * (2-1)

Net Savings:
9.5 * Major Defects+Minor Defects