Software Development Inc.Software Development Inc. (SDI) produces and markets software for...

Software Development Inc.

Software Development Inc. (SDI) produces and markets software for personal computers, including spreadsheet, word processing, desktop publishing, and database management programs. SDI has annual sales of $800 million.

Producing software is a time-consuming, labor-intensive process. Software quality is an extremely important aspect of success in computer software markets. One aspect of quality is program reliability. Does the software perform as expected? Does it work with other software in terms of data transfers and interfaces? Does it terminate abnormally? In spite of extensive testing of the software, programs always contain some bugs. Once the software is released, SDI stands behind the product with phone-in customer service consultants who answer questions and help the customer work around problems in the software. SDI’s software maintenance group fixes bugs and sends out revised versions of the programs to customers.

SDI tracks the relation between quality costs and quality. The quality measure it uses is the number of documented bugs in a software package. These bugs are counted when a customer calls in with a complaint and the SDI customer service representative determines that this is a new problem. The software maintenance programmers then attempt to fix the program and eliminate the bug. To manage quality, SDI tracks quality costs. It has released 38 new packages or major revisions in existing packages in the last three years. The accompanying table reports the number of defects (bugs) documented in the first six months following release. Also listed in the table are total product cost and quality cost per software package release.

Product costs include all the costs incurred to produce and market the software, excluding the quality costs in the table. Quality costs consist of three components: training, prevention, and software maintenance and customer service costs. Training costs are expenditures for educating the programmers and updating their training. Better-educated programmers produce fewer bugs. Prevention costs include expenditures for testing the software before it is released. Maintenance and customer service costs include (1) the programmers charged with fixing the bugs and reissuing the revised software and (2) the customer service representatives answering phone questions. The training and prevention costs are measured over the period the software was being developed. The number of defects and maintenance and service costs are measured in the first six months following release.

*Per 100,000 lines of computer code.

All the numbers in the table have been divided by lines of computer code in the particular program release. Programs with more lines of code cost more and also have more bugs. Prior studies find that using lines of code is an acceptable way to control for program complexity. Thus, the numbers in the table are stated in terms of defects and cost per 100,000 lines of code.

The figure below plots the relation between total cost and number of defects. The vice president of quality of SDI likes to use it to emphasize that costs and quality are inversely related. She is fond of saying, “Quality pays! Our total costs fall as the number of defects declines. The more we spend on quality, the lower our costs.”

SDI total costs by defects

Required:

Critically evaluate the vice president’s analysis.