As IT executives struggle with business value, cost of quality
emerges as a key element of the IT value equation. Applying cost of
quality principles to applications involves accounting for costs
and benefits of quality initiatives.
Performance engineering is the preferred approach for achieving
performance levels consistent with business demands.
IT executives face increasing demands from the corporation to show
the return on information technology. Yet the cost of quality (CoQ)
has seldom been considered in the cost-benefit analysis. CoQ
principles applied routinely and effectively in manufacturing are
now emerging as important factors in the application value
equation. The "good" part of the good, fast, and cheap equation is
getting its due, along with improvement programs such as Six Sigma,
TQM, and the like.
Our research shows that in 1998, more than 85% of IT shops
conducted return on investment (ROI) analyses of their IT
expenditures (up from less than 50% in 1996). Furthermore, with
more than 30% of IT organisations now involved in process
improvement initiatives (such as Software Engineering Institute's
Capability Maturity Model, Six Sigma, ISO 9000-based approaches),
many companies have faced the challenge of showing ROI for improved
productivity and quality.
By 2001/02, software process improvement will be on the rise again,
with renewed interest in quality and agility measures. In the
meantime, ROI analyses will become increasingly common, with a
growing interest in being able to express the cost of quality and
agility.
Applying cost of quality to software
When CoQ was
developed for manufacturing, the assumption was that it was always
cheaper to do the job right the first time. However, software now
challenges this assumption with its requisite changeability. It is
supposed to change - otherwise, its functionality would be realised
in the hardware. Software adjusts in order to respond to changes in
its functionality, quality, or even its purpose. Both software
professionals and their customers have come to rely on the ability
of software to accommodate changes, generating a whole new meaning
to "doing the job right".
IT shops must understand the costs of quality software before they
can justify investments in improving quality. The following
questions must be answered:
- How much does defective software because of poor quality cost
the organisation?
- How good or bad is the software quality in the IT application
portfolio?
- How much does it cost to produce quality software?
The costs of quality can be placed in three primary
categories:
1. Cost of nonconformance
In dealing with nonconformance, both pre-release and post-delivery
quality issues must be addressed. For pre-release, typical cost
items include defect management, re-work, re-reviews, and
re-testing. For post-delivery, technical support, defect
notification, fixes, and updates must be considered.
2. Cost of evaluating conformance
Evaluating conformance entails assessing the quality level of the
software produced, both in terms of identifying the nonconformance
situations as well as providing quality control checks. To
determine the level of nonconformance and understand the condition
of the software, normal cost items include inspections, testing,
software quality assurance, and reviews. For quality control
checks, typical costs include product quality audits and criteria
for "go/no-go" decisions. For many IT organisations, costs
associated with assessing quality levels are frequently
overlooked.
3. Cost of preventing poor quality, or ensuring good
quality
To prevent quality issues from arising, effort is
expended to set quality goals and establish standards of
performance as well as performance zones. It is also important to
develop and execute a process improvement program for a quality
process to develop quality products. Typical costs include
training, process improvement initiatives, metrics collection and
analysis, and defining release criteria for acceptance
testing.
Cost-benefit analysis for cost of quality
For software
quality, the end game centres on controlling costs and managing
according to the appropriate quality performance zones. Once the
three categories of quality costs are in place, several benefits
can be realised.
First, organisation quality costs can and must be compared to the
benefits derived. The costs can be compared to the overall
development, delivery, and, ultimately, maintenance and support
costs. Previously masked costs associated with software quality are
revealed and visible to IT management. Economic trade-offs with
quality become apparent, leading to more effective decision making.
The bottom-line effects of quality programs and process
improvements become measurable, visible, and actionable.
Once IT executives see and understand the real cost of software
quality, more thorough analysis will lead to proactive positions
regarding the competitive environment. Quality costs are baselined
and benchmarked against industry norms. Application development and
maintenance organisations are then able to deal with software
quality in an economic context, thus having a bottom-line
effect.
Most CoQ techniques are applied to ROI retrospectively, because
most IT executives want to know the payoff of their investments in
process improvement. However, we recommend IT organisations
consider some other applications and use CoQ to:
- Determine the potential costs and risks of specific quality
tradeoffs on critical software projects
- Determine potential legal exposure associated with
customer-experienced defects (eg, Y2K exposures)
- Develop a basis for budgeting quality management functions
(control and assurance)
- Couple software quality cost data with production cost data to
demonstrate the value of staff efforts to the corporate bottom
line
- Compare the proposed process improvement initiatives and select
those that are most cost-effective
Bottom Line: With increased demand for IT ROI and most IT
organisations likely to experience software quality woes post-Y2K,
cost of quality (CoQ) techniques are emerging as an effective way
to communicate the value of quality initiatives and identify
quality initiative candidates. CoQ enables users to understand the
economic tradeoffs of delivering quality software.
http://www.metagroup.com/CW360 would like to hear from you
Where do you draw the
line between cost and quality? How do you balance the value
equation?
E-mail CW360.com and share your views >>