9.3 TSPSM BCR Methodology

8.5 PSP ^SM NPV Methodology

The NPV methodology for the Personal Software Process ^SM is a procedure to measure, quantify, and analyze money returned less inflation. The ratio of discounted benefits to costs for the Personal Software Process ^SM remains high due to reduced maintenance costs. NPV is the discounted money earned from using the Personal Software Process ^SM to create a new and improved software process. Its NPV methodology is a three-part process that consists of estimating discounted benefits, special costs, and the benefit to cost ratio. Its benefit methodology consists of combining the discounted net benefits together with the special costs using the B/CR formula. Key elements include lowering the gross benefits to form the discounted benefits. These are used to form a realistic estimation of the magnitude of the benefits to the costs. (B/CR is a ratio of benefits to costs for objectively analyzing economic value. ROI% is used to avoid overstating the benefits. NPV is a skeptical and even cynical approach to ensure benefits are not overstated. All three of these methods should be used as exhibited by this NPV methodology. They are not mutually exclusive of one another.) Figure 37 illustrates the NPV methodology for the Personal Software Process ^SM .

Figure 37: NPV Methodology for Personal Software Process ^SM

Estimate NPV of benefits for PSP ^SM : The objective of this activity is to discount the gross benefits of PSP ^SM based on inflation. This substep includes: divide benefits by devaluation rate for PSP ^SM .

Estimate adjusted NPV benefits for PSP ^SM : The objective of this activity is to validate the benefits of the PSP ^SM by removing its costs. This substep includes: subtract special costs from NPV benefits for PSP ^SM .

Estimate adjusted NPV B/CR for PSP ^SM : The objective of this activity is to measure the magnitude of the discounted net benefits to the costs for implementing PSP ^SM . This substep includes: divide adjusted NPV benefits by special costs for PSP ^SM .