Why DFTS Entails Different Financial Analyses

This chapter discusses economic imperatives of a DFTS initiative using a set of financial approaches. But while carrying out financial analyses, you should not lose sight of the objectives of such an exercise, as often happens. The key objectives here are delivering customer requirements as trustworthy software. Chapter 2 identified five key elements of trustworthy software: reliability, safety, security, maintainability, and customer responsiveness. Delivering these objectives should remain the focus of such analyses. Appropriate financial analyses provide visibility and control for effective decision-making. In this regard, we underline, equally, the need for nonfinancial control mechanisms presented in Chapter 21.

From another perspective, sound financial return is one of the desired outcomes of a DFTS initiative that is designed to meet customer requirements while also meeting the software developer's internal objectives. It is just that customer requirements rather than short-term financial return are the primary focus of DFTS. Therefore, this implies that before financial return of a DFTS initiative is evaluated, you must answer the question "Did we deliver trustworthy software in the first place?" If the answer is "yes," the next question is "Do the customers concur with this answer?" If the answer is "no" to either of these questions, financial evaluation is not one for trustworthiness, and you must go back to the drawing board. Any financial evaluation of DFTS deployment without due consideration of customer requirements is largely a pointless exercise in a DFTS context and is of limited value. For one thing, it may lead to wrong decision-making regarding the initiative's cost and quality implications. Ignoring customer requirements may also impair financial performance in the long term. This is due to higher life-cycle costs associated with defective software as well as loss of customer confidence and competitiveness due to poor quality. High costs and poor quality constitute the double whammy of a flawed software development process.

Because regular accounting data is inadequate, we recommend using the following four approaches, as needed, to evaluate economic imperatives of a DFTS deployment:

• Cost of Software Quality (CoSQ)

• Activity-Based Costing (ABC) in software development

• Application of Taguchi's Quality Loss Function (QLF) to evaluate software quality

• Financial evaluation of a DFTS intervention