18.2 Personal Software ProcessSM

The return on investment (ROI) of software process improvement (SPI) methods is the amount of money gained, returned, or earned above the resources that are spent. ROI is a solid measure of how much additional money we have gained , saved, or received from using a SPI method. ROI begins to clear the landscape. It helps us determine whether the SPI method was worth all of the time, trouble, expense, and investment in a new SPI method. Once again, there are only two parts , terms, or components to the simple ROI equation: benefits and costs. We have already identified the benefits of our chosen SPI method and the costs up to this point. Essentially, ROI consists of dividing the benefits by the costs.

However, the ROI model requires an additional manipulation of the benefits and costs. Before dividing the benefits by the costs, the costs must first be subtracted from the benefits. What? The ROI model assumes that the benefits are not truly benefits until the costs have first been eliminated, paid for, or covered. That is, benefits usually represent the gross windfall, savings, or revenue of using a SPI method. However, in order to achieve the benefits, some measure of investment is required. Therefore, the benefits came at a cost that must be accounted for, isolated, and eliminated. That is what the ROI model does. First, we will identify our benefits. Then we will subtract from the gross benefits the costs that were necessary to achieve the benefits. Then we will divide the adjusted benefits by the costs, in order to determine what is known as ROI. Whereas benefit/cost ratio (B/CR) is used to evaluate gross benefits, ROI is used to evaluate net benefits, or gross benefits less the costs of SPI.

16.1 Software Inspection Process

The benefits of using the Software Inspection Process to help produce 10,000 lines of code are $2,767,464. This was obtained by subtracting $1,742,533 in new total life cycle costs from $4,509,997 in old total life cycle costs.

The special, new, or additional costs that are required to introduce inspections consist of the training and inspection cost itself. The training costs to prepare four people to use inspections to help produce 10,000 lines of code are $11,240. The inspection cost for our four trained inspectors to evaluate 10,000 lines of code is $70,833. This amounts to nearly 42 Software Inspection Process runs. That totals $82,073 to introduce the Software Inspection Process as a SPI method.

The development cost of $508,000, testing cost of $195,000, and maintenance cost of $967,900 were not included. The development, testing, and maintenance costs either stayed the same or decreased. Had the development, testing, or maintenance costs increased, the differences or the increases would have been included.

Let's determine the B/CR of the Software Inspection Process to help produce 10,000 lines of code. Divide the benefits of $2,767,464 by the costs of $82,073 for the Software Inspection Process. The B/CR of using the Software Inspection Process to help produce 10,000 lines of code is 34:1.

However, the benefits of the Software Inspection Process must be adjusted, by first removing the costs. That is, the costs of inserting the Software Inspection Process as a SPI method must first be removed from the gross benefits. We will call these the adjusted benefits of the Software Inspection Process. Subtract $82,073 in Software Inspection Process costs from $2,767,464 in gross Software Inspection Process benefits. The result is $2,685,391 in adjusted benefits. Table 20 illustrates the ROI of the Software Inspection Process.

Table 20: ROI of Software Inspection Process

SPI Method	Benefits/Costs
Inspection Benefits (Gross)	$2,767,464
Inspection Costs	$82,073
Inspection B/CR	34:1
Inspection Benefits (Adjusted)	$2,685,391
ROI	3,272%

Now we are ready to determine the ROI of the Software Inspection Process to help produce 10,000 lines of code. Divide the adjusted benefits of $2,685,391 by the costs of $82,073 for the Software Inspection Process. Multiply the result by 100%. The ROI of using the Software Inspection Process to help produce 10,000 lines of code is 3,272%.