4.4 Return on Investment

4.2 Cost

Cost is the amount of money that is spent on a SPI method. Cost is the economic consequence that is the result of creating a new and improved software process. Cost is the amount of money you must spend to get something back. SPI costs abound. Examples of SPI costs include the cost of training, the cost of travel, and the cost of buying that new SPI tool. Cost is an important factor.

Who wants to quantify the costs? Not very many! But everyone wants to quantify the benefits. Benefits are politically correct. Ask people for the benefits, and they will rattle off productivity, quality, and we'll feel better about ourselves . Cost is related to benefit. People are not very good at quantifying the economic value of benefits. That is, they don't know how much money they have made. In fact, they may even intuitively believe there are no benefits. They may believe the benefits are soft-side benefits and are therefore not economically quantifiable. The benefits are immeasurable, most believe. However, they just cannot be counted. And they should not be counted. Who would dare to question the benefits of the SPI method? Who would dare to count how much our SPI program is worth? Everyone knows that SPI is beneficial. Everyone knows that SPI adds value. It's just that the value is not quantifiable. Anyone who dares to quantify the economic value of an implicitly priceless SPI method is a troublemaker. Figure 8 illustrates the formula for costs.

Figure 8: Formula for Costs

If the benefits are priceless and immeasurable soft-side results, and there are no quantifiable economic benefits, then, by all means, let's not count the costs. If we place no benefit next to high cost, then we all look bad, SPI looks bad, and the SPI method is all for naught. So, let's not delve into the details of cost. In fact, let's not spend more than a few minutes counting the cost of the SPI method. Let's rattle off a nonsensical figure from the top of our heads. Let's see. The SPI method costs $1,000, the fee for the SPI trainer. And $1,000 is such a small price to pay for the hidden treasure that our SPI method represents.

Let's examine this so-called $1,000 SPI method. We had to train 100 people at $1,000 a person. That's $100,000. We had to fly 100 people coast to coast at a cost of $2,000 a person. That's $200,000. Each person stayed in a hotel for 10 nights at $100 per night. That's $100,000. It takes 100 hours to apply our SPI method at a rate of $100 per hour . That's $1 million. Let's see, so far the cost of our fancy SPI method is $1.4 million. It better yield more than $1.4 million in benefits. If you insist that your immeasurable and unquantifiable treasure is worth the cost, you're probably out of your mind.