Financial Implications of Inculcating Quality in Software Development: A Call for "Value-Based Quality Budgeting"

By Rao, Shankar K. | Journal of Financial Management & Analysis, January-June 1998 | Go to article overview

Financial Implications of Inculcating Quality in Software Development: A Call for "Value-Based Quality Budgeting"


Rao, Shankar K., Journal of Financial Management & Analysis


Introduction

Writing on the chosen topic with special emphasis on "Value - based quality budgeting"- a new concept introduced by Shankar K. Rao for the first time in the literature on information technology' - - is a difficult assignment as there in scanty or no information at all available in this crucial field not only in information technologically advanced (developed) countries but also in developing countries.

The past decade has witnessed the free-market economy wave sweeping developing nations worldwide. The liberalization and globalization programmes undertaken by these nations has made a profound impact in the Information Technology (IT) industry with organisations going in for rapid computerisation of their operations. This has led to a spurt in software development companies and hardware assembly firms coming up in every nook and corner of these nations. When this trend began, it bore healthy results with rise in employment and access to new development tools and products. However, today, the software market boom is turning into a software market doom with supply exceeding demand by a ratio of 20:1(based on the practical experiences of the author). Prices of hardware systems are drastically reducing, leading to a no-profit situation culminating in closure of many small firms. This has had a parallel effect on the software market too. Today, considering intense competition in award of contracts for software project development, quality has been relegated to the background. With emerging new technologies and rapid scientific advancement, the role of quality in software development needs to be looked at from a closer perspective.

Renowned quality expert, Crosby has defined software quality as conformance to requirements2. While we can debate on whether this definition describes quality in totality, it is noteworthy that quality goes much beyond the prerequisite of meeting user requirements and into such areas as ease of use, easy learning, operational efficiency, ease of installation, and proper documentation. Here the horizon of quality extends much wider. Most software developers ignore these aspects in the development process and spend time on testing (which is just to find and fix defects). But testing only reaches a minimum level of quality. Ultimately due to paucity of time, the product is delivered without considering design compatibility, documentation standards, efficiency, etc. The result is a poor quality product. This lackadaisical attitude by customers and software developers towards quality has been borne by disregarding appropriate quality costing as an important aspect of project costing, without considering the fact that quality is directly linked to productivity.

Relationship between Quality and Productivity

Productivity is the ratio of output obtained to a given amount of input utilised. Quality is measured both in the final products that are produced and in all the inputs along the path of production. An increase in the quality of inputs will mean fewer with less repeat or modified work, thus, productivity increases. Any reduction in quality of computer operations or system can disrupt schedules, delay deliveries, increase modifications, increase rejected programs, and waste professional time and computer resources. Required error corrections and modifications caused by inaccurate requirement definitions all lower productivity. Poor quality of computer program inputs not only increase costs (inputs in productivity equation) but also have lowered the acceptability of the products (outputs in productivity equation). Thus increased productivity will only come from increased quality at every input to the computer system production chain3.

Thus, to increase productivity with increased quality input, the need of the hour is in inculcating the Total quality Management (TQM) approach in software development'. The basic philosophy of TQM is that products or services become better and cheaper if user demands are continually analysed and development processes are improved accordingly. …

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