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MAKE AND BUY DECISION

It is often more cost effective to acquire rather than develop software

Managers have many acquisition options which makes make/buy decision harder

1. Software may be purchased (or licensed) off the shelf

2. Full-experience or partial-experience software components may be acquiredand integrated to meet specific needs

3. Software may be custom built by an outside contractor to meet the purchasersspecifications

The steps involved in the acquisition of software are defined bythe criticality of the software to be purchased and the end cost. In

some cases (e.g., low-cost PC software), it is less expensive to

purchase and experiment than to conduct a lengthy evaluation of

potential software.

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?

For more expensive software products, the following guidelines can

be applied:

1. Develop specifications for function and performance of the

desired software.

2. Estimate the internal cost to develop and the delivery date.

3a. Select three or four candidate applications that best meet your

specifications.

3b. Select reusable software components that will assist inconstructing the required application.

4. Develop a comparison matrix that presents a head-to-head

comparison of key

5. Evaluate each software package or component based on pastproduct quality.

6. Contact other users of the software and ask for opinions

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In the final analysis The make/buy decision can be made based onthe following conditions:

Will the software product be available sooner than internallydeveloped software?

Will the cost of acquisition plus the cost of customization be lessthan the cost of developing the software internally?

Will the cost of outside support (e.g., a maintenance contract) beless than the cost of internal support?

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DECISION TREE

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Computing expected cost

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OUTSOURCING

Sooner or later company asks a question can we getsoftware and system at lower price?

The answer is outsourcing.

Software engineering are contracted to a third party whodoes the work at lower cost and hopefully higher quality.

The decision to outsource can either be strategic or

tactical.

Strategic level: Business manager considers if significantpart of software can be contracted to others

Tactical level: Project manager decides if part of project or

whole project

should be outsourced.

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Advantages and Disadvantages

Advantages Disadvantages

Cost savings can

usually be achieved

by reducing the

number of people,

facilities.

Loss of control over

software

Company becomes

dependent on third

party which is not

good considering the

competition

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Automated estimation tools

Automated estimation tools help planner to estimate cost

and effort and to perform what-if analyze for project

variables such as staffing etc

All these tools have a general characteristics. Theseare

1. Sizing of project deliverables

2. Selecting project abilities

3. Predicting staffing levels

4. Predicting software cost

5. Predicting software schedule