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CORNELL CS 501 - BUSINESS ASPECTS OF SOFTWARE ENGINEERING

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CS 501: Software EngineeringAdministrationHigh Level Decision MakingProduct ManagerIn-house Computing DepartmentsBusiness Models: Bespoke SoftwareBusiness Models: Package with ModificationsBusiness Models: Package Without ModificationsBusiness Models: Embedded SystemsOutsourcingFree-Lance Software DevelopmentSlide 12Slide 13Fixed and Variable Cost: Packaged SoftwareFixed and Variable Costs: Profit or LossProfit or Loss?Unorthodox Business Models: SharewareUnorthodox Business Models: Open SourceNotes on Open SourceOpen Source License1CS 501 Spring 2003CS 501: Software EngineeringLecture 7Business Aspects of Software Engineering2CS 501 Spring 2003AdministrationFeasibility report• Submit an email message to [email protected] with the report as an attachment. • If you wish to revise your report, resend everything with a clear message in the body of the email.• Possible formats are .doc, .pdf, .html, .ps, or .txt. • Choice of layout, format, etc. are your decision. How would the client like to see the report?3CS 501 Spring 2003High Level Decision MakingBig software projects are of strategic important for organizations• The senior management have a duty to understand the strategic decisions, the cost options, and the risks.Senior personnel requirement: individual who is familiar with both the strategic business aspects and the computing aspects of projects, e.g.,Chief Information OfficerConsultantDoes not require detailed technical expertise4CS 501 Spring 2003Product ManagerWhen software is a product or part of a product, somebody must look at it as a productProduct manager: Sees software as a product with many aspects:• Function -- What does it do?• Market -- Who is it for?• Sales -- What price, advertising, sales channels?• Packaging -- What media, bundling, packaging, documentation?• Legal -- What licenses, legal protections, etc.?5CS 501 Spring 2003In-house Computing DepartmentsOrganization• Central computing department, reporting through a Chief Information Officer• Decentralized model with computing distributed across the organization, reporting to operational unitsExpertise• Full in-house design and software development expertise• Outsourcing with project management in-houseEven if development is contracted to consultants, software houses, etc., organizations need considerable in-house expertise to oversee the work.6CS 501 Spring 2003Business Models: Bespoke SoftwareSoftware is tailored to specific environment• Very large applications (e.g., air traffic control)• Small-scale, highly specific applications (e.g., Cornell dormitory keys)Development options• Software is written in-house• Software is written by contractorProduct may be owned by supplier or customer. Maintenance may be in-house or by contractor.7CS 501 Spring 2003Business Models: Package with ModificationsSoftware house develops general purpose packageClient• Licenses package• Source code is modified for client's specific needsBusiness consideration• Modifications may be by software house or in-house team• Maintenance may be by software house or in-house team Legal issues include: access to source code, ownership of modifications, avoiding being locked-in to a supplierExamples: Corporate pay-roll systems, accounting systems for small businesses, etc.8CS 501 Spring 2003Business Models: Package Without ModificationsPackage Licensed in Binary Form Only• Package typically has many options, including configuration options• Package may be a self-contained application or may be designed as a component to incorporate in applicationsLegal considerations: usually there is a clear distinction between the package (license from supplier) and application.Examples: Database systems, mathematical packages, etc.9CS 501 Spring 2003Business Models: Embedded SystemsSoftware bundled with hardware product Product is seen by the user as a hardware product, even if the software development is the major part of the costExamples: Global Positioning System, automobile engine control, PalmPilot10CS 501 Spring 2003OutsourcingConcept: Contract with software house to develop software for an organization.Benefits: Software house may be better organized to recruit staff, and manage projects. Clear visibility. No need to build an in-house team for a single project. Small organization cannot have all the expertise to cover a complex project.Disadvantages: Software house may not have the same goals as the organization (e.g., incentive to prolong project, to build software that can be used in other projects). Organizations need considerable in-house expertise to oversee the work. Must not over-estimate the expertise of the software house.11CS 501 Spring 2003Free-Lance Software DevelopmentYou and a few friends create a company to develop software. You are offered a contract to write bespoke software.How much should you charge per hour?You plan to work 40 hours a week for 50 weeks of the year and want to earn $50,000.Hourly rate = $50,000 / (40 x 50) = $25But ...12CS 501 Spring 2003Free-Lance Software DevelopmentSalary $50,000Benefits $15,000Rent, equipment, etc. $10,000Fees, services, etc. $15,000Travel and misc. $10,000 TOTAL EXPENSE $100,000Hours worked 2,000less administration 400less marketing 350 BILLABLE HOURS 1,250Hourly rate = $100,000 /1,250 = $8013CS 501 Spring 2003Free-Lance Software DevelopmentYou MUST have a contract with the customer. It may be a simple letter or a complex agreement.What should it contain?Are you being paid by the hour? Or by completion of the task?What acceptance tests will be done? Who decides when the job is done?Who owns the software? What licenses does the other party have?Who provides hardware, software that is required, supplies, etc.?WHEN WILL YOU GET YOUR MONEY!14CS 501 Spring 2003Fixed and Variable Cost: Packaged SoftwareExample:• The initial development cost of a software product is $1 million.• The cost of packaging and distribution of each copy is $5.• Technical support costs average $15 per copy.• The package sells for $200 per copy.Fixed cost = $1 millionVariable cost = $2015CS 501 Spring 2003Fixed and Variable Costs: Profit or Loss$1.5M$1.0M$0.5MUnit sales2,500 5,000 7,500RevenueCosts16CS 501 Spring 2003Profit or Loss?If you sell 7,500 copies do you make a profit of $350K?•Did you borrow money to cover the start-up period? How much interest did you pay?•What about taxes?Cash flow•When will you be


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CORNELL CS 501 - BUSINESS ASPECTS OF SOFTWARE ENGINEERING

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