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CORNELL CS 501 - Lecture 23 People 1

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CS 501: Software EngineeringAdministrationBusiness Models: Free-Lance Software DevelopmentFree-Lance Software DevelopmentSlide 5Business Model: Packaged SoftwareFixed and Variable Costs: Profit or LossProfit or Loss?Business Models: In-house Computing DepartmentsSoftware HousesOutsourcingBusiness Models: Bespoke SoftwareBusiness Models: Package with ModificationsBusiness Models: Package Without ModificationsBusiness Models: Embedded SystemsUnorthodox Business Models: SharewareUnorthodox Business Models: Open SourceNotes on Open SourceOpen Source LicenseSoftware Development StaffManaging PeopleMaslow's Hierarchy of NeedsSoftware is Built by TeamsAdministrative Leader (Manager)Group WorkingCommunicationSlide 27MeetingsHiringStaff RetentionSalariesFirmnessTechnical ChallengesTurning a Group AroundHow to be LedTo Build and Maintain a Strong Team1CS 501 Spring 2008CS 501: Software EngineeringLecture 23People 12CS 501 Spring 2008AdministrationQuiz 4Tuesday, April 223CS 501 Spring 2008Business Models:Free-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 ...4CS 501 Spring 2008Free-Lance Software DevelopmentSalary $50,000Benefits (including taxes) $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 = $805CS 501 Spring 2008Free-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?6CS 501 Spring 2008Business Model: Packaged SoftwareExample of fixed and variable cost:• 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 = $207CS 501 Spring 2008Fixed and Variable Costs: Profit or Loss$1.5M$1.0M$0.5MUnit sales2,500 5,000 7,500RevenueCosts8CS 501 Spring 2008Profit 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 paid (always late)?•When do you have to pay your bills?Risk•What extra costs do you have if the product is a year late?•What if you only sell 5,000 copies?•If you increase the price, does your revenue go up or down?9CS 501 Spring 2008Business Models:In-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.10CS 501 Spring 2008Software HousesA software house is a company that creates software for other organizations, e.g., S.A.P., Infosys, Oracle/PeopleSoft, etc.Business is a mixture of:consultingpackages (solutions)custom softwaremaintenanceeducationBecause large sums of money involved, emphasis is on contracts, visible processes, well-defined deliverables, and acceptance tests.11CS 501 Spring 2008OutsourcingConcept: 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.12CS 501 Spring 2008Business 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.13CS 501 Spring 2008Business 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.14CS 501 Spring 2008Business Models: Package Without ModificationsPackage Licensed in Binary Form Only• Package typically has many options, including configuration options• Package may be a self-contained application (e.g., TurboTax), a component to incorporate in applications (e.g., Oracle database system), or system software (e.g., Windows)Legal considerations: there is a clear distinction between a package (license from supplier) and application.Examples: Database systems, mathematical packages, etc.15CS 501 Spring 2008Business 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: Cell phone, GPS, automobile engine control, iPod16CS 501 Spring 2008Unorthodox Business Models: SharewareShareware•Producer writes a software package.•Distribution is open, but requests a fee, e.g., $50.•Users who pay the fee may get a small benefit,


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CORNELL CS 501 - Lecture 23 People 1

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