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 acquired and integrated to meet specific needs 3. Software may be custom built by an outside contractor to meet the purchasers specifications

The steps involved in the acquisition of software are defined by the 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.

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 in constructing 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 past product quality. 6. Contact other users of the software and ask for opinions

 In the final analysis The make/buy decision can be made based on

the following conditions:

Will the software product be available sooner than internally

developed software? Will the cost of acquisition plus the cost of customization be less than the cost of developing the software internally? Will the cost of outside support (e.g., a maintenance contract) be less than the cost of internal support?

DECISION TREE

Computing expected cost

OUTSOURCING
Sooner or later company asks a question can we get

software and system at lower price? The answer is outsourcing. Software engineering are contracted to a third party who does 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 significant part of software can be contracted to others Tactical level: Project manager decides if part of project or whole project should be outsourced.

Advantages and Disadvantages

Advantages
Cost savings can

Disadvantages
Loss of control over

usually be achieved by reducing the number of people, facilities.

software Company becomes dependent on third party which is not good considering the competition

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. These are 1. Sizing of project deliverables 2. Selecting project abilities 3. Predicting staffing levels 4. Predicting software cost 5. Predicting software schedule