Valuating Software Service Development: Integrating COCOMO II and Real Options Theory

  • Authors:

  • Brendan Tansey;Eleni Stroulia

  • Affiliations:

  • University of Alberta, Canada;University of Alberta, Canada

  • Venue:
  • ESC '07 Proceedings of the First International Workshop on The Economics of Software and Computation
  • Year:
  • 2007

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Abstract

Modern businesses increasingly attempt to innovate by offering competitive, value-added services, as opposed to goods, and an important requirement in this regard is the evolution of their software infrastructure. Most related strategic decision making relies on model-based estimation of the costs and benefits involved with alternative courses of action. Therefore, reasoning about the economic tradeoffs related to the evolution and management of software is becoming an increasingly relevant problem. More specifically, we are interested in the problem of estimating the relative costs of managing, evolving, and adapting software applications in light of the business value this activity can generate in terms of enabling new and/or improved service offerings.