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NSF Wants To Know How Much Software Really Costs
eldavojohn writes "It's no secret that the actual cost of software is very complicated. Sure, the companies that write software are spending money on it, but when that software is released, it doesn't stop costing money. You can probably think of a number of relatively tiny things that add up — especially if you're a system administrator — like the man-hours spent patching software to avoid a nasty infection spreading quickly. The bigger debt is that old piece of software you paid a bunch of money for back in 1998 that you're critically dependent on, but it has no support and hasn't been updated in years due to any number of reasons. Well, the National Science Foundation paid Gartner almost half a million dollars to find out what it truly costs to bring an organization to a fully supported environment. According to Gartner, this hidden liability or 'IT debt' is at $500 billion worldwide right now, and in five years it will be at $1 trillion. Along similar lines, a company called Cast that makes software quality tools reported that your average business application comes with a million in IT debt (PDF). And if that's not misapplied enough for you, they estimate that the debt is $2.82 per line of code in the application and also that it's on average higher in the government sector."
I know companies that don't bother figuring out the 'hidden' cost of keeping their workstations or servers up to date. Then one day they realize they need to upgrade 30+ system all at once for some new piece of software they want. When they can't budget/manage/understand something as straightforward as hardware maintenance and upkeep, how are they going to understand something less physical like software 'debt' or whatever they are labeling it now.
I will shred my adversaries. Pull their eyes out just enough to turn them towards their mewing, mutilated faces. Illyria
The NSF wants to know something about the computer industry and they ask Gartner? Gartner, the company that advocated OS/2 and I-CASE?
Software cost = programmer's salary ... ... ... ... ... ... ... ...
+ the cost of the computer the programmer used to write the code
+ the cost of the electricity to power said computer
+ the cost of the software the programmer used to write the code (which may be $0)
+ the salary of the QA staff that test the code
+ the salary of the documentation staff that write the documentation for the code
+ the salary of the HR staff that hired the programmer, QA staff, documentation staff, etc. and ensures they receive their paychecks
+ the rent/mortgage payment for the office where the programmer, QA staff, documentation staff, and HR staff work
etc.
Obviously software cost depends on what you measure it in. For example Linux kernel is estimated to cost near 1.4 billion US dollars (at the bottom), but IF you measure this in chickens.... it could cost 35,008,752.2 chickens.
In ounces of gold it would be around 1,040,041.6 ounces. In DOW it would cost approximately 127,186
It is also possible to estimate its cost in terms of Libraries of Congress, man years and many such wonderful things, however note that many Keynesians say that gold has no value but what is 'speculated' to be value while they do not see the same thing about their cherished and printed fiat, so then we could argue that Linux kernel is worth nothing if 1,040,041 ounces of gold priced at current levels in USD are worth nothing.
It's all a matter of point of view.
You can't handle the truth.
I wonder why /. does not have a section on economics. Isn't it long overdue to have one?
So many stories really belong in economics.
We could discuss what things are worth.
We could point out stories that appear on front pages of various portals and news sites and discuss what really is going on behind the title on them, just like the title I linked to:
Stocks Rise on Renewed Hope for Fed Action
- which sounds as if it is a positive for the economy that stocks rise on 'Hope for Fed Action', when in reality, those who understand can tell you that "Fed Action" means more money printing/borrowing, which implies more inflation and debt, so rising stocks (and rising gold) in this situation means that there is an expectation of yet more inflation, so stocks will go up in nominal terms, but all US holdings will lose more purchasing power.
Isn't /. 'news for nerds' and isn't economy yet another 'nerdy' subject?
You can't handle the truth.
It could cost $5,- per game and people would still make big profits. Illegal copying drives the price up, however.
Ha, I notice you got modded "Funny" which is appropriate in this context. This is about support costs, not sales prices, and there are very, very few companies that will provide support for unauthorized copies of their software. Do you work for the BSA, by any chance? That's the kind of out-there comment I would expect from them.
But okay, just to roll with it: do you honestly believe that the majority of software outfits would dramatically lower their prices if (ahem!) "piracy" dropped to zero? Of course they wouldn't. It's whatever the market will bear, baby. Matter of fact, they'd probably claim increased losses due to piracy and increase their prices even further. Yeah, there's dishonestly and sleaziness on both sides of this particular issue. Now, I will agree, a certain percentage of those who acquire software products illegally might have purchased said products if they were not readily available for free. But that number is nowhere near 100%, which is one of several fundamental flaws in the arguments put forth by the RIAA, MPAA, BSA and the like.
The higher the technology, the sharper that two-edged sword.
Don't forget about the risk and about the cost of opportunity. There is always a risk associated with any endeavor (well, supposed to be, until the gov't 'insures' something against risk and crashes the economy) and there is cost of opportunity - money could be spent on other things that really could provide more benefit for the sunk costs.
You can't handle the truth.
"Its okay, this project/software is using 'internal resources'"
"Say, Jim, would you mind working a few extra hours for the next 14 weekends in a row? I know you're salary, but we'll make it up to you once this project is done..."
And that, my friends, is how you completely ignore hidden costs and justify even the most lingering of projects.
At least at my company, anyway.
If the costs ended there, that'd be great. But they don't.
Someone has to do the requirements gathering draft up a specification. So you need a systems analyst. Then someone needs to take that specification and turn it into a real systems design. So you need a systems architect. Then someone needs to start writing code, so you need some developers. Someone needs to test all this code, so you need some testers. Someone needs to integrate all this into the existing environment and get it up and running; so you need some systems integrators. Then integration testing must happen, so you need some more testers. And, over all of this, you need at least a project manager or two to do timelines and communicate with management. Someone has to assure the quality of this system, so you need a quality assurance guy. Someone needs to maintain the system while it's running and even during development, so you need some systems administrators. Then management gets wind that all this is way too inefficient, so they hire some "Six Sigma blackbelts" to figure ways to improve the whole process by minimizing errors. They also might hire some management consultants to bring the whole team out on a retreat and give them motivational pep talks.
And after all of that, someone comes along and says "hey, you made it do this, but it also needs to do that." Everyone groans and the timeline slips.
Lather. Rinse. Repeat.
And all you wanted to do was write some damned code!
My blog
That would be nice and is how business used to be...but now its more about investor profits...then the rest of that stuff. Society has created an unsustainable monster of necessary yearly increases in revenue. Its no longer about generating a nice profit and making a decent living. I really think its a mind set that is beginning to come back to bite society in the ass though. Look at any main street in any small town and its pretty evident that we're in trouble. In the town I live the corner grocery store shut down when they just couldn't compete with the conglomo grocery store moved in less than a mile down the road, then the drug store that had been in business for over 8 years closed down when CVS and Walgreens decided to both move in right next door to each other in the same area as the big grocery store. Supporting businesses around them like the bakery/donut shop, appliance store, mom and pop book store, pet store, etc have all been replaced by big corporations down the road. The argument has been that it created jobs, but most of the jobs are paying far lower than the small stores and services paid that were vacated due to their demise. Business is supposedly booming the new "central" part of town sure has lots of familiar stores and restaurants but the funny part is the per capita income of the town has dropped significantly over the past decade or so since this change started. Do I think Wal-Mart needs to die? NO...but I do think in many instances the "convenience" the corporate world brings does more harm than good over the long term. Sadly I think its too late to really do anything about it.
This is about support costs, not sales prices, and there are very, very few companies that will provide support for unauthorized copies of their software.
You meant to write:
very, very few companies will provide support for their software
The only "support" I get for any software is free (except my labor) from google.com. I don't need to pay hundreds/thousands for some guy in India to read me a script telling me to wipe the drive and reinstall, which after some decades of experience is all I now expect.
"Science flies us to the moon. Religion flies us into buildings." - Victor Stenger
your cost is the salary divided by the work done.
These kinds of studies often lead to stopping work because it's "too expensive" which leads to your staff sitting doing nothing. It's absurd.
I've seen many small projects which would have 1 to 2 percent improvement canceled because they were not "cost effective" and then the programmers sat there doing nothing for 2 months. You should always let your programmers work on little side projects that they are enthusiastic about as long as they make the big deadlines that you want.
She was like chocolate when she drank... semi-sweet at first and then increasingly bitter.
+ the cost of the marketing department who make sure that you write software that someone will want to buy
+ the cost of the sales department who make sure that people actually buy it
+ the cost of the financial department who make sure that people actually pay for it and that your company's bills are paid on time thus keeping the electricity on.
+ the cost of the provisioning/deployments department who ensure that your customers can get what they've paid for.
+ the cost of the operations department who ensure that other systems that your software relies on are running 24x7
+ the cost of the support department who resolve customer issues keeping them happy and more likely to buy more or recommend your products to others.
Your post is exactly the reason why most developers hit a career ceiling. You're unable to see much of anything beyond your own cubicle. You don't even understand what QA do. (Testing is a small part of the role, and about the least important factor in creating quality software).
You forgot:
Corporate taxes.
The salaries for the accountants, the sales/marketing guys, managers, and executives.
Advertisements (email, radio, tv, magazines).
Normal office equipment (Phones, Email, firewall, desks, chairs, pens, paper).
Website for support/advertising/patches.
IT support staff to keep the network, email, firewalls, anti-virus, and patches going.
Network equipment (Switches, routers, firewall, internet connection).
401K matching, partial subsidized office perks (gym membership, etc).
Interest paid on the money fronted by investors/loans.
Most likely a conference room for company meetings, sales pitches, etc.
Sales/Marketing expenses (trips, meetings, persuasion/entertainment monies).
Legal Fees (Trademarks, Contracts, lawsuits).
Possibly head hunter/placement fees associated with hiring your programmers, QA, HR, Financial staff.
Probably a ton more as well.
More probably, they would increase the price until piracy returned.
You're not using the type of software they are trying to figure out the price for then. Software such as AdvantX (A medical software package) or Siriusware (A POS system used commonly by Theme parks and Ski Resorts and other places where they have ticket tracking/rentals/etc). Call either of those companies for support and you actually get quality support.
Yes. You'll mostly see that in vertical-market apps which serve critical business functions, have a limited market, and cost a lot of money. They also usually have support contracts, so you're paying for that support on top of the actual cost of the software itself. Consequently, they damn well better provide good service.
The higher the technology, the sharper that two-edged sword.
A memetic mimetic, if you will.