Budgeting and accounting of software cost: Part 2
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M. Senthilvelmurugan is a part-time lecturer in IT at the Faculty of Management, Multimedia University, Malaysia.
T. Subramanian is a lecturer in IT at the Faculty of Management, Multimedia University, Malaysia.
Keywords: costing systems, costing models, function point analysis, software development lifecycle Abstract The first part of this paper surveyed the literature, reviewing trends in costing systems and costing models. This, the second and final part, deals in selected case studies, discussion, analysis and findings. The paper highlights the issues determining the size of software and how they relate to the accounting and budgeting of software cost through the estimation of various software metrics to empirically predict the cost involved before starting development. The paper also discusses how project and software costs are derived from the results obtained from the cost metrics. For this purpose, a practical six-step approach is derived and presented. Finally, the limitations are discussed and a conclusion is given.
CASE STUDIES
Dr. A. Seetharaman Associate Dean & Chairman, Center for Multimedia Banking, Investment & Accounting Faculty of Management Multimedia University 63100 Cyber Jaya Malaysia Tel: +60 3 8312 5573 Email: [email protected]
Heemstra and Kusters23 researched methods to justify cost-benefit for IT projects. The authors claimed that IT investment made up about 50 per cent of total expenditure and the cost-benefit ratio can be viewed from the following levels: . application . investment selection . organization
Although the problem of investment in IT seems to exist at all levels, the measurement of IT at the organization level is the toughest. It was found that
the software development cost formed only a fraction of the entire project cost, and surveys from other journals found that software maintenance cost was equal to development cost. The authors identified the current approaches to estimating software investment cost and then identified a framework containing the most relevant criteria that could be used in justifying the investment of software. The authors provided a case study of cost-benefit risk (CBR) at the Dutch Department of Transport. Analyzing the results, the authors suggested that to optimize investment in software,
# Henry Stewart Publications 1743–6559 (2005) Vol. 1, 6 427–436 JOURNAL OF DIGITAL ASSET MANAGEMENT
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Seetharaman, Senthilvelmurugan and Subramanian
stakeholders should be involved in the evaluation process. This offers better communication and ensures full cooperation from all parties involved. The limitation of this survey was that although the authors suggested that stakeholders should be involved in the software evaluation process, this does not mean that the risk of high software investment could be reduced. Many other factors, not mentioned by the authors could also pose a threat to inflicting higher investment than usual for the software procurement. Toffolon and Dakhli24 discussed issues pertaining to software reuse and how reusability of software comp
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