DCG's Software Development Value Index - A metric for effectiveness, efficiency and economy

Is software development delivering value to the organization? Taking a systems view of the software development organization, software development delivers value when it is:

  • Effective => An output metric, O
  • Efficient => A transformation metric, T
  • Economical => An input metric, I

[caption id="attachment_270" align="aligncenter" width="500" caption="Software Development Value System"]Software Development Value System[/caption] Here at DCG, we have developed the concept of a balanced Software Development Value Index (SDVI):

(x * I) + (y * T) + (z * O)

where priority weights x+y+z = 100%.

The answer to the annual or quarterly question, "Is the Software Development organization delivering value?" is "Yes" if the SDVI exceeds the annual target. For example, for Year 20xx, SDVI priorities (or weights) are chosen by the Software Development (or IT) Governance Committee to be:

  • Effective,  z=50%
  • Efficient,  y=20%
  • Economical,  x=30%

Let's choose a target for value delivered of SDVI > 85%. The Software Development Input, Output and Transformation scores are generated by combining and normalizing the scores for a set of metrics measured under each heading e.g. Input metrics might include budget and hours. Lets assume that for our example software development group in Q1, 20xx the normalized metrics are:

  • Effective, O = 87%
  • Efficient, T = 90%
  • Economical, I = 80%

Then our SDVI = (0.30*0.80)+(0.20*0.90)+(0.50*0.87) = 0.855 At 85.5%, we can conclude that software development delivered value in the first quarter of 20xx! You will see that we have defined the concepts of "Value Neutral", "Value Add" and "Value Multiplier" for our software development transformation process.  The meaning of these will be described in a future blog but essentially they refer to the transformation value of individual projects and are intended to help with the project prioritization process that is part of software development governance especially at budget planning time.  By the way, if you don't have a Software Development Governance Committee, we should probably talk!

Written by Michael D. Harris at 11:45

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"It's frustrating that there are so many failed software projects when I know from personal experience that it's possible to do so much better - and we can help." 
- Mike Harris, DCG Owner

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