Software Benchmarking


Related Links Venture Capitalist & IPO's Software Measurement Mergers & Acquistions Benchmark Studies Client List Public Speaking		Benchmark Data The average productivity rate as well as the range of productivity is provided for each of the following industries. Overall Industry Averages Health Care Aerospace & Defense Manufacturing Travel and Leisure Retail Finance & Banking Insurance Education Telecommunications Government Software Development Companies Question please contact David Longstreet (david@softwaremetrics.com). Percent of Time By Phase Time by Phase - How do best in class and worst in class spend their development time. Additional industry data is provided outlining how time is spent by major phase. Requirements Design Code Test Benefits of Benchmarking Increase profit margins Improve return on IT investments Reduces the unknowns Identify best practices and worst practices Pinpoint redundancies Quantifies the risks Benchmarking Studies By completing benchmark studies for a variety of software firms over the past decade, we have learned some best practices for benchmarking. in a variety of industries, we have learned some important concepts. The first thing to understand is the software development industry is broken down into three major categories. Own Account - firms primarily engaged in developing software for in-house use. Commercial Software - firms engaged in developing software for commercial re-sale Pre-Packaged - firms engaged in developing software for retail sale and distribution. While it should be obvious any analysis combining these three categories will be way off the mark, in practice many combine this three categories. Own Account Companies developing software in-house may have applications and projects ranging from a few function points to an excess of 20,000. It is unusual for companies to develop software applications in excess of 20,000 function points for in-house use. It is common for own accord projects in excess of 20,000 function points to be canceled. On the other hand, some firms developing software for their own accord which exceeds 20,000 function points have entering into commercial software ventures. Key Benchmarks for On Accord The two major benchmarks for any IT organization developing software for their own accord would be: - Total IT employees relative to Total Employees (industry ranges from 2% - 12%) - Total IT Budget relative to Total Corporate Earnings (industry ranges from 1% - 7%) Better yet, it is important to benchmark against firms in similar lines of business as defined by the Standard Industrial Classification Codes (SIC). Commercial Software and Pre-Packaged Understanding IT employees to total employees and other organizational metrics is not useful for firms developing commercial software or pre-packaged software. Instead they would want to know: - Estimated Value of Software Developed - Value of Software Developed per Employees - Cost per Function Point Commercial Software It is not uncommon for commercial software companies to create products in excess of 50,000 function points and spend more than 200 million dollars. The cost per function can range from $4,000 - $10,000. The range depends on the size of the final product and the industry line of the commercial software company. The larger the product the greater the cost per function point. Investors in commercial software firms should have a clear understanding of the expected cost and value of the final product prior to investing in a commercial software venture. Firms involved in the acquisition of another firm should have clear understanding of the value of software. In fact, some firms have acquired competitor firms in hopes of using their "home grown software." Trend Since software applications continue to grow, there are more firms entering into commercial software ventures. This is a trend we see in the software industry as a whole - a movement to commercial software. Firms using and relaying on software cannot afford or justify spending 100's millions of dollars on software projects; instead, they are looking to commercial (or off the shelf) solutions. Pre-Packaged Pre-packaged software is generally small as measured by function points. The size of pre-packaged software is generally less than 2,000 function points points. Pre-packaged software must adapt quickly to consumer tastes and time to market is critical. There are approximately 40,000 prepackaged titles being sold today. Step 1 - Determine your line of business (on accord, commercial, or prepackaged) Step 2 - Gather the appropriate metrics for your own firm Step 3 - Compare against firms in similar line of business Step 4 - Compare against firms in your same functional line of business or SIC code.

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