Calculating the real cost of software defects

Hewlett-Packard Journal, Oct, 1991 by William T. Ward

The Software Defect Cost Equation

The calculation of prerelease software defect cost proposed here is based on the formula:

Software Defect Cost = Software Defect Rework Cost Profit Loss

Software defect rework cost is determined by the amount of effort and expense required to find and fix software defects during the integration through release phases of a software project. Profit loss is the revenue loss that is caused by lower product sales throughout the entire postrelease lifetime of the product. The lower sales factor is caused directly by the lengthy find and fix cycle of prerelease defects that force a schedule slip and result in a loss of market-window opportunity.

Many other factors could probably be used to determine the software defect cost but our data shows that the rework cost and profit loss factors have a major impact on the result and will supply a close first approximation of the final value. Table I lists a set of product and project software factors that will be used to calculate a software defect cost value. All of these factors represent typical values derived from our database.

Table I

Typical Values in the Metrics Database

Code size                     75 KNCSS
Calendar time for pre-        6 months
release testing
Number of prerelease          110 defects
defects found and fixed
Prerelease defect density     1.5 defects/KNCSS

Software Defect Rework Calculation

This calculation is very simple and is based on data presented in Figs. 2 and 4 and Table 1. A typical product will have 110 software defects found and fixed during the project test phase. Each of these defects will require 20 engineering hours to find and fix. The total prerelease software rework effort then is:

Software Defect Rework Effort = 110 X 20 = 2200 engineering hours.

To convert this effort value to dollars requires the $/hour software engineer factor. As a close approximation of an industry standard value, we will use $75/hour as the standard charge for the services of a software engineer. This includes basic salary administration overhead of 750/6).

Software Defect Rework Cost = 2200 hours x $75/hour = $165,000.

On a per-defect basis, rework cost can be determined as:

Rework Cost per Software Defect = 20 hours x $75/hour = $1500.

These calculations are useful in highlighting the true waste factor of poor software quality. Each software defect is responsible for $1500 of unnecessary expense, and for a typical project $165,000 is required for software rework.

Software Defect Profit Loss Calculation

The other major factor contributing to software defect cost is product profit loss because of missed market-window opportunities and the resultant loss of product sales. In other words, if a product release date slips because the software defect find and fix cycle is unnecessarily long, then potential product sales are irretrievably lost and overall lifetime profit dollars will be less. Such factors as rapidly obsolete technology and the availability of competitive products also contribute to the potential loss of sales.