"This pioneering book highlights critical, overlooked skills needed by true software professionals."

Steve McConnell
CEO and Chief Software Engineering
Construx Software

"It's about time someone took this stuff seriously."

Steven Mellor
Chief Scientist
Embedded Systems Division
Mentor Graphics Corporation
Co-Author of Exploring the Role of Executable UML in Model-Driven Architecture and six other books

"Despite the fact that engineering economics is considered a core area of any engineering field, virtually no books have been written in the area of software engineering economics. Steve Tockey's Return on Software nicely fills this gaps by providing a comprehensive introduction to software engineering economics accessible both to students and to new software professionals."

Donald J. Bagert, Ph.D., P.E. Director of Software Engineering and Professor of Computer Science & Software Engineering Rose-Hulman Institute of Technology

"The elements of this book are useful not only in making decisions but also in understanding why and how other people and organizations make decisions"

Shari Lawrence Pfleeger
Senior Researcher, RAND
Co-author of Security in Computing and eight other software engineering titles

"This just what the doctor ordered to help software programs solve the problem of how to introduce engineering economics and business decision-making into their curricula. The economics of software development should not only be part of any computing curriculum they are an essential element of recent accreditation and certification recommendations.

This book is an accessible and relevant text for any student of software engineering. The style is clear and straightforward and the software examples will be appealing to students and faculty alike. I can't wait to use it in class!"

Thomas B. Hilburn, Professor
Department of Computer and Software Engineering
Embry-Riddle Aeronautical University

Is your organization maximizing the return on its investments of money, time, and personnel? Probably not, because most software professionals don't know how to consider the business aspects of their software decisions. Most don't even know that it's important to do so. Business consequences should play a critical role in all software technical choices—from choosing which projects to do, selecting software development processes, choosing algorithms and data structures, all the way to determining how much testing is enough.

Return on Software: Maximizing the Return on Your Software Investment is about making choices: software technical choices in a business context. It helps software professionals appreciate the business consequences of the decisions they make. This primer will prove a valuable reference for making the important decisions the typical software organization faces both today and down the road. Inside, you'll learn how to:

• Estimate how much each proposed software technical decision will cost, and how much it will return.

• Weigh the time frames for a software decision's costs and benefits against each other to reveal when there might be a more important factor than schedule.

• Attach a value to quality and produce a rational answer to the question, "How much testing is enough?"

• Account for risk and uncertainty in software technical decisions, such as when considering a new technology.

• Communicate your decisions in a way that speaks to the all-important bottom line.

Each chapter contains a set of self-study questions designed to help you apply the featured concepts and techniques. An enhanced online index allows you to quickly and easily search the entire text for specific topics.

Amazon.com® Reader Reviews (Ranked by Helpfulness)

Average Amazon.com® Rating:  Based on 9 Ratings

The Latest on Software Economics - 2004-12-03
Reviewer Rating:
There are hundreds of books on topics relevant to various aspects of software engineering. However, when we analyze what went wrong with so many of our large practical software projects, one of the leading culprits is a misunderstanding of the business, economic and financial aspects of the projects. Where are the books and courses to help us with this major problem?
University engineering programs often have a course such as Fundamentals of Engineering Economy. What Steve Tockey has done with his book is to apply these general engineering economics topics specifically to the field of Software Engineering and set a standard for the subfield of Software Engineering Economics. His is not the first such book (see, e. g., Barry Boehm, Software Engineering Economics, Prentice Hall, 1981 or Leon Levy, Taming the Tiger - Software Engineering and Software Economics, Springer-Verlag, 1987) but it is the most thorough and up-to-date one that I know. It is an excellent book on a very important subject. Every professional software engineer, whether CTO, group manager or programmer in the trenches, will benefit considerably from reading this book.
Return on Software is divided into several major parts: general concepts of business decision-making, interest and the value of money, and cash flow streams; business decision-making at for-profit companies; decision-making at government and not-for-profit organizations; estimation, risk and uncertainty; and decision-making based on criteria other than money such as reliability, quality, speed, and other important features (strict economists might argue that all of these other criteria could be equivalenced to money considerations but I think considering these other criteria on their own seems more natural to me).
Judging from the topics listed above, Steve believes business decision-making to be the key ingredient of successful software engineering. I could not agree more. The crucial chapter in the book is #4: The Business Decision-Making Process. The key topics in this chapter include understanding the real problem, defining the selection criteria, identifying all reasonable technically feasible solutions, evaluating those proposals, selecting the preferred proposal, and monitoring its performance. The remainder of the book is an elucidation of those topics.
Each chapter closes with a summary and a set of self-study questions supporting the book to being used as a textbook. My university will offer a course around "Return on Software" in the spring quarter for our Master of Software Engineering students and I expect the course to be offered regularly. The last time I checked, Steve's company was not offering a short course on his book's topic but it would not surprise me to see one soon.
To prove that I am not from the publisher's marketing department, I would like to suggest that the next edition include at least two more topics: buy-or-build decision-making and outsourcing (whether offshore or not).

Economics with a Software Spin - 2005-02-28
Reviewer Rating:
First, a confession, I know Steve Tockey. I work with Steve. That may bias my review a bit depending on how much I like Steve. One thing about Steve is that he home brews many nice beers and brings them into work where we get to share. I like Steve.
I also like his book. Now, I will admit that this is no thriller where you are excited to turn the next page (though I did get a little worked up on Analytical Hierarchical Process). It is designed to be an entry level economics text for the world of software engineering. The world of computer science and software engineering needed a book like this and didn't have one. So, Steve brewed this one up.
Part one (chapters 1-9) contain the basic economic theory you would find in most basic economic books. The topics are based around making decisions to make the most money (for profit companies) or to deliver the most benefit (non-profit). The text in these sections tends to get acronym heavy and Steve had to use the equation editor to type all the fancy mathematical formulas needed for things like interest for equal-payment-series capitol recovery. If you have had a basic economics course in college you can probably skip the first part without any pain. If you haven't or had forgotten (like me), then reading them is warranted. I found Steve's prose on this very dry subject to be reasonable.
Parts two through five carry on in the same way (chapters 10 - 20). Part two in decision making in for-profit companies and part three is advanced decision making in for-profit companies. Again, if you have concepts like Minimum Attractive Rate of Return, Cash-Flow Streams, Planning Horizons, Sunk Cost & Salvage, Inflation & Purchasing Power, Depreciation, Modified Accelerated Cost Recovery System, etc. then you can skip these sections. Same sort of story for part four, decisions in non-profit companies and part five, present economy.
BUT WAIT, there is part six! Estimation, risk, and uncertainty. Now here is a section that everybody should read, at least a couple of times. In my work and consulting, I find I am recommending to my clients that they read this section carefully. People building software seems to really miss these economic concepts. Steve does a very good job here in explaining how estimation, risk, and uncertainty work together (often against) on a work effort. He then provides several decision making strategies that work within the reality of uncertainty.
Part seven completes the teaching part with working with multiple-attribute decisions with a good discussion on number theory and how to rationally make comparisons. This is another section that I find most people don't understand too well and highly recommend that everybody reads this part.
There is a part eight but it is a summary and conclusion.
So, my bottom line is that some parts of the book are a must read. So parts are a could read. If you don't mind skimming the parts that you know or are not applicable for the current situation, this book should work out fine. It is also one of those books that you will actually pull off the shelf next time you are asked to lead the selection of a new Commercial Off The Self (COTS) system, choose between two competing project ideas, or just want to make a better personal finance decision.

An Excellent Resource - 2004-11-29
Reviewer Rating:
How I was introduced to this book:
About nine months before this book was published I was researching the return on investment of software projects. While doing my research, I was introduced to Steve Tockey who asked if I might be interested in reviewing his book.

My background:
For almost 10 years I've worked in the software and consulting industry. Currently, I work at one of the leading CRM software companies worldwide where I spent three years advising customers on how they can get the most out of their investment in our software. At the time of my research, it was imperative that our division understood how software investments are impacted by certain business decisions and related financial considerations. Today, I am responsible for planning, implementing, and measuring the outcomes of investments and projects within our marketing organization.

Comments on the book:
This book does an excellent job covering the financial aspects of investing in software systems (or really any investment) as well as covering decision-making and risk management techniques. If your career path includes the development of any business case for software systems, this book explains many of the concepts you will have to use. While the introductory portions of the book explain how financial principles generally apply to software, the book goes far beyond an introduction - honestly, it's depth in content will give it a home on my bookshelf as a trusted reference for years to come. Besides clear explanations and good fundamental examples, the accompanying self-study questions, website, and tools will help readers truly understand and use what is being taught.

If you are familiar with Steve McConnell's books on software, you will not be disappointed with this one (as Steve Tockey works at Construx Software).

Must reading for everyone involved in the software development process - 2007-11-12
Reviewer Rating:
Even though there is not a single line of code in this book, it is one that all people who are involved in the process of managing software development should read. In most cases, investment professionals will have an easier time understanding it than software developers will. The decision to invest organization resources in a software development project is treated as an investment and the point of the analysis is to determine if it is a sound one.
Part one starts with the fundamental concepts of how business decisions are made. Cash flow diagrams are used to illustrate how the flow of money relative to your organization can be visually modeled. Entire chapters are devoted to the various ways interest can be computed, the formulas used to compare the net worth of two different proposals and how to develop mutually exclusive alternatives. A large number of formulas are used, so if you are unfamiliar with the mathematics of finance, you will probably have a difficult time understanding them.
Parts two and three deal with how to make decisions in for-profit companies. Decision analysis, economic life, replacement decisions, salvage value, factoring in inflation/deflation, depreciation, cost accounting, and the impact of income taxes on business decisions are all examined using formulas, charts and diagrams. At times it gets very technical. To give you some idea, here are the titles of some sections:

*) Calculating after-tax cash-flow streams.
*) Inflation and after-tax cash-flow streams.
*) Gain or loss when selling or scrapping depreciable assets.
*) Comparing financing methods in after-tax cash-flow terms.

Part four deals with making decisions in government and nonprofit organizations. This is a very short section, less than twenty pages in length. Since these organizations generally cannot lose money either, the main focus is on the different ways government and nonprofit organizations finance their expenditures. Part five covers present economy, how to do break-even and optimization analysis. The primary focus is on how to perform various types of break-even analysis.
Part six examines estimation, risk and uncertainty. How to recognize and model the level of uncertainty and how to make decisions in situations with a great deal of uncertainty. This requires some knowledge of the fundamentals of probability and expectation. The last section covers the situation where there is more decision criteria than just the basic cost. This of course can be rather difficult, as it can enter the area of personal opinions. It is often due to the ordinal form of the data, where the range of assignments can be something like, {very poor, poor, average, good, very good}. While all can agree that poor comes before average, what one person will consider average, another would categorize as good. Fortunately, it is fairly easy to assign numeric values to the categories for standard numerical analysis of the data.
This is probably the hardest "computer" book I have ever read. I know a reasonable amount of financial mathematics, but it was still difficult to wade through all the equations, charts and diagrams. Despite this difficulty that you will most likely also face, I strongly encourage all managers to thoroughly study the contents. There is a set of self-study questions at the end of each section and solutions to most of them are included in an appendix. The software development industry has a (largely deserved) reputation for lax financial planning and the person who reads and comprehends the material in this book will have an enormous competitive advantage in the battle for jobs, revenue and profits.

Published in Journal of Object Technology reprinted with permission

Excellent Coverage of One of The Most Important (Yet Often Forgotten) Topic in Software Engineering - 2007-09-15
Reviewer Rating:
Engineering is the practical and economical application of science in building products and services. So it puzzles me how financial aspects are so often neglected in teaching Software Engineering or Computer Science. What a big mistake! This is a skill that no Software Engineer should left unmastered. By the way - this is very useful even if you're not dealing with software and for your private life as it allows you to make informed decisions based on a sound rational. Steve Tockey writes in a very concisive and interesting way and provides several examples for each topic. I highly recommend it!

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