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Have you come across it - your management or the business saying: “all this process just adds cost” ?  There is a very simple reason why this perception takes hold, and it is crucial for you to address it, if you want to survive a process improvement project and see it through to its benefits. This page will also tell you why buying on price alone may well cost you more.


That process appears to cost more is actually evident in the CMMI data, shown here

This diagram shows that the normalized estimates of level 2 are higher than that of a level 1 (blue line going up for level 2 then down for level 3).


When you operate at level 2, what typically happens is that the forecasts become more accurate as scope is better defined, and the team forgets fewer things to include in the estimates. Hence the cost, versus what used to be quoted, appears to be up.  But if you consider the actuals, you’d see that the time/cost and the risk of overrun has significantly come down (the red lines).

What to do about the perception

The perception that “process costs”, typically results from only having limited or no actual time and cost data. If you had the data of “actual time, cost and scope, in view of process adoption”, you would see the above diagram emerge. Until you measure all four, you have a moving target, as there is no real basis for comparison (after all, one can always deliver half the scope “on time, to cost”).


This is probably why the CMMI has moved the Measurement and Analysis key process area to level 2 (it used to be in level 4) – without measurement you can’t manage and debunk perceptions.  Hence it is strongly advisable to institute this capability first (let the data can speak for you).

Buyer beware - the lowest price may cost more

The diagram above also shows why buying the lowest price may not be the cheapest after all. The lowest price may well be from a CMMI level 1 organization as the level 2 organization’s offer is likely to be higher.  However the level 1 organization has a 50/50 chance of delivering twice over time/cost, whereas the level 2 organization will deliver at maybe 10% over cost. Thus a level 2 company may deliver at 130% of the lowest quote and the level 1 to whom it is awarded is likely to deliver at 200%


As you can see, a level 3 organization will quote the same cost as the level 1 organization, but have you got a way of telling which one is which? (other than demanding that they fill out our CMMI quick self assessment truthfully J)


What most of us forget when buying from a level 1 organisation is that one can also end-up on the other side of the bell-curve – that is, 3 times or failure !  We’ve all seen it before, the project that was supposed to cost $ 1 Million and is now at $2 Million, and no one knows how much is still to go, but since so much is invested that we better finish it?! (if you have such a case, consider function point analysis to obtain some certainty)

How to select if it isn’t on price alone?

If you have to compare RFP responses, costs and timelines, always also consider the vendor’s capability maturity. This is exactly what, for example, Dutch KPN (Telecom) does: they evaluate their vendors on capability maturity, not just price, and have a multiplier to normalize the offers from the weaker contenders.


Equally, if you are a level 2 organization responding to an RFP, and suspecting other parties may be at level 1, make your buyer aware that cost alone is no certainty, and suggest a simple capability evaluation for all parties involved. You don’t need the full CMMI assessment, since just a few very pointed questions and inspections will tell the true state of capability of each of the organisations involved.

Are there other ways to compare?

Yes for sure. By using function point analysis and software metrics one can compare effort by unit of software delivered, a very powerful way of comparing apples for apples in respondent’s prices. But that’s a different topic.



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