Pricing via Functional Size - A Case Study of a Company's Portfolio of 77 Outsourced Projects

Abstract

A medium-sized west-European telecom company experienced a worsening trend in performance, indicating that the organization did not learn from history, in combination with much time and energy spent on preparation and review of project proposals. In order to create more transparency in the supplier proposal pro-cess a pilot was started on Functional Size Measurement pricing (FSM-pricing). In this paper we evaluate the implementation of FSM-pricing in the software engineering domain of the company, as an instrument useful in the context of software management and supplier proposal pricing. We analyzed 77 finalized software engineering projects, covering 14 million Euro project cost and a project portfolio size of more than 5,000 function points. We found that a statistical, evidence-based pricing approach for software engineering, as a single instrument (without a connec-tion with expert judgment), can be used in the subject companies to create cost transparency and performance management of software project portfolios.