Valuation of Software Initiatives Under Uncertainty: Concepts, Issues, and Techniques

State of the practice in software engineering economics often focuses exclusively on cost issues and technical considerations for decision making. Value-based software engineering (VBSE) expands the cost focus by also considering benefits, opportunities, and risks. Of central importance in this context is valuation, the process for determining the economic value of a product, service, or a process. Uncertainty is a major challenge in the valuation of software assets and projects. This chapter first introduces uncertainty along with other significant issues and concepts in valuation, and surveys the relevant literature. Then it discusses decision tree and options-based techniques to demonstrate how valuation can help with dynamic decision making under uncertainty in software development projects.

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