Valuating Software Service Development: Integrating COCOMO II and Real Options Theory

Our work examines the problem of estimating the potential business value of evolving service-oriented applications, based on the value of the new services this evolution is anticipated to enable and the estimated cost of the development effort. We have adopted COCOMO II as the software-development cost model, as it is designed to account for evolutionary software development. However, it is clear that the model will have to be extended in order to represent the particular idiosyncrasies of this new development style. As it is, it can estimate the cost of adapting source code; however, SOA development also involves developing and adapting declarative composition specifications, which may be a fundamentally different process. Specifically, research into the cost of creating a Web service composition is required. We have also adopted real-option theory for modeling the business services that can be delivered based on an envisioned service-oriented application. Our intuition is that the fundamentally compositional nature of service-oriented development comes with the built-in advantage of enabling interesting evolution at the design level (as opposed to the code level). Therefore, we believe that there is a very direct mapping between the design-evolution potential of a service-oriented application and the business services that it can support in the future. Consequently, we hope to develop a real-option model grounded to the SOA development process. Along these lines, we are developing a tool to assist in this research. The tool will help the user to reason financially about a proposed change to a web service, constructing a fairly complete view of the situation and the possible futures associated with it. Traditionally, the value of a software service has been determined solely by the business community, with only the occasional regard for the possible value of flexibility. Conversely, the cost of developing software has been studied extensively by the computing science community. This work is an attempt to further join these two fields for a more complete view of web-service econometrics.