Software firms invest in process improvements in order to benefit from decreased costs and/or increased productivity sometime in the future. Such efforts are seldom cheap, and they typically require making a business case in order to obtain funding. We review some of the main techniques from financial theory for evaluating the risk and returns associated with proposed investments and apply them to process improvement programs for software development. We also discuss significant theoretical considerations as well as robustness and correctness issues associated with applying each of the techniques to software development and process improvement activities. Finally we introduce a present value technique that incorporates both risk and return that has many applications to software development activities and is recommended for use in a software process improvement context.
Available at: http://works.bepress.com/warren_harrison/14/