Life cycle costing of software programs : a case study

Abstract

Literature claims that cost management through Life Cycle Costing (LCC) is useful to businesses in various perspectives. Despite the benefits mentioned doubt arises regards the extent of LCC's suitability and application in business environments. The study is set in an environment subject to technological change and products with short life cycles. Adequate data is collected to construct a life cycle model of a case study developed by a software house. The theoretical implications of LCC are questioned through the analysis of the resulting representation. The research also comments on the use of information provided by LCC, by decision makers. The results of this study illustrate that LCC is highly challenged in this context as forecasts beyond the development life cycle are so vague that they are somewhat disregarded. Planning takes place in phases so that budgets are more reliable and can be met. However, cost management suggestions are highly applicable. Careful design avoids future non-value adding activities, and continuous cost reduction results in favourable variances and profitable products. Moreover, cost data reports track the profitability of products.