Dynamic Optimization of Software Enhancement Effort

6 Pages Posted: 2 Nov 2007 Last revised: 27 Jan 2013

See all articles by Subodha Kumar

Subodha Kumar

Temple University - Department of Marketing and Supply Chain Management

Yonghua Ji

University of Alberta - Department of Accounting, Operations & Information Systems

Denny Yeh

Fu-Jen Catholic University

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management

Date Written: 2007

Abstract

As the competition in the software development business grows fiercer, the features provided in the software become more and more important. With the growing popularity of open source software and the advent of new software delivery models, such as software-as-a-service, the traditional software vendors cannot compete on price in the long run. Therefore, they need to compete by increasing the number of features provided to customers. Moreover, the new entrants and the open source software vendors also need to provide increased number of features continuously in order to penetrate the market. Hence, these software firms need to invest judiciously in the software enhancement effort such that their revenue is maximized at the minimum possible cost. In addition, this strategy should be dynamic in order to capture the dynamic nature of the market. Therefore, we propose a dynamic optimization approach to obtain the optimal software enhancement effort over time. In this paper, we consider the value of adding more features as well as the impact of more bugs introduced while adding new features. Most of the past literature ignore the fact that the value of adding more features is not realized immediately by users. Therefore, we consider that there is a lag between the addition of new features and the increase in system's value. We also present several interesting managerial insights that can be used by software vendors to efficiently allocate resources based on the values of related parameters.

Keywords: Software enhancement, optimal control theory, software features, dynamic optimization

JEL Classification: C61

Suggested Citation

Kumar, Subodha and Ji, Yonghua and Yeh, Denny and Sethi, Suresh, Dynamic Optimization of Software Enhancement Effort (2007). 16th Annual Workshop On Information Technologies and Systems, Milwaukee, Wisconsin, December 2006. Available at SSRN: https://ssrn.com/abstract=1026842 or http://dx.doi.org/10.2139/ssrn.1026842

Subodha Kumar (Contact Author)

Temple University - Department of Marketing and Supply Chain Management ( email )

Philadelphia, PA 19122
United States

Yonghua Ji

University of Alberta - Department of Accounting, Operations & Information Systems ( email )

Edmonton, Alberta T6G 2R6
Canada

Denny Yeh

Fu-Jen Catholic University ( email )

510, Zhongzheng Rd.
Xinzhuang Dist.
New Taipei County
Taiwan

Suresh Sethi

University of Texas at Dallas - Naveen Jindal School of Management ( email )

800 W. Campbell Road, SM30
Richardson, TX 75080-3021
United States

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