The Potential of Portfolio Analysis in Guiding Software Decisions

Authors: S. Butler, P. Chalasani, S. Jha, O. Raz, and M. Shaw

Position Paper for First Workshop on Economics-Driven Software Engineering Research (EDSER-1), affiliated with the 21st International Conference on Software Engineering (ICSE'99), May 1999.

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Developing a complex software system involves decisions about how to allocate a limited resource budget among a collection of costly software alternatives (such as technologies or analysis techniques) that have uncertain future benefits. Very little quantitative guidance is currently available to make these decisions. We suggest that these allocation problems are naturally viewed in the powerful portfolio selection framework of financial investment theory. We view each software activity as an investment opportunity (or security), the benefit from the activity as the return on the investment, and the allocation problem as one of selecting the "optimal" portfolio of securities.

Brought to you by the Composable Software Systems Research Group in the School of Computer Science at Carnegie Mellon University.

[Last modified 03-May-2000.
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