FPA: Alternatives to 'Guesstimates'


APF: A Decision Making Tool

FATTO provides many consultancy services, one of them being the use of Function Point Analysis with the end goal of measuring functional size and eventually helping with the appraisal of a software application. Such service was offered to a software system for an online retailer that positions itself within the Money Orders industry.

There are various reasons to attribute a value to a software application. The following list mentions some of those reasons:

  • Account software as part of the organization’s assets
  • Sell the application to another company
  • Confirm the appraisal of a third party
  • Identify which components are considered as the most valuable
  • Analyze if it’s worth developing new software or if it’s better to buy
  • Helps in the cost and duration implication evaluation related to software  decisions
  • Helps  in the decision making related to risk  management 

 When a software application is appraised, it is important to consider that the monetary value is expressed as a range, using the cost to develop the application as the ‘floor’ (minimum value) and the results, the problems resolved and opportunities seized as the ‘ceiling’ (maximum value). The cost to convert itself into an available application is interpreted simply as the value associated to develop the application (Functional Requirements * Delivery Rate compatible with the Non-Functional Requirements * Man-Hour Value). The cost is directly related to the functional size.


Value is something that can be perceived differently by any given entity. Therefore, we can say that this value can be considered subjective. For example, a glass of water for someone that has been in a desert without drinking water for some time is more valuable in comparison to a person that has been swimming in a crystal clear river. An organization that is able to streamline an operational process by 50% with the use of said software, has a greater perceived value of this than another organization that can only streamline the process by 5%.  The added business value (ceiling) includes components such as operational procedures (flows that link different business functions), quality levels (number of defects), performance and time to market levels.


Keeping in mind that the perception of value can be subjective, we will only consider the floor of the appraisal (minimum value) based on its functional size in this analysis.


The functional user requirements were analyzed on behalf of their documental representation, product self-experience and interviews with SMEs. Throughout this analysis, the SCOPE tool was used, developed by Total Metrics. This software facilitated the estimation process because it maintains Data Type Functions and Transaction Type Functions in an organized manner and permits for the identification of duplicated functionality (as compared to using an Excel Document). Besides these benefits, SCOPE has the ability to report the functional size of the project and the baseline of subsystems, releases and projects that span various applications; it can also estimate the effort necessary to complete the software development using the delivery rate as an input.


Once the application functional size was calculated (automatically calculated by SCOPE), the delivery rate to develop an application like this one (of the same functional size) from the ground up was calculated; using as a benchmark as an input with specifications similar to the application being measured.


This data alongside the functional size allowed for the required effort calculation for its development (Effort = Function Points *Deliver Rate). Since this functional size was being estimated, the uncertainty was considered in the model by the use of present ranges in the cone of uncertainty of COCOMO II with the purpose of obtaining a punctual estimate; the PERT method was also used, being that it considers an optimistic and pessimistic scenario provided by COCOMO II.


Once the required effort was calculated, it was possible to calculate the cost of the application using as a reference the Man-Hour value defined by the client. However, this result represents the floor value for the appraisal of the application as it was defined at the start of this article.


Moreover, FATTO Consultancy and Systems provides information in regards items not directly related to cost such as duration and quality that contribute to the evaluation of opportunity cost. The value of said aspects is under the criteria of the client and will be reflected in the final monetary value of the application (ceiling).