CS 5150

Software Engineering

Lecture 5 by Stephen Purpura

Matching Process to Risk

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 Big Team vs. Small Team Risks

When requirements or plan are uncertain, the

minimum (engineers, modules, lines of code, tests,
etc.) should be impacted by changes (that result from
uncertainty).

Changing the direction of a big ship requires more

ocean than a small ship requires.

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 Some definitions of success are more concrete …

How do you approach these definitions of success?

(a) Increase market share by 3%
(b) Gain 10,000 new web site visitors
(c) Build a document repository web site
(d) Make Windows safe from hackers

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 Let’s Start a Technology Company

It is 1998. Regular consumer Internet usage is less

than 10 million people. We want to start a company
that will allow consumers to pay their bills using an
Internet interface. We’ll call this market “online Bill
payment”.

What do we do next?

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 Which Option Would You Choose?

Feasibility and planning

• Option 1: Sketch the components of the web site, make a list

of modules, build budgets for building the components
• Option 2: Plan how you will acquire the first 1,000 users
• Option 3: Start building a prototype

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 Draft 1: Requirements for
Acquiring 1,000 Customers

Step 1: At least 1,000 potential customers must navigate to the

site
Step 2: Each customer must be able to:
• Identify themselves
• Establish funding information
• Pay a bill
• See status/history
• Troubleshoot
Step 3: Profit?
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 Draft 2: Requirements for
Acquiring 1,000 Customers

Step 1: Sign relationship deals with 4 billers that will ask at least
25,000 customers to navigate to your web site.
Step 2: Each customer must be able to:
• Identify themselves
• Establish funding information
• Pay a bill
• See status/history
• Troubleshoot
Step 3: Profit?
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 Draft 3: Requirements for
Acquiring 1,000 Customers

Step 1: Sign relationship deals with 4 billers that will ask at least
25,000 customers to navigate to your web site.
Step 2: Each biller can customize their customer interface
Step 3: Each customer must be able to:
• Identify them self
• Establish funding information
• Pay a bill
• See status/history
• Troubleshoot
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 How Much Money Do We Need?

The founders of a company seek $250k based on a broad plan

(that seems feasible) to test whether they can acquire 1,000
Internet Bill Payment customers by leveraging agreements with
4 billers that will drive 25,000 potential users to their web site.
Success =
• A conversion rate of 4%
• 1,000 happy customers with at least 1 transaction each
• A web site that can handle the daily load
• A secure system ships every day

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 What Does Success Earn You?

• An increase in valuation
• Credibility

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 The Capitalization Table of a Seed Funded
Company with a $250,000 Round

Investor Common Shares Preferred Shares % of Company

Founder 1 30,000,000 25.00%
Founder 2 30,000,000 25.00%
Investor 1 10,000,000 8.33%
Investor 2 10,000,000 8.33%
Director 100,000 0.08%
Programmer 1 30,000 0.03%
Programmer 2 30,000 0.03%
Option Pool 19,840,000 16.53%
Authorized but
Unallocated 20,000,000 16.67%
Total 100,000,000 20,000,000 100.00%

Assuming a liquidity preference of $1:$1 for Preferred shares, if this

company is sold for $250,000, how much does each programmer
receive?

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 Basic Process Steps in all Software Development

• Feasibility and planning Start with a

meaningful goal!

• Requirements
Minimum possible
• System and program design product driven by
• Implementation goals!

• Acceptance and release

• Operation and maintenance

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 What are the technical risks?

Major Risks
• Company will run out of money
• Customers don’t understand how to use site
• Customers can’t complete transactions
• Customers don’t have funding ability
• Web site fails under load
• Hackers/fraud/repudiation

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 Observations about Software Processes

Completed projects should have the basic process steps

but ... the development process is always partly evolutionary.
Risk is lowered by:
• Prototyping key components
• Frequent releases, dividing large projects into phases
• Early and repeated testing with users and customers.
• Following a visible software process
• Making use of reusable components
• TESTING! Simulations! Trial runs!

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 Matching Process to Risk

• Company will run out of money Minimum

Product

• Customers don’t understand how to use site

Iterative
• Customers can’t complete transactions Design
• Customers don’t have funding ability

Modified
• Web site fails under load Waterfall
+
• Hackers/fraud/repudiation Reaction

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 Iterative Processes: Requirements and Risk

Mistakes in the requirements are the most expensive to

correct.
Requirements are hard to understand until there is an operational
system, particularly with user interfaces
Create an outline system quickly, review it with clients, test it
with users, improve the understanding of the requirements
Example: Start-up time of launching a complex application.

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 Contrast the Previous Example with Planning the
Next Version of Microsoft Windows

People buy Windows primarily because of network

effects. But some upgrade because of “excitement”.

What do we do next?

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 Matching Process to Risk

• Company will run out of money Minimum

Product

Iterative
• Customers aren’t excited
Design

• Network effects
• Hackers/fraud/repudiation Modified
• Application and hardware compatibility Waterfall
• New “lock in” features

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 Application Compatibility

Stability is a major feature of Windows.

• Recent but older applications run correctly
• Older web sites can be viewed in Internet Explorer
• Home users can use older HP laser printers

How do you assure this? You test and validate every

day.

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 Big Team vs. Small Team?

Why can Google Chrome ship faster than IE?

Version Ship Date Market Share

1.0 December 11, 2008 70.5% vs. 1.4%
2.0 May 24, 2009 68.1% vs. 1.7%
3.0 October 12, 2009 64.6% vs. 3.6%
4.0 January 25, 2010 62.1% vs. 4.6%
5.0 May 25, 2010 60.0% vs. 6.8%
6.0 September 2, 2010 60.1% vs. 8.0%

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 Conclusion and Preview of Next Talk

• If the software isn’t written, deployed, and

functioning as desired, there are unknowns in its
development.
• To eliminate unknowns, you simulate desired
production behavior.
• You order the creation of the simulations based on the
potential cost of known unknowns and unknown
unknowns. This is learned from experience.
• Big teams use more simulations than small teams to
minimize the number of times they modify plans with
cascading changes.
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