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Software Development using Economic Optimization


Posted by Lawrence Sinclair on 29 Apr 2009 at 23:43

Project Management tools can collect information about time required to produce specific product sub-components (features, user stories). Some agile software development tools, like Pivotal Tracker collect information about actual outcomes based on detailed descriptions of requirement. The tools also collect information about who was involved in developing those results.

Given information like this, it is quite possible to solve some interesting problems for larger organizations. For example, given a set of developers, in an environment with budget constraints, one can find the optimal price (cost) for development output units (velocity) given developer wages and marginal productivity. One can also look at this from a hedonic perspective where you look at the optimal allocation of skills.

Ultimately, this could help firms find wages that reflect value added, or know how much they should be willing to pay for given skills. There is also the possibility to saying "we have a project that requires this mix of skills, what is the optimal set of people we should allocate to this project, given the value they add to other competing needs in the organization?"

The image below shows a little detail fleshing out the basic framework for solving this general class of problems. 

The basic mathematical framework

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