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Applications of DEA to measure the efficiency of software production at two large Canadian banks

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Abstract

This paper presents two empirical studies of software production conducted at two large Canadian banks. For this purpose, we introduce a new model of software production that considers more outputs than those previously cited in the literature. The first study analyses a group of software development projects and compares the ratio approach to performance measurement to the results of DEA. It is shown that the main deficiencies of the performance ratio method can be avoided with the latter. Two different approaches are employed to constrain the DEA multipliers with respect to subjective managerial goals. As is further shown, incorporating subjective values into efficiency measures must be done in a careful and rigorous manner, within a framework familiar to management. The second study investigates the effect of quality on software maintenance (enhancement) projects. Quality appears to have a significant impact on the efficiency and cost of software projects in the data set. We further show the problems that may result when quality is excluded from the production models for efficiency assessment. In particular, we show some of the misleading results that can be obtained when the simple, traditional, ratio definition of productivity is used for this purpose.

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Authors
  1. J.C. Paradi
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  2. D.N. Reese
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  3. D. Rosen
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Paradi, J., Reese, D. & Rosen, D. Applications of DEA to measure the efficiency of software production at two large Canadian banks. Annals of Operations Research 73, 91–115 (1997). https://doi.org/10.1023/A:1018953900977

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