insurance for software defects
August 31, 2007
The more I think about it, the more astonished I become. Maintenance contracts for (bespoke) software: Buying insurance to cover against the possibility that the software doesn’t work.
I know the consumer electronics industry does the same, and I always baulk at the idea of spending an extra fifty quid in case the manufacturer cocked up. I wonder what percentage of purchasers buy the insurance? And I wonder what percentage of goods are sent back for repairs? Perhaps the price could be increased by 10% and all defects fixed for free. Or perhaps the manufacturer could invest a little in defect prevention.
It seems to me that software maintenance contracts are an addiction. Software houses undercut each other to win bids, and then rely on the insurance deal to claw back some profits. So no-one is incentivised to improve their performance, and in fact the set-up works directly against software quality. Perhaps it’s time now to break that addiction…
If a software house were able to offer to fix all defects for free, would that give them enough of a market advantage to pay for the investment needed to prevent those defects? Is “zero defects or we fix it for free” a viable vision? (Does any software house offer that already?) And how many software companies would have to do it before the buyer’s expectations evolved to match?
As an industry, do we now know enough to enable a few software houses to compete on the basis of quality?
August 31, 2007 at 2:03 pm
Isn’t the problem with “zero defects or we fix it for free” that you’d then get into tricky questions of quite what a constitutes a defect?
August 31, 2007 at 2:37 pm
Yes indeed. The problem doesn’t seem to be there for commoditized consumer goods, but for bespoke software it’s a real issue. So in order to get to “we fix it for free” a software team would have to look very carefully at customer involvement / feedback / collaboration: acceptance tests, regular reviews, all the usual “agile” yada yada. For real.
August 31, 2007 at 4:02 pm
In practice, we provide this service to our clients. Where we’re generating most of the code using a well tested framework it works out pretty well (although we have documentation differentiating defects from unexpected or unconsidered user cases, user inputs, etc.). As the projects become more complex and truly custom, it becomes more of an issue, so I’d be interested to hear how anyone else doing this mitigates their risk (other than just by adding a contingency cost to each project).
September 8, 2007 at 8:22 pm
Since you reference my article on Viable Vision, I figure I should respond.
The claim of Theory of Constraints is that with a focus on doing the right things, quality goes up naturally. (The focus isn’t on “zero defect” or whatever, it is on making sure the constraint is doing the things it (they) should be doing. One of those activities includes making sure the constraint doesn’t work on crap that will have to be thrown away later — time wasted on the constraint can never be recovered.
Jack
September 10, 2007 at 8:41 am
Hi Jack,
Agreed - defects will disappear via thorough application of either lean or TOC principles. But the software development world seems to be addicted to defects, for some reason. So much so that the existence of defects in software has become an accepted norm. I’m interested in why that delusion perpetuates. And I’m interested in the possibility of competing on the basis of shredding it. Would a zero defects shop dominate the market? I think so, and that would be mostly due to the fact that zero defects would only be possible by doing everything else right, as you say.
And yet, the existence of maintenance contracts, and their use to reclaim profit from bidding wars, creates a barrier to accepting these notions. How do I persuade a software house CEO that having the customer pay for defect fixing is an addiction with negative consequences for everyone?
Thanks for encouraging me to think through this. I guess I need to turn all of this into a conflict cloud and get my thinking hat on…
January 23, 2008 at 12:11 pm
Software being a human activity, I don’t think that defects will disappear one day. If we consider Toyota and its lean car production system, this does not make defect disappear, but however will limit intervention on the car during the time of its warranty. Thus promising zero defects would not be a good business claim, but having an extended warranty period on the software and making corrections for free could allow to win contracts over higher maintenance fees. Toyota needed however a lot of time before gaining its reputation and being a market leader… and I think that they still need to compete on price.