System Engineering For Managers: Factors Affecting LCC and Consequences of Buying Cheap Softwares

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SYSTEM ENGINEERING FOR MANAGERS
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System Engineering For Managers 2
Table of Contents
1 Literature Review................................................................................................................................3
2 Factors Affecting LCC and Their Relationship...................................................................................5
3 High-Level Casual Loop Diagram.......................................................................................................7
4 Detailed Level Casual Loop Diagram..................................................................................................8
5 KMS (Knowledge Management SYSTEM) CASUAL Loop Diagram................................................9
6 Consequences of Buying Cheap Softwares........................................................................................11
7 Circumstances Under which cheap software is Recommended.........................................................12
8 References.........................................................................................................................................14

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1 LITERATURE REVIEW
When we talk about product life cycle costing, we look at the cost of the product over its life
cycle including the accumulated costs right from R&D to disposal. The terms LCC was first
coined by the US Department of defense, a term which was very common among the men in
uniform and also among the quality surveyors and constructors (Popović and Bojić, 2012). The
software industry has been the discipline slow to pick up the methods of LCC in software cost
estimations. But this has been fast changing since more industry players are coming to terms
with the LCC methods and factoring many matrices in handling LCC.
Few scholarly articles have been written in this subject areas to broaden the research on this
area. A study in Finland has shown that a scaring 5% of the major ICT industries use the LCC in
totaling the project costs. The Swedish, according to report penetration of LCC is about 60%.
This shows clearly that the LCC concept in really making penetration and about to hit mass
adoption (Munassar and Govardhan, 2010).
Several philosophers have argued on the best definition of LCC. From business, LCC can be
defined as the total cost of purchasing a good and or service from the supplier of choice. The
main purposes of LCC are first, it is vital in selecting the suppliers since the project lead can way
the LCC for each supplier quotation and pick the reasonable one. LCC can also serve the
purposes of evaluating the different supplier and compare their quotation by factoring their
different LCC. This enables the project lead to easily have an evaluation of different suppliers.
To put this into perspective, scholars have deduced that TCC concerns majorly with the
transactional costs foregoing the operational costs (Basbagill et al., 2013).

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According to research, most LCC focuses primarily on the capital invested and the fixed
assets required to finish the project. Several factors affect the LCC and some scholar have
published work on the same. The factors includes the service life including design and life cycle
of the product, the period it takes to conduct analysis, and the amount of costs variables which
includes but not limited to the cost of acquisition, maintenance and other software operational
and management costs, costs associated with disposal of the software product normally called the
residual costs, the current inflation rates in the particular region and other utility costs which may
include the energy consumptions accrued to the software product (Azhar, 2011).
The design and analysis phase particular requires expertise to deliver the phase deliverables.
The cost of hiring this expertise must, therefore, be included in the LCC. According to [], LCC
does not get aggregated once the software is delivered, factors such as maintenance come into
play as more cost continuously get incurred to ensure the software delivers its user requirements
and system other non-functional requirements (Krutz and Vines, 2010).
From the literature review, it is clear LCC methodology has come along way and has the
gain foot in the software life cycle. This is evident by the penetration it has achieved especially
in North America and Europe. The project leader has realized the TCO only is not enough to
objectively know the total cost accrued to the software product. This made the LCC be favored
as it covers even the hidden costs of disposal and maintenance in calculating the LCC.