Modern Software Problems - The Technical and Social History of Software Engineering - page 370

generate a risk analysis for software packages that cost about $75 million to devel-
op. That is a very risky region with many failures.
Using industry defaults for projects with about 250 people and a development
schedule of 42 months, they are almost always late and over budget. There were
no contingency plans for this. A retrospective risk analysis that I created after the
bankruptcy showed the following:
Risk of cancellation of the project 36.76%
Risk of negative return on investment 46.56%
Risk of schedule delays 49.01%
Risk of cost overruns 41.66%
Risk of unhappy customers 56.37%
Risk of litigation 17.15%
Average of all risks 41.25%
Financial risks 88.22%
These risks are so high that it was folly to invest more than $75 million without
seeing a very detailed risk-abatement plan provided by Studio 38. Software star-
tups of this size are among the most risky ventures of the modern era.
Lessons learned: The main lesson from the Studio 38 failure is that governments
have no business trying to operate as venture capitalists in an industry where they
have no experience or expertise.
Problem avoidance: Large software applications with teams of 250 people
routinely run late by six to twelve months. These delays might have been reduced
or minimized by better quality control up front, such as inspections and static ana-
lysis. Over and above normal delays, this project had no effective backup or con-
tingency plans for how to get additional funds once the initial loan ran out.
Normal venture investments are preceded by a careful due diligence process
that examines risks and benefits. Apparently, Rhode Island ignored due diligence
and risks and was blinded by potential benefits.
2012: Knight Capital Stock-Trading Software Problems
On Wednesday, August 1, 2012, a software bug in the Knight Capital stock-trading
software triggered a massive problem that involved 140 stocks fluctuating wildly.
One of the additional problems was that the stock-trading software had no “off
switch” and could not easily be shut down.