Cost Matrix, SLA and ROI

Cost matrix, Service Level Agreements (SLA), and Return on Investment (ROI) are all important concepts in software quality assurance.

A cost matrix is a tool used to assess the costs associated with various software quality activities. It helps organizations determine the costs of different quality assurance activities, such as testing, code reviews, and documentation, and allows them to prioritize these activities based on their cost-effectiveness.

Service Level Agreements (SLAs) are agreements between service providers and customers that specify the level of service that will be provided. In the context of software quality assurance, SLAs can be used to define the quality standards that a software product or service must meet, and to establish metrics for measuring and monitoring quality.

Return on Investment (ROI) is a measure of the financial benefits that can be derived from an investment. In software quality assurance, ROI can be used to assess the financial benefits of investing in quality initiatives, such as automated testing tools or process improvements.

Together, cost matrix, SLAs, and ROI can help organizations make informed decisions about software quality. They can help to prioritize quality initiatives, establish quality standards, and justify investments in quality assurance activities.

Cost Matrix

When analyzing a product or service in terms of performance, feasibility or options for improvements, then it is helpful to map costs as a matrix along with returns or quality of the product or service as a cost matrix. A cost matrix (error matrix) is useful when specific classification errors are more severe than others. Various class labels which might be used are High risk, Low risk and Safe.

SLA

A service-level agreement is a negotiated agreement between two parties, where one is the customer and the other is the service provider. This can be a legally binding formal or an informal “contract”. Contracts between the service provider and other third parties are often called SLAs – because the level of service has been set by the customer. Operational-level agreements or OLAs, however, may be used by internal groups to support SLAs.

The SLA records a common understanding about services, priorities, responsibilities, guarantees, and warranties. Each area of service scope have the “level of service” defined. The SLA may specify the levels of availability, serviceability, performance, operation, or other attributes of the service, such as billing. The “level of service” can also be specified as “target” and “minimum,” which allows customers to be informed what to expect (the minimum), while providing a measurable (average) target value that shows the level of performance. In some contracts, penalties may be agreed upon in the case of non-compliance of the SLA. It is important to note that the “agreement” relates to the services the customer receives, and not how the service provider delivers that service.

SLAs commonly include details about definition of services, performance measurement, problem management, customer duties, warranties, disaster recovery, and termination of agreement. In order to ensure that SLAs are consistently met, these agreements are often designed with specific lines of demarcation and the parties involved are required meet regularly to create an open forum for communication. Contract enforcement (rewards and penalties) should be rigidly enforced, but most SLAs also leave room for annual revalidation so that it is possible to make changes based on new information.

SLAs have been used since late 1980s by fixed line telecom operators as part of their contracts with their corporate customers. This practice has spread such that now it is common for a customer to engage a service provider by including a service level agreement in a wide range of service contracts in practically all industries and markets. Internal departments (such as IT, HR, and real estate) in larger organizations have adopted the idea of using service-level agreements with their “internal” customers — users in other departments within the same organization. One benefit of this can be to enable the quality of service to be benchmarked with that agreed to across multiple locations or between different business units. This internal benchmarking can also be used to market test and provide a value comparison between an in-house department and an external service provider.

Service level agreements are, by their nature, “output” based – the result of the service as received by the customer is the subject of the “agreement.” The (expert) service provider can demonstrate their value by organizing themselves with ingenuity, capability, and knowledge to deliver the service required, perhaps in an innovative way. Organizations can also specify the way the service is to be delivered, through a specification (a service level specification) and using subordinate “objectives” other than those related to the level of service. This type of agreement is known as an “input” SLA. This latter type of requirement is becoming obsolete as organizations become more demanding and shift the delivery methodology risk on to the service provider.

An SLA serves as both the blueprint and warranty. The contract

Codifies the specific parameters and minimum levels required for each element of the service, as well as remedies for failure to meet those requirements.
Affirms your institution’s ownership of its data stored on the service provider’s system, and specifies your rights to get it back.
Details the system infrastructure and security standards to be maintained by the service provider, along with your rights to audit their compliance.
Specifies your rights and cost to continue and discontinue using the service.

ROI

A business organization often measures the value of financial investments in terms of the RETURN ON INVESTMENT (ROI). It is the base reason for acceptance of proposals by the higher management, especially even adapting the relatively new and untested SQA paradigm. Businesses do not embrace new systems and methods easily. Though, now more and more organizations are becoming bolder and starting to embrace new technology, especially the relatively new and smaller ones who are just getting into the business. These are the ones that have less to lose because they have not invested in older systems which are considered as lost investment when abandoned, and they can start fresh with new systems not weighted down with the familiarity of old ones.

SQA may give returns in the following areas

Cost savings. Due to its pay as you use system and not the cost for the whole system like in a traditional network hosting model.
Production Enhancement. This is mainly brought about by cloud applications adding value to business processes by efficiency and optimization. Another reason is that these applications are consumed through web browsers which even older computers can run without problems compared to newer applications which may need more computing power.