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Understanding the Software Development Life Cycle — IT Certificate

For large firms, software development costs are normally a minimal expense on the company’s
overall consolidated financial statements. One of the greatest risks in any software development
project centers around shareholder confidence. Shareholder confidence usually comes into play
when a new system is launched and it malfunctions, or when significant downtime occurs.

When software development failures are reported in the news, like the issues with the
unemployment system in Florida, stakeholders may loose confidence and the organization may be
subject to a series of embarrassing questions. This type of reputational risk can lead to lower market
share, fines and penalties, or even regulatory scrutiny.

One may ask how we can increase shareholder confidence and reduce reputational risk. One option
is to have teams work closely with the business unit and IT unit to ensure projects meet their stated
objectives and are delivered on time and within budget. There has been, and will continue to be, a
great demand for IT resources to improve and automate business processes. Organizations need to
continuously improve their capability to manage all aspects of system development projects to
minimize project delays or stoppage and to ensure projects meet their deliverable expectations.

Impact of Development Risks

Project delays and budget overruns may impact a project at varying levels, ranging from total failure
to a system launching with less functionality than promised. In some circumstances, certain aspects
of the system will be removed or delayed for a later phase to ensure completion of the project.
Although the removals and delays to the project completion might be intended to help, they often
cause business users to become frustrated, and may potentially cause compounded complications
with staffing and system functionality as the project moves through future phases. Because system
risks are comprised of so much more than just IT and technical issues, the costs and impacts that
result from risks can be felt in several other areas as well:

Wasted Product
The system could be part of a manufacturing process, whereby system dysfunction could lead to
wasted materials that drive up costs.

Not Meeting Service-Level Agreements
A service level agreement (SLA) articulates service-related expectations and corresponding fines and
penalties for non-compliance. Organizations can suffer financial, reputation, regulatory, and legal
consequences when the internal IT department or the external vendor cannot meet the
requirements of the SLA.

Lost Sales Revenue
System dysfunction for a revenue-generating system will definitely hinder revenue and decrease
shareholder confidence. Since making money is a key component of any organization, a project
failure or “glitch” in a revenue-generating system could have long-term revenue and reputational
impacts.

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