Economic Quality

The Measure of Real Return
June 11, 2006
Jeff Elpern

What is Economic Quality

SQI defines Quality as an economic measurement for both users of a product and the product's manufacturer or developer. SQI replaces "defect" measures of quality, such as software bugs, with a direct economic measure - return to users and profits to manufacturers.

A user purchases a product expecting an economic return, i.e. the cost of the product less the value generated (cost savings or increased revenue) generates a certain return. If the real return exceed the pre-purchase expected return, the product will be perceived as high quality. If reality does not meet expectations the product is low quality.

Similarly, the product manufacturer or developer sells a product expecting a certain economic return. If the products margin less the cost of post-sales support is less that the expected return the product is low quality for the provides. If expectations are exceed the provider view the product as having high economic value for the firm.

This is the short definition. For a fully developed framework and mathematical supporting theory see the Unifying Theory of Software Quality developed by Jeff Elpern and a founding principle for SQI.

Economic Quality at the Client Interface

SQI focuses on “out of normal” events at the Client Interface because: 1) they are direct cost events to the users and the product provider that lowering the returns for both, and 2) they are an excellent barometer of what the real returns are likely to be. Thus, it is SQI doctrine that client interface events impact real returns and, at the same time provide management insight into how real returns for both users and the firm can be increased.

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