A Value-Chain Analysis or Sortware Productivity Components

The value chain, developed by Porter and his associates at the Harvard Business School [Porter, .1980; Porter, 1985], is a useful method of understanding and controlling the costs involved in a wide variety of organizational enterprises. It identifies a canonical set of cost sources or value activities, represent"ing the basic activities an organization can choose from to create added value for its products. Figure 1 shows a value chain for software development representative of experience at TRW. Definitions and explanations of the component value activities are given below. These are divided into what [Porter, 1985] calls primary activities (inbound logistics, outbound logistics, marketing and sales, service, and operations) and support activities (infrastructure, human resource management, technology development, and procurement).