I got an interesting email from a person asking about the variations in software productivity industry averages. I believe the person already knew the answer and was just looking for clarification.
There is no such thing as an industry average cost for software development and there is no such thing as an average industry wide cost for construction either. Since the cost per unit of developing software is so varied, knowing the average cost to develop software is about as useful as knowing the average cost to make something.
1. Productivity varies based upon the size of the project. The larger the project the lower the productivity (higher the unit cost). A project that is 5,000 function points is going to cost more per function point than a 500 function point project. This is true in construction projects too. A sky scrapper is going to cost per square foot (or square meter) to build than a single family dwelling (holding everything else constant). Software development has diseconomies of scale or increasing marginal costs.
2. Software productivity rates vary by type of industry. The software productivity rate for software developed for the health care industry is different than software developed for the banking industry. A medical office is not going to cost the same per square foot (or square meter) as a bank.
3. The way data is gathered will impact software productivity rates. Since I work a lot on mergers and acquisitions, I include everything and everybody not just the IT staff or programming effort. I prefer to use payroll reports and expense payment reports and not just data from time reporting systems. The typical gap between payroll and time reporting systems can be up to 50%. In other words, most software organizations under report its true cost by about 50 percent.
Read more at Reboot! Rethinking and Restarting Software Development