Using real options to manage Technical Debt in Requirements Engineering

Despite the importance of Requirements Engineering (RE) for the success of software products, most of the requirements decisions such as requirements specification and prioritization are still ad hoc and depend upon the managers´ preferences and the trade-offs they make. The Technical Debt (TD) metaphor looks into the trade-offs between short term and long-term goals in software development projects that may lead to increased cost in the future. This problem is mainly due to the lack of a systematic and well-defined approach to manage the high level of uncertainty in requirements decisions. In this paper, we propose to apply the real options thinking to develop a quantitative method for managing requirements decisions under uncertainty and, more specifically for managing requirements debt in software development projects. A real option is a right without an obligation to make a specific future decision depending on how uncertainty resolves. We demonstrate the application of real options in the context of requirements debt valuation by using the binomial model combined with dynamic programming. We provide an illustrative example to show how uncertainty creates option value and influences requirements decisions and finally outline a future research agenda.