By the numbers
- By Wilson P. Dizard III
- May 01, 2002
How much does software depreciation cost the federal government each year? Economists at the Congressional Budget Office have developed a formula to calculate it.
They added up expenditures for prepackaged software, computer programming and integrated systems design, then adjusted them to account for embedded software. They applied further statistical adjustments, including a factor for inflation and a calculation of the growth of software industry receipts.
One of the most variable factors, investigators found, is the falling cost of software, which has been estimated at 3 percent to 15 percent annually. The economists calculated that software for PCs and recent mainframes depreciates at a geometric rate over a three- to 10-year schedule.
Taking all those factors into account, the economists estimated that in the late 1990s, software depreciation cost the government between $4.1 billion and $11.4 billion annually.