Financial Cost of Software Bugs

Ryan Cohane
3 min readNov 16, 2017

In 2002, software bugs cost the United States economy approximately $59.5 billion (Software). In 2016, that number jumped to $1.1 trillion. The financial cost comes from various places. There are the more obvious costs such as revenue lost due to customers being unable to use the product and payments to the developers who have to fix the bug (Spaven). However, there are also less obvious ones. When a software failure is made public, companies lose an estimated $2.3 billion in shareholder value on the first day alone. There are indirect financial costs coming from problems with brand reputation and customer loyalty (McPeak). Fixing the bug can also push back other code changes and new features as well as mess up the production schedule (Leon).

IBM commissioned a report in 2008 to look into ways to minimize code defects and lower development costs. One of the interesting revelations from the research was that the further into the Software Development Life Cycle that a bug is discovered, the more expensive it is to fix. In other words, as a bug makes its way through the design phase, implementation, integration testing, customer beta test and finally postproduction release, it gets more and more expensive. The cost of a bug found in postproduction release is 30 times more expensive than if it was found during the design phase (Minimizing).

Examples of Costly Software Bugs:

NASA’s Mariner 1 was the United State’s first attempt to send a spacecraft to Venus. Shortly after it was launched in 1962, it veered off course due to a software bug. A NASA employee was forced to command the spacecraft to self-destruct. $18 million was blown up due to a missing hyphen in the code (Leon).

Over the summer, Amazon Web Services went down for 4 hours and affected countless sites. Though the financial cost is unclear, consider that when Amazon’s site went down in 2016 for 20 minutes, it’s estimated that the outage cost Amazon around $3.75 million. The incident this summer was 12 times as long and involved many other websites.

AT&T updated the software for long distance calling in January 1990. However, they failed to realize that the system would not be able to keep up with the speed of the new program. Long distance calling went down for 9 hours. 200,000 airline reservations were lost and there were 75 million missed phone calls. The total estimated cost to AT&T was $60 million (McPeak).

Bonus: When I was researching the topic, I saw the following statement on many sites, “The Systems Sciences Institute at IBM has reported that the cost to fix an error found after product release was four to five times as much as one uncovered during design, and up to 100 times more than one identified in the maintenance phase.” While trying to trace the information back to its origin, I found a very interesting investigation into this misleading statement:

Work Cited

Leon, Janet. “Celerity.” The True Cost of a Software Bug: Part One, Celerity IT, LLC, 28 Feb. 2015,

McPeak, Alex. “What’s the True Cost of a Software Bug?” CrossBrowserTesting, Smartbear, 8 Aug. 2017,

Minimizing Code Defects to Improve Software Quality and Lower Development Costs. IBM, 2008,

“Software Errors Cost U.S. Economy $59.5 Billion Annually NIST Assesses Technical Needs of Industry to Improve Software-Testing.” NIST News Release, National Institute of Standards and Technology, 28 June 2002,

Spaven, Freyja. “Cost of Software Errors: How Much Could Software Errors Be Costing Your Company?” Raygun, Raygun, 22 Mar. 2017,

Stambor, Zac. “How Much Did Amazon’s Outage Cost the Online Giant?” Digital Commerce 360, Vertical Web Media, 11 Mar. 2016,