What’s the Average Cost of a Software Bug?

On August 1st, 2012, Knight Capital Group's new trading software malfunctioned, purchasing $7 billion in NYSE stocks in just 45 minutes. This unchecked glitch cost the firm around $440 million, resembling a scene from The Dark Knight Rises where Gotham's Stock Exchange is thrown into chaos.

Such examples prove why top-notch quality assurance (QA) and quality control (QC) aren’t just nice-to-haves—they’re essential safeguards against small bugs that can snowball into multi-million dollar disasters. In this article, we’ll explore the true cost of software bugs, from real-world cases to factors that influence bug expenses, the average cost of fixing bugs at different stages, and how to prevent these costs from escalating.

Also Read: Quality Assurance vs. Quality Control

According to a report released by the Consortium for Information & Software Quality (CISQ), the economic impact of poor software quality in the US reached a staggering $2.41 trillion in December 2022. Adding more to these was the cost of reworks for flawed software (technical debt) which accumulated to around $1.32 trillion. Here are some incidents from the past where software bugs proved incredibly expensive:

1994, Intel Pentium FDIV Bug

In 1994, Intel launched a no-questions-asked replacement program for the infamous Pentium processor FDIV bug, at a staggering cost of $475 million. The issue stemmed from a flawed algorithm that, in extremely rare cases (1 in 9 billion), could produce incorrect calculations. Despite the slim odds, Intel couldn’t withstand the outcry from the scientific, financial, and engineering communities. With media scrutiny and public pressure mounting, Intel was forced to replace the chips for any customer concerned about their system’s performance.

2004, UK Child Support Agency (CSA) IT System Failure

In 2004, the UK Child Support Agency (CSA) faced a significant IT system failure with its CS2 system, developed by Electronic Data Systems (EDS). The failure was attributed to bugs and design flaws. An internal memo leaked from EDS described the system as "badly designed, badly tested, and badly implemented". The project’s cost ballooned to somewhat £1.1 billion, including £539 million for the rollout and an additional £321 million for fixes. 

2021, Facebook Outage

On October 4, 2021, Facebook (Meta) experienced a significant outage that lasted around seven hours and eleven minutes, affecting its subsidiaries (Instagram, WhatsApp, Messenger, and others) for over 3.5 billion users globally. The outage was triggered by a faulty configuration change during routine maintenance, which disconnected Facebook's backbone routers, leading to a cascading failure that rendered the company's services unreachable. Facebook lost around $65 million in ad revenues in this outage duration with its share prices taking a 4.8% dip and wiping $5.9 billion off Zuckerberg's net worth.

Here are some key factors that typically influence the cost of software bugs:

General Factors

• The architectural complexity of software — often leads to technological interdependencies (e.g., subsystems, third-party services, external libraries, databases) that can complicate debugging efforts.
• Time-to-market pressures  — can lead to cutting corners in testing and QA. This urgency can result in more bugs making it into production code.
• Team size and skill levels — weigh in equally with the testing efforts. A larger team may lead to better coverage in testing, but if team members lack skills and experience, and are ineffective in collaborating while running tests, bugs can find their way into production code.

Also Read: STLC: Getting Started with Software Testing

Direct Financial Costs

The direct financial costs associated with software bugs include:

• Developer costs — can be attributed to the significant time spent on debugging. Developers typically spend 25%-50% of their time debugging code that converts to high development costs.
• QA and testing costs — can quickly pile up, especially if bugs are found far late into the development cycle.
• Potential downtime or service disruptions — due to a buggy system can lead to system outages, resulting in lost dollars and increased operational costs.
• Customer support and communication overhead  — can strain support resources and further increase costs.

Indirect Costs

The indirect costs for debugging include:

• Slow development processes — owing to the complicated debugging procedures are the leading cause of delays for new releases and software updates.
• Unhappy customers — because of a suboptimal product and not-so-great user experience often reflected by low sales figures, off-putting reviews, and higher development costs.
• Critical bugs — that directly affect users and user experience with the system can tarnish a company's reputation, putting pressure on development and marketing budgets.
• Legal Penalties — for flawed systems in highly regulated sectors like healthcare and finance may lead to legal penalties and compliance issues, further increasing costs.

Also Read: What is Bug Life Cycle?

The cost of fixing bugs grows exponentially as the software development cycle progresses from the design to the post-production phases. 

“IBM System Science Institute reported that fixing a bug during the testing phases can be 15 times more expensive than fixing it during the design phase. The costs can further skyrocket up to 100 times for bugs found in the post-production and maintenance phases.”

See the trend for yourself:

Another report by the National Institute of Standards & Technology (NIST) shares similar data on the average cost of software bugs distributed over five stages as the SDLC progresses. 

Here are its findings:

Here are the key reasons why the cost of fixing bugs skyrockets as SDLC  advances:

Late Discovery 

Early-stage bugs may be relatively simple to identify and typically cost way less to fix while addressing them for live systems may require significant code rewrites or even redesigns.

The Domino Effect 

Bugs caught early are simpler and cheaper to fix. In live systems, though, they often need major code rewrites or full redesigns, which raises the cost.

Resource Allocation 

As projects advance, resources might shift to other priorities, making it tougher to tackle bugs proactively. This can create a backlog of issues that become increasingly difficult to resolve as they pile up.

Legal and Compliance Risks 

The costs of compliance and legal guidelines—particularly in highly regulated sectors like finance, healthcare, and defense—can quickly spiral out of control if not managed properly as the project progresses.

Opportunity Costs 

Unresolved bugs can seriously slow down a company's progress, making it harder to adapt to changing market conditions, meet end-user needs, and stay competitive.

Also Read: What is an End User and How to Identify End User Types?

Here are some key strategies to help reduce expenses related to bug-fixing:

Use Bug-tracking and Reporting Tools

Using project management software and bug-tracking tools can help prioritize, track, and address bugs for reduced turnaround times. Bug reporting tools, such as BetterBugs can significantly speed up bug reporting and debugging procedures. Moreover, BetterBugs quickly integrates with major issue trackers and project tools.

Also Read: Top 10 Bug Tracking Tools

Prioritize Bug Fixes 

Major or minor, it’s best to focus on fixing high-impact bugs based on priority levels that directly affect user experience, system functionality, and business goals.

Leverage QA from the Start

Involving QA right from the start of a project can help identify and resolve issues proactively. Working with a mindset that values quality over everything can be a success metric.

Use automated testing and CI/CD tools 

Using automation tools/frameworks and CI/CD pipelines to identify and catch bugs early in the testing and operations workflows, ultimately reducing the overall cost of fixing them later. 

Also Read: Automation Testing 101

Adopt shift-left testing with TDD methods 

Shift-left testing approach (running testing procedures from the project design phase itself), combined with the TDD methods (writing tests before code), can be a major driver for keeping bugs and defects at bay from the start. 

Invest in Personnel Training

Regular knowledge transfer sessions from senior team members, coupled with professional certifications for QA and developers from recognized bodies like ISTQB, Microsoft, and Oracle, can ensure the teams stay up-to-date with best practices, enhancing their ability to write clean, efficient code and conduct thorough testing, minimizing project setbacks.