How to Estimate Software

Development
Software Development
Estimation
 Every project owner desires to know the financial
implication and time frame for the completion of an
intended project, right from the word go. Irrespective of
how small or simple a project may seem, the process of
estimation is always a big deal because of its significance.
 There is a lot to consider depending on the case of
estimation, be it a new project, changing teams for an
ongoing project or just contemplating a new idea for
investment. There are also some possible factors to put in
the list of considerations such as a detailed specification,
functional requirements, the risks involved in the intended
project and so on.
Software Development
Estimation
The objective of estimation is to predict the
amount of funding, resources and time
needed to create a project. Considering
these factors, project stakeholders can
make informed decisions and ensure a
smooth and efficient delivery and
implementation.
Why is Estimation Important
People often confuse an estimate for a budget. They
are similar but a step from each other. An estimate
becomes a budget after approval from a project owner.
Only after such approval can funds be allocated.
Therefore, there can be no project funding without an
estimation.
An estimation accounts for producing and managing a
project. It provides the calculation of resources, effort,
cost and timing it might take to make the successful
completion and delivery of a project.
Why is Estimation
Important
As for you, the project owner, it should be understood
that an estimate does not indicate the final cost but just
a ballpark range. The intention of the estimate is to
secure a budget or investors and get the project started.
It is more like a prerequisite to the development phase.
Major Components of Project
Estimation
A standard estimate must be transparent and fair. To
provide a clear and accurate picture of your future
project and its cost, it should include the following
elements:
Tasks – the details of what should be done
Resources – the human efforts, number of experts
Rate – the ratio of cost to time, the currency of payment
and discount
Duration – the length of production in hours or days
Third party services – in case of additional services
that might not involve the software vendor directly.
Software Estimation Methodologies
Estimation by Analogy
To have an estimate by analogy, the cost of production
from similar projects in the past are reviewed and
compared to the one at hand. The differences between
them are noted. Those could be such factors as
complexity, the scale of the project, anticipated delivery
date, location, inflation, present exchange rates, etc.
The resulting project estimation can be fairly accurate if
a good analogy is found. Remember that no solution is
exactly the same. Work on your estimates systematically
and justify them to the project stakeholders.
Estimation by Analogy
Let’s have it in mind that if the project size in terms of
scope, capacity, or performance of an intended project
is twice as much as that of the analogy project, then
the resulting estimate of the analogy must be “scaled
up”. There is a bit of caution here – twice the size
might not equate to twice the cost. The ratio of size to
cost must be analogous.
This method is preferable when you have limited
information about the project to be estimated.
Bottom-up Estimates
In this method, the project is divided into several tasks
and subtasks that can be easily defined and managed.
Hence it becomes easier to estimate. All the tasks are
then separately estimated and totaled from the bottom
to the top to provide a final estimation.
This style “bottom-up“ takes more time to make an
estimation, but it gives the best level of accuracy if all
the component details are put into consideration.
Project Evaluation and Review
Technique or Three-Point Estimates
In this methodology, three ranges of estimates from
three data points are first provided. The three data
points being “best scenario”, “worst scenario”, and the
“most likely scenario”. The final estimate is the
weighted average of the estimates.
The three-point estimate has the advantage of reducing
the chance of an inflated estimate. It is also one of the
simple yet accurate software development cost and
time estimation techniques. The three estimates to be
averaged can be done by different people for better
precision.
Parametric Estimating
 This method is similar to estimation by analogy but with
more accuracy. Parametric estimation involves a statistical
or mathematical approach:
 The first step is pinpointing the factors of development e.g.
business or functional requirements
, non-functional requirements, the complexity of the project,
and technology.
 Next is getting information about the required work to
complete one unit from similar past projects, then relating it to
the total number of units applicable to the present project.
 Lastly, the cost is done by an empirical relationship between
the factors involved and total units of the project. Scalability is
then used for accuracy.
Use Case Points
This type of estimation is used to predict the software
size, especially if Unified Modeling Language and
Rational Unified Process methodologies are to be used
for the software design and development.
Estimation is made possible by requirements definition
for use cases. The size of the software is calculated
considering elements of the system use cases, technical
and environmental factors. The result is then applied to
calculate the efforts for the project.
What-If Analysis
 What-if analysis refers to the process of exploring different
scenarios and assessing the potential impact of changes or
variations on the project scope and estimate in particular. It is
used to analyze how modifications to various factors can
influence the project’s timeline, effort, resources, and costs.
 This is one of the types of estimation that can also be
leveraged in project management, not only at the very
beginning of your endeavor. It enables managers to anticipate
potential changes, risks, and uncertainties. By exploring
different hypothetical scenarios and evaluating their impact,
you can make more informed decisions, improve planning
accuracy, and increase the chances of project success.
Expert Judgment
 That’s one of the easiest techniques in terms of time and
efforts required. Often, it’s used when you only have a project
vision with not much data available and want to get an
approximate idea of how much the development would cost.
 Expert judgment involves seeking input and guidance from
project managers and other IT experts that can provide a
qualitative and subjective approach to estimation. In this case,
costs will be based on their knowledge and experience.
 However, it is important to note that expert judgment is not
that foolproof and accurate. So if you can share more details
with the team, then this method should be used in conjunction
with other techniques to enhance the estimate.
Estimating Pitfalls
 Software project estimation can be challenging, and there are several
common pitfalls that project teams may encounter. Being aware of
them can help project owners, managers, and other stakeholders
mitigate risks and improve the accuracy of estimations.
 Here are some software project estimation pitfalls to watch out for:
 Insufficient requirements
 Optimistic bias
 Time pressure
 Inadequate historical data
 Neglecting risk assessment
 Overlooking dependencies
 Scope creep
 Lack of stakeholder involvement
 Inadequate experience and expertise
What method is the most
efficient to get a software
development estimation?
Project management and estimation software tools can
be of great assistance. In some cases, automated
software estimating tools can even be more effective
and accurate. However, the most considerable way to
achieving a great estimation is by combining multiple
project estimation techniques.
It is advisable to get three different estimates by
applying software costing models that are most related
and suitable to the conditions of a project type.
The three estimates based on their results can be
considered as the “best scenario”, “worst scenario”,
and the “most likely scenario”. These three resulting
estimations can then be used to produce a final
estimation based on a weighted average.