Software Estimation – How to Forecast the Time and Cost of Your Product

Introduction: What is Software Estimation?

Software estimation is a crucial part of each development process and if done properly, can influence the success of the whole project. It lets us clarify the business goals, project plan, and assumptions. As a result, we’re able to define the main requirements both for the project itself and for each and every person involved in the process. What’s more – it impacts the morale of the team – you probably know how it feels to be overdue with tasks and how much stress it implies.

On the other hand, unreliable estimation is one of the 10 top reasons for project failure, leading to misunderstandings within the team, missed deadlines, and cost overruns. Especially if software development is the key project for the business, unreliable estimates can be frustrating and not only strain the budget but also bring the risk of spending much more on looking for other “healing” solutions. 

And of course, we’re not indicating that the estimation will guarantee the success of the product launch by itself – we’re only suggesting that it’s an amazing tool to mitigate the risks for schedule and budget overdue.

So, to manage the project properly, it’s important to understand what the estimation is, what part it plays in the development planning and how to run it properly.

So what exactly a software development estimation is? 

Software estimation is the strategy of determining the amount of effort, time, and money necessary to complete the project, which can be mobile app development, building a website, or a full-stack web platform. In software development companies, we’re taking into consideration our experience, techniques, tools, and processes used to complete tasks. In our IT world, the estimation should have an error margin of 5-10% to be considered accurate.

The estimation process brings many benefits to both the project team and the customer, like: 

• Easier managing the uncertainty
• Better adjusting to the project plan 
• Allows the developers to deep down into the software projects and understand the requirements 
• Help manage stakeholders’ expectations 

Basic Estimation Techniques and Steps You Can Take Today to Improve Planning 

When talking about estimation, we very often resort to talking about time. Our estimations, regardless of the methods we choose, at some point always end up being reduced to simple minutes or hours.

So maybe there’s no need to bother with story points and all other complex stuff. I mean, isn’t it more efficient to just make a work and effort estimation in hours? 

Well…probably not. The problem is that we are not as good at estimating time, as we may think. So, all in all, I’d probably stay away from trying to do so. Especially since there are plenty of far better ways of doing it. 

The estimation of the time and cost of the project is never easy. There are many factors that need to be taken into consideration before making an accurate estimate, such as:

• The number of people working on the project
• The complexity and size of the product
• The scope of the software project 
• The experience level of the team members
• How much documentation there is on your product
• How much you know about your product

How to start estimating software development?

At Pagepro, we always start the development process by preparing the estimation of costs and time for our customers, so they can prepare both financially and mentally for the project. We run through the 6 points to make sure we understand the idea for the software well and have all the needed resources to process it without any trouble.

Understanding the project requirements

The best practices don’t have to be complicated. To deeply understand the project and the value it will bring to future users, we run a meeting with our customer, so he can guide us through the idea, and talk about the technical requirements, major features, and the budget he has for the development.

Prepare the exact scope of the project (to avoid scope creep)

Setting the scope of the project means determining the project goals, deliverables, tasks, costs, and deadlines. So it’s crucial for the exact estimations, as it sums up everything we need to run the successful development.

Determining the scope can help you avoid scope creep – doing the tasks that weren’t planned in the first place, which can influence the schedule of the whole project.  

Make the work breakdown

Since we have the scope and knowledge about the features and functionalities, we can break down the work, sign it up to the developers, and choose the right project manager responsible for the whole process.

Project planning with our developers

Our React developers worked on many various both simple and complicated projects, so they have the knowledge, wide enough, to choose the best tools and solutions and often help with making the estimation as accurate as possible.

The general rule is: the more skilled the team is, (surprise) the better the chance for accurate planning. 

However, the expert opinion should not be limited to a single person. 

Technical people are great at estimating technical stuff, but with a deep understanding of project business goals, together with business analysis, and a project manager, they are able to come up with a truly the most efficient plan of action.

A collective effort, especially those who are directly responsible for the task or were working on similar projects in the past will always bring more accuracy than having a single expert plan the whole thing. Either way, brainstorming with the right people can get you far. But there’s more.

Making project tech-savvy 

Modern technologies are built in a way that makes it possible to reuse the earlier created components in other, similar software pieces. What’s more, React has a huge community of active contributors that share both their knowledge and solutions. We run through the available solutions to check out if there is any way to increase the effectiveness of the engineering, and, as a result – shorten the time to market.

Choosing the right software estimation technique

There are many techniques by which you can greatly improve the accuracy of your planning. Having said that, it’s always going to be largely dependent on your team’s skills, experience, and historical data. Nevertheless, applying well-researched approaches and deep analysis to planning will always do you good.

Estimation Techniques 

Bottom-up Estimates

This model is based on dividing tasks and requirements into smaller chunks. 

When building any software it’s really hard to estimate how long exactly could it take to complete the project. For example, when we decide to build a mobile app there are hundreds if not thousands of co-dependencies between different features and functionalities that we might not be able to understand at first. However, if we fail to estimate such dependencies at first, it’s bound to bite us in the future. 

By dividing complex projects into small chunks, and then estimating the complexity of each, we might be able to estimate the overall time more realistically. So when creating an app, we would consider each step based on its complexity, rather than predicting the time based just on the dev’s feeling. 

Once all the tasks are estimated separately, they are then totaled from the bottom to the top into the final estimation.

This technique is considered as the most accurate because all the component details are taken into consideration. 

Comparative method – Estimation by Analogy

This technique is quite different as it doesn’t involve estimating the precise time or complexity of the software project. Instead, it focuses on comparing it to other tasks or projects that you have already had a chance to work on. The idea is that by doing so you can get an estimate of where the project you’re currently working on places in comparison to other projects. It’s important to include every project that is somewhat similar but still be aware of varying complexity levels. 

This model provides accurate estimates if a good analogy is found. Of course, you have to remember about scaling the project estimation appropriately to the software size and complexity.

This is a fair technique if the information about the project is limited. 

Three Point Estimation [PERT technique]

We use this method a lot because it’s a great way to avoid inflated estimates, it’s simple and can be done by different people involved in the project and then compared, to bring the most reasonable results.

It requires preparing three estimations from three data points: best scenario [O – optimistic], worst scenario [P – pessimistic], and most likely scenario [R – realistic]. Then they are calculated according to the formula: (O+4R+P)/6, so if the optimistic scenario requires 60 min, the pessimistic 120 min, and the realistic 80 min, the final estimation will be: (60+4*80+120)/6 = 83,3 min. 

Important note: To each estimation, we’re adding 10% for testing and project management, which are the essential parts of the process, but can’t be specified without further knowledge about the whole project schedule.

Conclusion: The Importance of Using an Effective Software Estimation Method

Software estimation is a crucial process in any IT project. It helps developers and companies plan their work, budget, and resources, as well as predict future costs of development.

Even though the process might seem like overkill, in the end, it’s one of those things you either do or regret you didn’t do it. All things considered, it’s a skill that you and your team can improve over time. Each time you go through the process of software estimation, you understand it better and improve on it.