Software Development Cost Estimation

Software development cost estimation can be determine through various estimation methods like, Analogous Estimation, Parametric Estimation, Three-point estimation ...
The cost of software development estimation can prove to be difficult for various reasons. For instance, project complexity plays a crucial role; the more complex the project, the more challenging it is to estimate. Another common reason is human factors. People are an essential part of software development, and estimating how efficiently a team can work is inherently challenging. Factors such as team experience, skill levels, and collaboration can impact the speed and quality of development

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Before delving into software development cost estimation, you first need to understand the Project Management Triangle or Iron Triangle.

Project Management Triangle:

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The Project Management Triangle is a foundational concept in project management that encapsulates three crucial factors constraining any project: Scope, Time, and Cost

1. Scope: This defines the project's features, functions, deliverables, and specifications. It outlines the necessary work to achieve a successful project.

2. Time: Also known as Schedule, this represents the project's timeline or the duration required for completion. It includes deadlines, milestones, and the overall time frame.

3. Cost:This refers to the budget or financial resources allocated to the project, encompassing expenses like labor, materials, equipment, and overhead costs.

The interconnected nature of these elements means that any alteration to one side of the triangle will impact the other two. For example, if the client requests additional features, the project may require more time and an increased budget (assuming quality isn't compromised). If a product is delayed for a critical presentation, features might need to be reduced or additional developers hired, thus increasing costs.

Understanding the Project Management Triangle is crucial for maintaining quality while striving to build a successful product.

Below are some of the Cost estimation technique

Analogous Estimation:

This Software development cost estimation method primarily involves utilizing historical data, encompassing the duration, cost, and resources applied in prior projects. For instance, if a UI/UX designer is tasked with estimating the cost of a new project, having experience with similar projects in the past enables them to provide an estimate based on the time and cost involved in previous endeavors.

Analogous estimation is not without its drawbacks, particularly due to the potential significant variance between past and present circumstances. For instance, if a developer used a specific technology in the past project, and it incurred a cost of $20, there's no guarantee that the same technology will cost the same now. Additionally, tools or solutions that a solution architect previously used might have undergone updates, necessitating the architect to invest more time in learning the newly updated tool. A more accurate estimation would involve...

Parametric Estimation:

This Software development cost estimation method involves utilizing statistical relationships between historical data and other variables to calculate estimates for various project parameters. Employing mathematical models and algorithms based on historical data, this approach predicts project costs, durations, or other relevant factors.

For instance, consider the development of a mobile app. To apply parametric estimation, project parameters such as team size, project complexity, and codebase size are considered. Historical data from past mobile app developments, including the corresponding development times, is then analyzed.

By combining project parameters and historical data, a formula can be derived.
For example: Development Time=�×(Size of Codebase)+�×(Team Size)+�×(Complexity)+...Development Time=a×(Size of Codebase)+b×(Team Size)+c×(Complexity)+...

Three-point estimation:

Is a Software development cost estimation technique used in project management to estimate the time, cost, or other variables of a project. It involves identifying three estimates for each activity or task: an optimistic estimate (O), a pessimistic estimate (P), and a most likely estimate (M). These estimates are then used to calculate a weighted average, providing a more realistic and risk-adjusted estimate.

Optimistic Estimate (O): This is the best-case scenario. It represents the minimum amount of time or cost required for an activity, assuming everything goes exceptionally well.

Pessimistic Estimate (P): This is the worst-case scenario. It represents the maximum amount of time or cost required, considering potential setbacks, delays, or complications.

Most Likely Estimate (M): This is the best estimate based on a realistic assessment of the most likely time or cost for the activity, taking into account normal conditions and expected challenge

The three-point estimation formula is often expressed as:

�=�+4�+�6E=6O+4M+P

Where:

  • �E is the expected (weighted average) estimate.
  • �O is the optimistic estimate.
  • �M is the most likely estimate.
  • �P is the pessimistic estimate.

The formula emphasizes a balanced approach by giving more weight to the most likely estimate, acknowledging that it is the most realistic assessment. This method is commonly used in Program Evaluation and Review Technique (PERT) analysis.

Three-point estimation is particularly useful in situations where there is uncertainty or variability in the factors influencing the project.

Buttom Up Estimation:

Bottom-up is a Software development cost estimation is like building a puzzle where you look at each small piece before figuring out the whole picture. In project management, it means breaking down a project into small tasks, estimating the time and resources for each task separately, and then adding them up for the overall project estimate. It's detailed, accurate, and helps in better planning, especially when you need to understand each part of the project. While it takes more time, the result is a clearer view of what's needed and where potential challenges might be

Team Velocity in Cost Estimation:

The overall Software development cost estimation is influenced by a recurring factor known as Team Velocity. Team Velocity refers to the rate at which a development team delivers features. If features are consistently delivered at a rapid pace, meeting deadlines, it indicates an acceleration in team velocity.

It's crucial to note that these estimation techniques provide approximations and don't offer an exact cost of development. Regularly assessing and adjusting your management triangle in consideration of your team velocity is essential for obtaining a more accurate valuation of the cost.

Summary

The overall cost estimation is influenced by a recurring factor known as Team Velocity. Team Velocity refers to the rate at which a development team delivers features. If features are consistently delivered at a rapid pace, meeting deadlines, it indicates an acceleration in team velocity. It's crucial to note that these estimation techniques provide approximations and don't offer an exact cost of development. Regularly assessing and adjusting your management triangle in consideration of your team velocity is essential for obtaining a more accurate valuation of the cost

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