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# How To Estimate The Correct Ballpark Cost For Your Software Development Project

Published on 14 May 14
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As IT systems emerge as a pivotal competitive element across industries in the fast evolving digital era, scope of software development projects is getting larger. Enterprises big and small are increasingly looking towards leading IT software development companies to leverage their skilled workforce, latest leading edge technologies to gain distinct advantage over the competition in technology. Affordability is a major factor in the choice of software development project partner. Therefore, it is a general practice during the pre-sales discussions to estimate the ballpark cost for your software development project.

The following are the fundamentals that details the crucial methods to estimate the costing of software development projects:

The cost of estimation requires effective monitoring and control of software costs to verify and improve the accuracy of estimates. The cost estimation models are used to calculate the efforts and schedule appropriate resources for the budget. They also help in risk mitigation and help leveraging estimating into better cost management in the complex technological present world.

The various cost estimation methods are:

Parametric Models:
This model makes use of the mathematical equation to perform software estimation. These equations may either be based on the theory or historical data. Further, the accuracy of the model can be calibrated based on the requirements on each specific environment.

This model includes popular models as

COCOMO(Constructive Cost Model) COCOMO 81 / COCOMO II ()
Developed by Bohem in 1981, this is a mathematical model based on the data from 63 historical software projects. The constructive cost model is an algorithmic software cost estimation model that uses basic regression formula with parameters that are derived from historical project data and current as well as future project characteristics. However, although it worked well for projects in the 80's and 90's , its successor, the COCOMO II is better suited for estimating modern software development projects.

COCOMO II is a model that allows one to estimate the cost, effort and schedule when planning a new software development activity. It addresses issues on non-sequential and rapid development process models. It further consists of three submodels, each one offering increased fidelity has three submodels: Application Composition, Early design and Post-architecture.

Putnam's software life-cycle management (SLIM):
It is one of the earliest developed model for estimating software development project and also among the most widely use. The Putnam model is an empirical software effort estimation model that describes the time and effort to finish a software project of specified size. Developed in late 1970s and based on Putnam's analysis of the life cycle.

It further has three tools
SLIM estimate
SLIM control
SLIM Metrics

While it is easy to modify input data as also refine and customize formulas, it is unable to deal with exceptional conditions.

SEER for Software (SEER-SEM)
SEER for Software (SEER-SEM) is an algorithmic project management application specifically designed to enable estimation, plan and monitor the effort and resources for software development or maintenance project. The model is based on parametric algorithms, knowledge bases, simulation based probability and historical precedents to allow project managers to estimate cost of software development project.

PRICE TruePlanning:
PRICE TruePlanning is a cost estimating framework designed to reduce the time and expenses required to satisfy, credible, data driven parametric estimating needs at all levels of an organization. It is the only cost estimating framework that can integrate multiple cost models-including hardware, software, IT, assembly and program management all within the same estimate. It offers faster, more insightful and more reliable parametric estimating.

Expert Judgement:
These depend on the experience and knowledge of practitioners. The expert then provides estimates based upon the projects he has participated. This includes models as

Delpi method: Herein the participants are involved in two assessment rounds

Work Breakdown Structure: Under this model, the budget elements are organized into a hierarchy that simplifies the task of budget estimation and control

Top Down/Macro Model:
The Top Down model depends on the experience and knowledge of estimator and emphasis planning and complete understanding of the system. This model requires minimum project details and is easier to implement, although it tends to overlook low level components. However, the modern software design approaches usually combine both top-down and bottom-up approaches

Bottom-Up:
Here, each software component is estimated and the combined result is used to arrive at the ballpark estimate the cost of project. The accumulated knowledge of small components is added to arrive at the estimate of the system. The analysis and refinement enable project estimators effective software development project cost estimates. This model while being more stable and detailed is more time consuming and even overlook system costs.

Thus, companies can achieve successful outcomes by effectively choosing the best suitable approach for estimating the cost of software development project. Thus through agile and accurate estimation of the cost of software development project, companies can improve bid success ratio, achieve tremendous saving in analyzing effective alternatives and improving cost management.

As IT systems emerge as a pivotal competitive element across industries in the fast evolving digital era, scope of software development projects is getting larger. Enterprises big and small are increasingly looking towards leading IT software development companies to leverage their skilled workforce, latest leading edge technologies to gain distinct advantage over the competition in technology. Affordability is a major factor in the choice of software development project partner. Therefore, it is a general practice during the pre-sales discussions to estimate the ballpark cost for your software development project.

The following are the fundamentals that details the crucial methods to estimate the costing of software development projects:

The cost of estimation requires effective monitoring and control of software costs to verify and improve the accuracy of estimates. The cost estimation models are used to calculate the efforts and schedule appropriate resources for the budget. They also help in risk mitigation and help leveraging estimating into better cost management in the complex technological present world.

The various cost estimation methods are:

Parametric Models:
This model makes use of the mathematical equation to perform software estimation. These equations may either be based on the theory or historical data. Further, the accuracy of the model can be calibrated based on the requirements on each specific environment.

This model includes popular models as

COCOMO(Constructive Cost Model) COCOMO 81 / COCOMO II ()
Developed by Bohem in 1981, this is a mathematical model based on the data from 63 historical software projects. The constructive cost model is an algorithmic software cost estimation model that uses basic regression formula with parameters that are derived from historical project data and current as well as future project characteristics. However, although it worked well for projects in the 80's and 90's , its successor, the COCOMO II is better suited for estimating modern software development projects.

COCOMO II is a model that allows one to estimate the cost, effort and schedule when planning a new software development activity. It addresses issues on non-sequential and rapid development process models. It further consists of three submodels, each one offering increased fidelity has three submodels: Application Composition, Early design and Post-architecture.

Putnam's software life-cycle management (SLIM):
It is one of the earliest developed model for estimating software development project and also among the most widely use. The Putnam model is an empirical software effort estimation model that describes the time and effort to finish a software project of specified size. Developed in late 1970s and based on Putnam's analysis of the life cycle.

It further has three tools
SLIM estimate
SLIM control
SLIM Metrics

While it is easy to modify input data as also refine and customize formulas, it is unable to deal with exceptional conditions.

SEER for Software (SEER-SEM)
SEER for Software (SEER-SEM) is an algorithmic project management application specifically designed to enable estimation, plan and monitor the effort and resources for software development or maintenance project. The model is based on parametric algorithms, knowledge bases, simulation based probability and historical precedents to allow project managers to estimate cost of software development project.

PRICE TruePlanning:
PRICE TruePlanning is a cost estimating framework designed to reduce the time and expenses required to satisfy, credible, data driven parametric estimating needs at all levels of an organization. It is the only cost estimating framework that can integrate multiple cost models-including hardware, software, IT, assembly and program management all within the same estimate. It offers faster, more insightful and more reliable parametric estimating.

Expert Judgement:
These depend on the experience and knowledge of practitioners. The expert then provides estimates based upon the projects he has participated. This includes models as

Delpi method: Herein the participants are involved in two assessment rounds

Work Breakdown Structure: Under this model, the budget elements are organized into a hierarchy that simplifies the task of budget estimation and control

Top Down/Macro Model:
The Top Down model depends on the experience and knowledge of estimator and emphasis planning and complete understanding of the system. This model requires minimum project details and is easier to implement, although it tends to overlook low level components. However, the modern software design approaches usually combine both top-down and bottom-up approaches

Bottom-Up:
Here, each software component is estimated and the combined result is used to arrive at the ballpark estimate the cost of project. The accumulated knowledge of small components is added to arrive at the estimate of the system. The analysis and refinement enable project estimators effective software development project cost estimates. This model while being more stable and detailed is more time consuming and even overlook system costs.

Thus, companies can achieve successful outcomes by effectively choosing the best suitable approach for estimating the cost of software development project. Thus through agile and accurate estimation of the cost of software development project, companies can improve bid success ratio, achieve tremendous saving in analyzing effective alternatives and improving cost management.

This blog is listed under Project & Service Management Community

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