Imagine that you are planning your vacations. You are excited about your future trip and make vast plans for this period of time. Well, you have arrived at the final destination and in the beginning you enjoy your long-awaited two-week holiday. But In the middle of your vacation, you realize that you have already run out of money and still have many unfulfilled plans and one more week of rest. If such an incident happens, it is pretty evident that these seven days will be completely and irrevocably spoiled due to the poor budget estimation of your upcoming trip. This simple example reveals the necessity and importance of planning, and it considers many activities we take in our life and work. And we clearly can draw a parallel with the software development project and its time and budget estimations. If we consider a project as a journey, it is vitally important to adequately assess the available resources, establish priorities correctly, and of course determine the cost and time frames. To do it correctly and minimize the risks related to the software project estimation, project managers apply some techniques, which proved their efficiency in this complicated process. And the current article is dedicated to the most common but meanwhile effective project estimation techniques which project managers use at the planning stage.
Technique #1: Analogous
How to proceed with estimations if there is no comprehensive information considering the software project and its functionality? There is nothing left but use the most simple analogous estimation technique. For example, a customer asked your team to create an e-commerce online platform which is pretty similar to one you had built in the recent past. In this case you have an opportunity to act analogously to the already launched platform and make necessary calculations on its basis.
The advantage of the estimation technique lies in the fact of its simplicity and quickness. But nevertheless, if we remember that each project is unique and there will never appear another one completely similar, this method will never be fully accurate, which is its main weak point should be kept in mind.
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Technique #2: Parametric
Along with the analogous estimation technique, parametric also relies on the data from the previous projects. But this method is much more accurate, as there is used historical data along with statistical data during the estimation process. Broadly speaking, you can take variables from the recently launched project with the similar characteristics, and apply them to the ongoing project. Let’s consider the simple example. Let’s say that you have written a 1000 word article for 200 USD. And now you have a task to write a 2000 word article on a similar topic. As you see, the second one must consist of twice as many words, so its cost will be: 200×2=400 USD.
Although parametric technique is much more accurate than the analogous one, it still has some shortcomings. From the example outlined above, it may happen that the article containing 2000 words may consist of a slightly bigger amount of characters than the one containing 1000 words. Therefore, the accuracy of the method is not as good as we’d like.
Technique #3: Bottom-Up
To apply the bottom-up estimation technique you need to possess all the information related to the project. Business goals, client requirements and other essential details should be clarified before the estimation process. This preparatory work is obligatory because the bottom-up approach presupposes dividing the whole project into stages, which will be estimated separately. It is similar to doing a jigsaw puzzle, since only when you put all the elements together, you will be able to see the whole picture. The same principle relates to this technique – you divide the project into stages, estimate them separately and in the end gain the comprehensive estimation.
Bottom-up technique presupposes very thorough preliminary work, and therefore, it has the highest level of accuracy. In addition, this method will subsequently help to better monitor the project progress, which is another indisputable advantage of the approach.
The only fly in the ointment is that to apply the technique, there is a necessity to use extra resources and involve other team members, which entails extra expenses and time.
Technique #4: Top-Down
As in the previous case of bottom-up estimation, top-down approach also presupposes dividing the whole project into phases. But the difference is that it should be done only after the project budget is defined, therefore this technique can be applied only to fixed-price projects.
When the budget is set, the project is divided into phases, you may correlate the expenses for each task with the amount offered for the entire project. In the result you will have a clear vision if the project not only fits the budget, but if it is also profitable.
Despite the similar principle, top-down estimation technique is much less precise than the bottom-up. Moreover, it does not presuppose taking into consideration possible changes that can be requested by the customer in the process of application development, which makes this technique relatively risky.
Technique #5: Three-Point
This kind of project estimation technique presupposes the highlighting of three estimating scenarios:
- Optimistic. The best scenario which can be imagined: the project fully fits the budget, all the necessary deadlines are met.
- Pessimistic. On the opposite, worth-case scenario, where additional expenses and time needed to finish the software project.
- Most likely estimate. The most realistic option, a median between the two cases outlined above. It concerns the real assessment of effort and time required for project development.
To receive the expected estimate, the following formula will be applied:
Three-point technique is pretty accurate, therefore it is of great help when you want to reduce the possibility of various risks. Meanwhile, all three scenarios should be carefully assessed for the optimal result, which makes this method fairly time-consuming.
There are hundreds of proofs to the expression “If you are failing to plan, you are planning to fail”. Each and every project, even if at first sight it can seem to be simple, requires thorough planning for its successful launch. The estimation techniques listed in the article help project managers to better explore and assess the potential project, to eliminate various kinds of risks and problems which might appear on the fly. Because as we all know, it’s better to prevent the disease, than cure it.
If you currently have a software project and need a team with robust project management, please contact us, our specialists will be glad to help.