Challenges of Cost Estimation for Software Development Projects

It is no hidden fact that project estimation is a vital step in software development projects. No matter how big or small, a software development project needs accurate project estimation to make things simpler during the project execution cycle. Several times, the project’s feasibility and success or failure come down to the complete project estimation process. A good project estimation will pave the way for a successful project, whereas an incorrect project estimation will spell the project’s inevitable doom.

Good cost estimation requires close attention, and there must be a few challenges that cost estimators face. Let’s take a look at some challenges of cost estimation for software development projects and their solutions.

Before taking a look at the challenges faced, it is essential to understand project estimation. What is it, and why it holds so much importance? When you brainstorm a software development project, you evaluate the project concerning time, energy, and cost. The project’s cost depends on the time and energy it will take to complete the project.

In short, cost estimation for a software development project is the process of gauging the project in terms of time, energy, and cost.

Challenges of Cost Estimation for Software Development Projects:

When it comes to project estimation, there are several challenges that estimators face. And some of the notable ones are mentioned below.

*Uncertainty- It is the most prominent challenge that a software development project faces at the beginning. There are situations when even the clients are unaware of what they want. They do not have the complete requirement laid out. And since there is no clear set of requirements, how do you estimate the time and cost involved?

*Big Tasks: After the client has provided the complete requirements, sometimes, estimators make cost estimations based on bigger tasks. They neglect the need to break them into smaller and simpler tasks. It only leads to overhead tasks in the future and inviting unavoidable budget overruns.

*Idealistic Estimation: Generally, estimators make cost estimations of a software development project based on ideal conditions. But in the real world, a project will have changes requests, version maintenance, resources shortage or unavailability, etc. All these factors only add up to the actual cost estimation.

*Estimators: A software developer must do the estimation, or their assistance is taken to make the cost estimations. Sometimes, estimators fail to consult a software developer, which leads to unforeseen lapses in the estimations.

*Buffer, Dependencies, etc.- Project buffer is hard to estimate and are uncertain prediction. The general rule is to keep a 15–20% buffer all the while the project is in progress. While doing so, there is also a need to keep the team’s experience and skillsets and project complexity in mind. A project depends on several internal as well as internal factors for successful completion.

Solutions to Each of the Challenges Faced:

These are proposed solutions to each of the challenges faced during project cost estimation.

*Question and Answer: when starting with cost estimation, a project manager should hold a question and answer meeting with the client. It will help both the parties define a clear set of requirements for the project. The PM can eventually direct their team about the project’s functional, non-functional, and technical requirements.

*Breaking Bigger Tasks into Smaller Ones: The project manager must divide the big tasks into smaller ones and estimate cost for each of them. One way to do is by creating a work breakdown structure and make a list of all the small tasks.

*Estimators: When making cost estimation for a software development project, always make a developer do it or take their assistance to do so. One more thing to consider is creating a range of time frames instead of defining a proper timeline.

*Buffer: A good percentage of the buffer must be considered keeping the real-world in mind. A correct buffer will only be possible if the dependencies are correctly taken into account.

The list of challenges of cost estimation for software development projects is endless. There can be new redundancies now and then, but they can all be generally categorized into the ones mentioned above. If a PM takes care of all the above challenges, it can create an accurate cost estimation for the software development project.