Custom software development estimation process.

When it comes to custom software development, your project budget estimation is one of the key issues to tackle. Why? Because you can’t just pick one of the offered pricing plans and click on the “Apply” button. One-size-fits-all solutions gradually lose relevance since each digital product requires a unique, individual approach. Thus, you can’t tell how much your project will cost you without a detailed preliminary investigation.

At the same time, if you fail to conduct comprehensive research, choose the proper software development cost estimation methodology, and build a viable plan, the outcomes may be critical. According to a McKinsey research, more than 60% of IT projects overrun their budget and schedule because of unclear objectives, poor business focus, shifting requirements, etc.

We at Acropolium have rich experience conducting result-driven investigation phases and helping our clients perform accurate custom development cost calculations. This post will explain why project estimation is essential, what factors to consider, and what are the most popular techniques to implement.

Why Is Software Development Estimation Important?

First of all, it’s worth noting that estimation is not the same as the project budget. Instead, it’s an approximate calculation that helps get an idea of the possible price, timeline, required talents, and scope of work. Meanwhile, the budget is an integral part of the agreement between a product owner and a development team.

It’s vital to remember that the project’s initial estimation and approved budget are not constant. On the contrary, they will likely change throughout the development lifecycle. The estimation occurs at the very beginning of a long and multi-level journey. Any changes in requirements and scope may drastically impact the final cost.

So what’s the importance of cost estimation in software development if it doesn’t provide a specific price tag on your project? Here are several most significant reasons to estimate your project in advance.

  • Making approximate calculations. As mentioned above, your project’s budget may change due to many circumstances. However, product owners, investors, and other stakeholders should have a rough idea of expectations.

  • Ensuring transparency. Without proper preparations and prior research, it’s not worth diving into the project. The estimation phase will provide more clarity and begin a trusting relationship between you and your development team. Also, it will help distribute the invested funds properly.

  • Defining milestones. The project estimation will denote the critical tasks, objectives, and sprints so that you see their impact on your budget. Besides, it helps designate the approximate project timeline and its ratio to the service cost.

  • Evaluating the project’s scope. You will get initial information on the tasks’ scope and complexity when estimating your project. Your vendor should consider these factors when determining what specialists to involve.

Who Is Estimating a Software Development Project?

Software development project cost estimation is not a direct responsibility of your engineering team. However, evaluating all critical aspects of the upcoming workflow organization requires the involvement of several stakeholders, including tech specialists.

Here are the potential participants of the estimation process with their roles explained.

  • A project manager plays a crucial role in project estimation. Later, throughout the workflow, they help control scheduling, meetings, communication, etc. So when calculating the budget, their participation is vital. Project managers communicate with other stakeholders and use their experience to define if a requirement is relevant and if a project objective can be met.

The statistics claim that when an organization involves effective project management, it wastes 13 times less money, while the development process is 2.5 times more successful.

The importance of effective project management.

  • The development team should provide their thoughts and insights to ensure all tech aspects (features, backend, design, integrations, etc.) are adequately estimated. For more detailed research, the involvement of a tech lead and business analyst may be necessary.

  • The product owner makes final decisions and communicates their vision to the development team. When estimating the project, the hired vendor should always consider your opinion.

What Affects the Estimating of a Custom Software Development Project?

Custom software development involves numerous aspects that may affect your project’s cost and timeline. Each of them matters and may become critical for your budget if ignored.

So to conduct an accurate software development project estimation, consider the following factors.

1. Project Type and Size

The first thing that matters is the type of software you build. Digital product development is a broad concept. It includes various projects, from sophisticated, innovative platforms to simple landing pages. Accordingly, depending on your business goals and requirements, the price and timeline will vary tremendously.

Here are several most common types of software development projects.

  • Building a product from scratch
  • Modernizing a legacy system
  • Adding custom features/integrations to a current solution
  • Designing a web application
  • Building a mobile app, etc.

2. Software Complexity

Even small projects may be challenging. So custom software development cost also depends on your software complexity. It’s preliminary about the number of modules, screens, and features to develop. A small project may take about a month, while an advanced one may last for more than a year.

Besides, based on your project’s complexity, a project manager will define the kind of talents you need and the number of specialists to involve.

Custom project development process.

3. Database Migrations

If you’re not a startup developing a brand new solution, you probably have an existing database or at least certain information you want to keep. So when building your software, the development team should migrate this data or integrate the current storage into the new system.

It’s another vital aspect to consider in your custom project estimation. Moving databases from legacy software is a complex process requiring time and resource investments. What’s more, it may result in numerous pitfalls and potential challenges. According to a recent study, budget overrun (39%) and extended downtime (66%) are among the most common data migration risks.

Database migration process

4. Team Size and Location

One more crucial factor is your development team. Its size depends on the project’s specifics we’ve mentioned above. However, on most projects, your core team will likely consist of the following professionals:

  • Project manager
  • Software architect
  • Software engineers
  • UI/UX designers
  • QA specialists
  • Business analyst

As for the team’s location, onshore options are usually the most expensive. So we recommend considering offshore companies whose service is more cost-effective. At the same time, outsourcing specialists are often even more experienced than in-house ones.

Offshore software development process

5. UI/UX Design

The designing stage should also be in the spotlight when conducting cost estimation for software development. UI/UX designers will play a vital role in your project. They deliver creative and user-centered solutions. Besides, the designers ensure your product’s functionality, interface intuitiveness, and brand identity.

Also, consider the research phase that often occurs before the designing process. Complex projects require an in-depth investigation, user interviews, A/B testing, etc., which takes time and effort.

Designing process.

6. Technical Aspects

Your future project’s tech aspects also significantly impact the development cost.

Firstly, it’s crucial to define and list the features your project needs. Their number and complexity are among the most critical factors.

Secondly, consider the mobile app platform you choose. Of course, building an application on a single platform or opting for a hybrid approach is less costly than developing all possible native solutions from scratch.

Next, don’t forget about the tech stack dilemma. There are numerous technologies, so you need to ensure that the chosen one is suitable for your product’s features. Besides, the framework should be future-proof and have a sufficient developers’ community. Otherwise, you may face maintenance and support challenges that negatively affect your budget.

And finally, don’t underestimate third-party integrations. The project’s cost will vary depending on their number and implementation complexity. In addition, integrated apps, social networks, and other systems may require extra effort regarding your product’s security and performance.

Tech stack choice

Things Ignored When Estimating the Cost of Software Development

When performing cost estimation in software development, there are many things to keep in mind. However, custom solutions are unique, so not everything affects the project price and needs close attention.

That’s especially applicable to agile software development cost estimation, which involves the development team’s flexibility and allows you to shift requirements. Such an approach enables adapting to changed circumstances. So you can adjust the budget and schedule to the current situation.

Thus, you can postpone or ignore estimating some digital production aspects’ costs. These, for example, could be additional “good-to-have” features that are not on your main list. Also, you may not pay much attention to minor staffing issues. When hiring an offshore vendor, you give them full responsibility for additional project and workflow aspects.

What Are the Deviations in Software Development Cost Estimation?

Software development project estimation is crucial to making your budget feasible, building a clear roadmap, and defining the key milestones. So it’s essential to pay attention to details, be realistic, and keep consistent documentation. Otherwise, numerous challenges may confuse you and lead to improper budget planning.

Here are the most widespread project estimation issues.

  • 1. Lack of documentation. Well-documented functional and non-functional requirements are the basis of quality software estimation. Lack of information in Request for Proposal and other requirements documents may lead to confusion and cause bottlenecks in the workflow.

  • 2. Unflexible requirements. On the other hand, remember that project estimation involves rough calculations since the requirements often change. Many lack flexibility due to their focus on a predefined plan. However, it’s worth being ready to shift along the way, especially if the project is custom and complex.

  • 3. Poor scheduling. Many clients want to reduce the time to market and accelerate the development process. And this is not a mission impossible if planned well. However, your project estimation should be realistic and consider various workflow aspects that may slow the delivery pace.

  • 4. Fixed price. Some clients think it’s good to define the exact budget in advance. Such a model may suit small and non-complex projects that can follow an accurate plan. However, it’s better not to rule out the possibility of shifting or expanding the requirements for more extensive and more complicated processes. In that case, you will have to change the budget limits.

Software Development Cost Estimation Methods

There are numerous software development cost estimation approaches. Each has its pros and cons, depending on your project’s type and goals. These methods often use the ratio of time to approximate cost required to perform particular tasks.

The following software development estimation techniques are the most common for projects of different sizes and complexity.

Accurate software development process estimation

Algorithm Method

This estimation model considers all critical factors of the project’s cost. It takes workflow units and evaluates the time and resources needed for each. This method works well in strictly organized projects with predefined tasks and goals. However, it may not suit an agile workflow organization where unpredicted factors may occur and significantly affect the timeline.

Expert Opinion

This approach relies on the tech specialists’ experience. They can calculate your project’s cost by comparing it to similar projects they worked with. Such a method may be applicable when calculating custom projects’ prices where many unpredictable factors could play a crucial role. However, based on human judgments and opinions, this model may lack accuracy and validity.

Analogous Testing

The core of this software development cost estimation model is historical data collected from previous similar projects. It examines analogous projects’ costs and relies on specific conclusions instead of assumptions. This model is quite accurate and gives comprehensive information about potential risks, hidden fees, etc. However, it’s more time-consuming and requires in-depth quantitative research.

Three-level Estimation

This technique focuses on analyzing three critical components of the estimation process. These are optimistic, pessimistic, and probable costs. Such an approach allows for improving risk management and considering various possible scenarios. It examines potential delays, bottlenecks, and hidden fees that may occur. For that, the three-level method studies the possible connections between various project aspects and their impact on each other.

Algorithm MethodExpert OpinionAnalogous TestingThree-level Estimation
Method basisCritical factorsExperts’ experienceHistorical dataThe key estimation points
Core estimationsAnalysis of factors affecting the costConsidering the experts’ knowledge and insightsAnalysis of similar projects’ costsAnalysis of optimistic, pessimistic, and probable scenarios
BenefitsGood for well-organized and predefined workflowsGood for unique custom projectsProvides comprehensive, data-driven insightsMay help you prevent potential challenges
DrawbacksDoesn’t consider significant changes; Lacks flexibilityHigher human error risk; Lacks data-driven approachCould be complex and time-consumingRequires particularly meticulous approach

Our Team Can Estimate Your Custom Software Development Project

We at Acropolium always conduct software development cost estimation before the project starts. Our team applies two common scenarios depending on the task’s specifics.

We conduct the discovery phase if our client doesn’t provide specifications in advance. It requires the involvement of a business analyst and tech lead for comprehensive evaluation. In this case, the estimation process goes as follows:

  • Collecting the client’s requirements
  • Receiving the project-related documentation
  • Conducting an audit
  • Creating a specification and estimation based on deadlines, required talents, and budget

If the client provides proper project specifications, we follow a streamlined scenario. The team consisting of a BA and tech lead starts project estimation immediately.

It’s also worth mentioning that you can adjust the rough estimation throughout the project. We at Acropolium act according to proven business processes confirmed by ISO certification.

So if you need any help with defining your project’s cost, our experts can help you avoid estimation bottlenecks and perform accurate data-driven calculations.

Custom Software Development Cost Estimation Made Easy

So, what is a perfect custom project estimation, and is it even possible to conduct one?

Based on the above, every project is unique, and you cannot evaluate the cost according to an average sample. So you should consider your individual business goals, requirements, tech specifics, and other essential factors. Thus, it’s a good idea to conduct a comprehensive investigation phase that will provide you with many crucial insights.

However, even the most detailed research doesn’t guarantee error-free calculations. Many unpredictable factors may occur along the way, shift requirements, cause delays, and affect your project’s budget.

Keeping that in mind, let’s state that an optimal project cost estimation is:

  • Accurate and realistic
  • Research-based
  • Well-documented
  • Flexible
  • Based on the proper estimation methodology

If you need help with calculating the cost of custom software development, we at Acropolium can come in handy. For our experts, project estimation is not rocket science. It’s a routine process we regularly perform for our clients. Our professional project managers, business analysts, and tech leads will do their best to come up with accurate calculations based on comprehensive research.

Get in touch to obtain a detailed consultation on your project’s cost. Our company will provide all the necessary information and help you keep your budget safe.