Constant evolution and turning adversities into opportunities is the fundament on which the new-age businesses survive and thrive. Be it including the right kind of technology or understanding the ever-changing likes and demands of the targeted audience, businesses have to dig deep to get their desired success.
To make your app or website reach targeted audiences, you need to have an astute project plan with reliable cost estimation. Especially for startups, getting credible cost estimation is essential as it helps them set the project’s tone in the right direction. The project cost estimation depends on whether you choose to outsource the project to another country or in your own country.
Accurate cost estimation would help business persons make a better decision about the product and maintain their budget.
What is project cost estimation?
Before the project is kick-started, it is vital to conduct accurate project cost estimation. Project cost estimation is concerned with predicting the overall cost of a project by outlining the project’s scope of work.
While estimating the cost of the project, the business owners need to look at various tasks that need to be completed, the resources required for the project, and the project’s total duration. Accurate project cost estimation helps the project owners manage the costs right throughout the duration of the project.
Getting the cost estimate right can prove to be the difference between success and failure for a project.
Factors affecting the project cost estimation
A lot of factors affect the cost estimation process. We have listed below some of the most important ones.
Scope of the project
The scope of the project is concerned with all aspects of a project like features, limitations, database, resources, timelines, deliverables, and other constraints.
While analyzing the scope of the project, the project owners segregate the features of the product into must-haves and nice-to-haves. This segregation will help the business owners identify the features they cannot remove whenever the budget has any change.
Sometimes the scope of the project changes during development. While some changes are small, like adjusting the fonts or colors, the others are big changes like adding an extra feature or an extra page. While it is normal to expect some changes, the nature of the changes affects the project’s initial estimate.
Sometimes the developers need to write a large piece of code to inculcate the required changes. This leads to a significant addition in developer hours which ultimately escalates the cost of the project.
Complexity of features
The features and functionalities that the project owners want to include in the application affect the calculation significantly. While some features are easy to implement using the existing tools and libraries, others may take days or even weeks to build. It would cost more to include advanced functions listed below –
- IoT integration
- AR or VR integration
- Big data analytics
- Audio or video streaming
- Machine learning
- Online chats
- Artificial intelligence
- Real-time data synchronization
- Custom design and animation
- Third-party services integration
- Complex backend
The complexity of features plays a massive role in increasing the costs of the product. To keep the costs under control, project owners can remove the functions that are not critical for the first version of the app.
The product with only the most vital features necessary to function is called an MVP (Minimum Viable Product). With an MVP, the product developers start with only the minimum set of features that form the core of the application and leave the extra functions for later updates. This way, the business owners would be able to get a more realistic cost estimate. Before that, the developers must be sure about the project’s long-term goals. The business owners must ask themselves questions such as
- How much scope does the MVP have for adding features in the future?
- Is the MVP enough to satisfy all the basic needs of the users?
One can take the help of professional IT product developers to get a better estimate for their MVP. An MVP is one of the best ways through which startups can reduce development costs.
The design costs form a significant portion of the total costs of the IT project. Outstanding design for an IT product has become more of a necessity now. Things like beautiful transitions of UI components into animations will make the design of a product more appealing. At the same time, with the increasing complexity of design, the costs will also soar.
The business owner should ask the following questions to get a better estimate of the cost of design.
- How many pages or screens will the project need to design?
- How many design iterations are expected?
- Is design branding required?
The design has the power to make or break the user experience, and hence it matters as much as the functionalities and features of the IT project. This is the reason many companies prefer to build a customized design experience. However, the customized design experience comes at a cost.
The backend architecture is considered to be the backbone of any digital product. Without a robust backend structure, the front end won’t perform flawlessly. The backend architecture is responsible for everything that happens in the app, right from storing and managing data to implementing the business logic.
The more complex the app is, the more time it will require to build the back end; in addition, it eventually turns into more cost. Apart from complexity, the number of expected users will also influence the cost of setting up the backend architecture.
The more number of expected users will shoot the cost of setting up the backend architecture. The number of expected users and the app’s complexity will also determine the maintenance of the app. The developers must choose proper backend architecture to ensure that the maintenance of the IT product is easy.
Maintenance and updates
Many people think that once the IT product is released, the job is done. It is not true. . Any IT product would require regular maintenance and updates to ensure that it functions smoothly. Therefore, maintenance is another factor that influences the costs of an IT project. While estimating maintenance costs, the business owners must keep in mind that the project will incur maintenance costs as long as it is functional.
The maintenance of IT projects includes the following things.
Operating system updates
New versions of operating systems both for mobile as well as desktops are released regularly. The developers also need to upgrade the product when the operating system changes. This involves time and effort on the part of the developers, and hence while getting the estimate of the project, the project owners should include the cost of upgrading the project to the latest operating system.
Library, framework, and tool updates
Like operating systems, the frameworks, third-party services, and libraries using which the product was built also get updated regularly.
Fixing bugs is one of the most critical maintenance activities. Even large companies like Google and Facebook face bugs.. The QA specialists find and solve the bugs to improve the performance of the product.
A lot of third-party services like payment gateways, push notification services, and maps have paid services. This is because these apps have special features and functions they release or allow only to paid users. Regular charges are to be paid (though some apps charge for once and all) to keep the third-party services keep running.
Although it is impossible to estimate the number of minor code modifications and bug-fixing required in the project, the business owners can arrive at a pretty accurate estimate after careful calculations.
Experienced IT product development companies can help a business estimate maintenance costs. This is because these companies would have worked on many projects and would know a broad range of maintenance costs associated with certain kinds of projects.
Many developers, while giving estimates, assume that the project’s scope won’t change and the project would not require too much maintenance. To ensure that one gets an accurate estimate, the project owners must ask the developers to include estimated maintenance costs for the product.
Steps to prepare a good project description to get the most accurate cost estimate
An accurate project description can help business owners to get a precise estimate. The entrepreneurs must take the following steps to prepare a good project description.
The project owners must write a summary of the project, which briefly explains the project’s aims, benefits, and expected outcomes. The summary should be short, and it should avoid unnecessary words and expressions.
In this step, the project owners must identify the business drivers that determine how the project will impact the organization’s performance. Justification of the project is crucial because it proves why the project is vital for the organization.
In this step, the project owners need to conduct a cost-benefit analysis of the project and assess the benefits that can be gained upon successful completion of the project.
The project managers must have a proper approach for the project that answers questions like how to phase the project? and what should be the lifecycle of the project? The approach of the project involves selecting, describing, and approving a method that is efficient for implementing the goals and objectives of the project in the current operational environment.
The process of scheduling is concerned with conducting a primary estimate of the time required to finish the project. Before starting any project, the project managers should develop a timeline that shows the total estimated amount of working hours required to complete the project. This timeline will help to develop the project schedule and get an estimate of the various activity durations.
Resource requirement specification
In this step, the project owners ask the handling managers to state the resource requirements for the project. The resources are the people, money, or equipment required to finish a project. A proper estimate of the resources required would help the business owners get an accurate estimate of the entire project. In addition, a RACI (responsible accountable, consulted, informed) chart can help the project owners deciding the roles to distribute among technical resources.
A RACI chart is a matrix of all a project’s tasks. It shows who is responsible for the work, who is accountable for it, who can be consulted, and who needs to be informed about the project.
Things required to receive the most accurate estimate possible
The project owners should consider the following factors to receive the most accurate estimates
Scope in detail and with accuracy
Before beginning the project, the project owners need to define the scope of the project and its core functionalities. To understand the scope of the project, one must get in touch with the top mobile app development firms and get an extensive idea of the procedures related to the project.
For example, if the idea is to build a sports fantasy app, the project owners need to add fun games and easy payment methods to keep the users hooked for a longer period. The app may need third-party apps, and thus their cost should also be included in the cost estimation.
Defining the scope of the project will help the project owners begin their project on the right note. The knowledge gained from this exercise can be utilized to develop a more competent MVP.
To receive the most precise estimates, business owners should focus on providing comprehensive documentation. By documenting their idea, the project owners can refine their scope and help the developers understand their vision. In addition, proper documentation will help the project owners get an accurate estimate and ensure that the development team can finish the project smoothly.
Establish technical ground rules
To develop a unique product, the project owners need to be sure about the technologies used. Therefore, setting the basic technological rules will not only make the cost estimation process fast, but it will also allow the businesses to be at par Knowledge of technology will help keep the project owners in sync with their IT service providers throughout the development process.
Collection of data
The project owners should develop their cost estimation for projects based on the acquired historical data. This way, they will be sure about the mood of the market and foresight the trends that are going to shift the paradigm in the future. The data obtained will further guide and help them develop similar kinds of projects in the future. Project cost estimation based on the collected facts and data will provide highly accurate forecasts.
Project’s Features list
The developers can’t provide the project owners with an estimate if they do not understand the project’s features. Therefore, while preparing the feature list, the project owners should conduct thorough research to include all the features that would help the project achieve its desired targets.
Once the feature list is ready, the business owners should prioritize the features based on their importance.
The MOSCOW method can prove to be an excellent method to prioritize the features based on their significance in the project.
Mo: These are the list of the must-have features that will form the core of the project
S: This list will have the ‘should have’ features which, if included, will make the project a cut above the competition
Co: These are the ‘could have’ list of elements. These are nice add-ons for the product, but the product will not lose its shine even if they are omitted.
W: The ‘won’t have’ elements will feature in this list. This is by far the most crucial feature of the MOSCOW method as it refrains the project participants from distracting from the project’s core objective.
The MOSCOW method helps the business owners track the project better and prevent unnecessary expenses.
The development team needs to be aware of the deadline by which the project must be delivered. If the business owners need to build a project with many complex features, it will take more time to build the project. More time means more development hours, which ultimately turns into higher costs.
Review and validate the estimates
There is no harm in reviewing the cost estimation for projects before going ahead with the project development. This process also involves checking the underlying data for better accuracy based on established costing notions. Moreover, the organization should refer to the cost indices when the up-to-date data related to their particular project is unavailable.
In addition to this, one should validate the logics and operations that went into while defining the project cost estimation as it will be vital for future reference. If there is a mistake in the logic or the flow of the operation, the estimation itself becomes untrustworthy. It thus would need to go through a significant revamp. Moreover, better documentation will help in validating the cost estimations in a synchronized manner.
Pitfalls to look out for in project cost estimation
We have mentioned below some of the common pitfalls that may result in an inaccurate estimation of an IT project.
Difficult to estimate features
In any project, there will be features that would be difficult to estimate. Deep research is required to estimate the value of these features. A good idea would be to keep a higher buffer limit for such features both in terms of cost and time. For instance, if the project requires the developers to include tricky third-party services that are not well documented, a significant amount of time is lost in integrating such a service in the project.
Many times the project owners forget to include certain must-have features into the specification list. For example, features like the contact us button, the ‘Buy’ button, and the FAQ section. However obvious it may seem, if the business owners do not add these features into the specification sheet, the developers won’t consider them in the final estimation sheet. This is why the project owners need to do proper app documentation to ensure that they do not miss any important features.
The lack of experience in developing IT projects can result in missed deadlines and grave errors. To ensure that the project is completed smoothly, as planned, and within budget, the business owners must hire expert developer teams with a proven track record of executing IT projects.
Improper requirement specification
Businesses have to understand that there is no place for guesswork when it comes to cost estimation. When the requirements are not described in the correct order, software agencies are left with no choice but to do a lot of guesswork. This can lead to incorrect cost estimates.
The development team would charge extra for those requirements that were not in the original scope of work as they would have to allocate resources to include these requirements. One should understand that precise requirements will lead to accurate cost estimates, and hence it is necessary to spend time researching the requirements of the project. If in doubt, the best way forward would be to drop a particular feature for now and include it in a later version.
Different types of pricing
The two most prominent methods used are cost through hourly rate or fixed price. Depending upon their requirements, the project owners can opt for either of the two methods.
For example, if the project has an estimated completion time of 1000 hours, the IT service providers can charge either, let’s say 20$/hr or $18000-20000 fixed for an entire project.
Therefore, the project owners would first understand how many alterations you would require in your project and decide the costing method accordingly. The project cost also depends a lot on whether the business chooses to outsource the project to developers based in another country or decide to give it to the developers based in their own country. Usually, outsourcing to developing nations like India is much cheaper than the first world countries such as the USA, the UK, and the like.
The cost estimation process is teamwork. The developers listen to the client’s vision and estimate the costs based on viable and essential features. While some aspects of a project are easy to estimate, others are more complicated
With so many factors involved in the development, the art of cost evaluation is complex and unique to every development company. While selecting the development team, the experience and skill set of the developers should be taken into account.
You can share your project requirements with TopDevelopers.co, and we will help you get the best project estimate for your project.