BY: Taqi Shah Page 2
What is Costs Estimation?
In a book '
How to be a Better Project Manager'
Trevor L Young
defines estimating as;
A decision about how much time and resource are required to carry out a piece of work to acceptable standardsof performance.
And Cost Estimate as;
The process of forecasting a future result in terms of cost, based upon information available at the time.
Projects normally have a budget, and continual cost estimation is necessary to ensure that spending is in line withthe budget. Accurate software cost estimates are critical to both developers and customers. It answers thequestions what are the costs associated with the effort required to produce each major deliverables, what are thecosts associated with hardware and software, what other non-labor costs need to be considered, and whatoperating costs need to be considered and identified.
Types of Cost Estimate
Cost estimates fall into two groups: conceptual estimates and detailed estimates. Each can be broadly defined asfollows:
Conceptual estimating or parametric estimating is the process of establishing a project’s cost, often before any
graphical representation of a facility has been developed.
The detailed construction estimate is the product of a process whereby the cost of a proposed construction projectis predicted. The estimate is prepared by breaking down the items of work in an orderly and logical basis,determining the cost of each item from experience, and summarizing the total.
Why Costs Estimation?
IT suffers from a universal law
: the first-time, first-use penalty
. The concept of the first-time, first-use penalty isthat it's next to impossible to accurately estimate the cost of something that has never been attempted. IT is sounique, so multifaceted, and has so many fronts that the constant movement of its variables creates a love-haterelationship for any organization trying to create an IT cost estimate.
Management asks, "Would you like more time?" We respond, "Thank you, no. I'll take some M-O-N-E-Y."
Customers offer, "Would you like to reduce the scope?" We answer, "Thank you, no. I'll take some M-O-N-E-Y."
Sponsors demand a speedier schedule. We respond, "Thank you, no. I'll take some M-O-N-E-Y."