There are four main elements that affect the accuracy of software development cost estimation, and now we’ll take a look at each one of them.
- Software House experience
- Requirements specification
- Expected results
- Future project’s evolution
Software House experience
Experience matters, and there’s no difference when it comes to estimating software development costs. The more experienced project managers and the more similar projects has a company built before, the more accurate software development cost estimation they can prepare.
There are three types of features: classic ones and easy to estimate, features traditionally difficult to assess their time and highly custom and unpredictable.
Features that are not defined precisely enough are traditionally difficult to assess. The point is that a project manager needs to make a lot of assumptions about what the client wants to build. What they can do (especially when a client comes with nothing but an idea) is to set as a point of reference another app they have made before.
There’s always the dilemma of whether to provide the client with a reasonable but higher cost estimate or focus only on the initially mentioned features. Although we know that the first one will still be uncertain, the second will definitely be too low (but more competitive and comparable to other offers clients will gain from the market). We’ll get back to this dilemma later.
Classic and easy-to-estimate features are common ones. They are a part of most apps (like signup, login or simple admin panel) and can be estimated even with a loss of up to 10%. There’s also only a tiny probability of complications.
The final group are highly custom and unpredictable features like integrations, parsing or processing of different form of data that can always cause problems. For this reason, you’ll likely get a range of software development costs rather than one value. The exact amount you pay will be up to the number of issues the development team encounters on the way.
The case is that those are features that can be implemented quickly and easily because they are well-documented and smoothly working, or that might be just appearances. In fact, the documentation needs to be updated, or the solution needs to be more robust. In such cases, the time required to contact support or look for other solutions takes time and affects the estimation and final software development costs.
The more experience a software development company has in building such solutions, the less probability of misestimating the entire project costs. The fact is that many basic integrations can be classified as classically easy tasks. The problem appears when requirements are highly customised, even in the case of well-known systems and solutions.
How to handle that?
Unfortunately, you have no impact on the project manager’s and company’s experience. All you can do is provide them with the most detailed list of features that you want to be featured in your app as possible (see the next section).
Requirements specification
The software development cost estimation is as accurate as the input from the client: the more detailed the app description is, the more precise estimation you can expect.
That’s the theory. In reality, you might have nothing but an idea. That’s okay, but it makes the estimation harder to prepare.
Even if you have some requirements, they might need to be more detailed. In fact, 8 out of 10 people still need to build user stories, and less than 5% passed through the discovery phase first. That’s perfectly normal, but it leads us to another problem.
Let’s say you want to build an Uber-like app. What features should your app have? You would say a map, searching for drivers and payment. That’s the most apparent, crucial and noticeable features, but are those the only ones you need?
The main problem is that when it comes to defining how the app should work, people need to remember about additional, interconnected features. That’s also perfectly understandable, as they don’t have any experience in app development and don’t know (and don’t need to know) all the nuances of the process. That’s our job to explain it.
Let’s get back to an Uber-like app. Do you think that the features described above are enough to make the app work? How will drivers know that someone booked a ride? What happens when someone forgets their password or wants to delete the account?
Another aspect to consider is payment. What if a client changes their mind and wants to cancel the tour? How to handle cash backs, appellations, complaints and all the elements required by the law? From this perspective, one feature has grown into four and so has the software development cost.
Those elements are apparent, but no one thinks about them when planning the app. Settings, security or refunds are necessary but unnoticeable. It’s the role of an app development agency to explain how applications are developed and help clients go through the process.
In fact, basic functionalities that don’t bring us any value for users (and we don’t think about them) account for around 30% of a regular, middle-sized app. Building a technical architecture of the project, an admin panel and fundamental user flow (authentication and logging in) lasts about 2-4 weeks, and after that, we still need a feature attractive to users. We only have a must-have base.
How to handle that?
As I mentioned above, the more precise you gather the requirement, the more reliable cost estimation you receive.
It would be best if you had some conclusions from the discovery phase, including a detailed description of features, user stories, and visual representation of possible actions users can take in the app. If you don’t have those, you should not invest in designs, as they will change hand in hand with changing requirements.
If you don’t have that, you have two options: go through the discovery phase or define the requirements yourself. If you want to do that alone, think carefully about those aside features connected with the ones you need (it’s a challenge, I know that). It would be best if you also wrote down the app’s main actions users can perform.
I recommend running the discovery phase in two main cases: you have nothing but an idea, and you need an exact estimation. During the discovery phase, you, hand in hand with your product development agency, will define who your clients and users are, what they need and how to build the app to suit their needs. You’ll create buyer and user personas and user stories and prepare a development plan. The discovery phase will also reveal the assumptions about the results (see below).
The discovery phase is an investment that pays off almost immediately. First, you’ll get a deep insight into what you want to build and why and assess whether that idea may succeed on the market. The second benefit is that you save money on further stages as you already know what to do and don’t need to pay for changing an ongoing project.
The third and most beneficial when we’re talking about estimations is that you can test your potential contractor. You don’t have much to lose – if the cooperation doesn’t suit your needs, you can take the discovery phase outcome and search for another software development company.
Expected results
The third element that affects the estimation is expectations. It matters what result you want to achieve because when it comes to software development, almost every feature can be done in a simple or complex manner.
Simple solutions can be built quickly and won’t be perfect, but they are an ideal match for new projects and MVPs. More advanced ones require more time and, therefore, money, so they are appropriate when you have a higher budget or constant income from the previous version of the app.
How to handle that?
Share your needs with the potential contractor and trust in their experience. Share your budget. A reliable partner will always take care of what’s best for the project and can advise other, better solutions that are within the budget but will provide a better value.
Even if it comes to an Uber-like app, it makes a difference whether it will be an MVP or a complete product. MVP can be made with a lower level of complexity and without custom designs to reduce the cost and verify the idea behind the app. It doesn’t need to be perfect, but it should be fully working and functional.
Future project’s evolution
If you ask me, there’s one constant in software development – everything changes. Then how to estimate software development cost?
Every cost estimation is based on requirements, but no one knows what the final app will look like and how many changes will be made during the development process. From my experience, every single project evolves. The problem with estimations is that we don’t know whether the app we’re estimating will be the same one that will be launched. It’s likely that certain features will be added (and some deleted) from that equation (and cost estimate).
As a client, remember that the estimation always refers to the product we’re discussing now and will change as the app changes. Projects are constantly evolving, and that’s a good thing – it allows us to adjust to market demand and trends, adjust apps to users’ needs and preferences after feedback was collected and, overall, make a better product.
Although experienced companies can assess the costs of those changes and add a safety buffer to the estimation, that’s not something clients want to hear at the beginning of cooperation. Therefore, not every company includes that in the estimation, but that affects the overall cost.
How to handle that?
First, comparing different offers, check whether there is an additional amount for changes. That will help you avoid an unpleasant surprise in the future. I advise you to trust those companies that are transparent and sincere.
The second is the way you think about the project. Think about it now like a set list of requirements that you want to see working, but like a process of finding the best version of the app. You will test it with users and adjust, and test and adjust… Even when the app is launched, you will still be releasing other versions to improve it.
When the requirements change, so does the price. It’s natural. And it’s an evolution that makes Fixed-Price contracts unpredictable and unfavourable for clients. However, it might seem the opposite (you can learn why that happens in my article called 6 Fixed-Price Contract Risks and Challenges You Need to Know).
.png)
.svg){kind=icon}
