Return to Archive Runtime - The Software Outsourcing Newsletter for Executives and Investors from Accelerance and Steve Mezak In this issue: Don't believe an estimate just because it is close to your own gut feeling. Choose an estimation method that works for your software and your outsourcing vendor. How to Estimate the Cost of Your Outsourcing Have you ever been surprised when your software takes longer to develop than you expected? Who hasn't?! If only there was a way to accurately estimate how long it will take to develop your software, and therefore how much it will cost. Recently several Accelerance teams responded to a fixed price RFP from an American client. The RFP contained a reasonably good specification although there were some missing details about the interfaces with other systems. The average estimate was 2,900 man-hours to develop the software. The client made their own estimate of only take 600 man-hours to develop the software! They selected a vendor that had a similar estimate close to 600 hours. I have to wonder if they are making an accurate estimate. This is not sour grapes - we win some deals and we lose some, and I truly wish this client the best. However, these three Accelerance teams are very experienced at creating great software. How can they independently come up with completely similar estimates that are so much higher? Software estimates depend on many things and there are several ways to make them. Over the years several techniques have been created to estimate the effort needed to complete software projects. Function Point Analysis, devised at IBM in the 1970s, defines function points in five groups: outputs, inquiries, inputs, files, and interfaces. Each function point is defined as a business function, like the user entering an input. This makes it easy to map function points into user-oriented requirements, like use cases. But it can also hide internal functions, which also take time and resources to develop. In 1981 another method, the Constructive Cost Model or COCOMO was created by Barry Boehm. It was updated in 1997 and renamed COCOMO II. The number of lines of code expected to be in your software is used in a formula to estimate the effort required to complete the development. I don't know about you, but I find it difficult to make the leap from a software idea or a page in a user interface to some number of lines of code needed to implement it. The COCOMO formula also uses five values to estimate the scale of your software and seventeen cost drivers. Estimating the scale and cost of your software is also an art. These methods are a bit formal and require research, skill and a little guess work. They are suited for large software projects where you have a good grasp of the requirements and effort required to begin with. For many software projects the requirements are less well known. Other less formal techniques are used to create rough estimates. For example, you can estimate the time needed to implement each of your user screens or pages. Screens may be complex or simple and you can make three different time estimates for each screen based on its type. You can also use the number of functions contained in your software or the number of database tables as other factors for making you estimate. Clearly experience developing similar software will enhance your accuracy. If you are using Agile methods, then you can use the "planning game" to calculate "story points" when you employ User Stories. See User Stories Applied : For Agile Software Development by Mike Cohn An advantage of the planning game is it helps you plan tasks, iterations and releases and gains in accuracy as your software is developed over time. Accelerance teams use both formal and informal methods to estimate the effort needed to create your software. One of the estimates for the project mentioned above was created with the Function Point Method. Estimating the time and effort required to develop your software is not a science, to say the least. If you are faced with a tight budget that will not accommodate delays and extra costs, then you need a fixed price bid, at least to get started. A fixed price bid needs to have a good specification of what you need. The downside of fixed price is the lack of flexibility. If you need to collaborate with an outsourced engineering team to design your software to begin with, then fixed price will not work. Your alternative is to select a great outsourcing team with an excellent track record of carrying out software projects for other clients and work with them to design your software and create an estimate you can both believe in. *** The Runtime Bottom Line: Using a fixed price project is a good way to limit your financial risk when you are getting started with a outsourcing vendor. However, it requires a good specification. You need to have some sense of the amount of effort it will take to create your software. Work with your outsourcing team to develop and improve the accuracy of your estimates, for either a fixed price or time and materials engagements.   Vision Resources Are you wondering how you will select an expert offshore team to develop your software? Use the Accelerance Vision Resources(sm) outsourced vendor selection service and cut the time of your vendor selection process by as much as 90%. Vision Resources leverages members of the Accelerance's 17 teams in 14 countries around the world. Click here to learn more about Vision Resources Accelerance, Inc. delivers impartial & expert strategies and services for risk-free outsourcing of your software development. Visit our web site at www.Accelerance.com Until next time, Steve Mezak Accelerance, Inc. Risk-Free Outsourcing www.Accelerance.com 213 Garcia Avenue Half Moon Bay, CA 94019 1-650-712-8990 Contact me by email (c) 2005 Accelerance, Inc. All rights reserved. You are free to use material from the "Runtime" eZine in whole or in part, as long as you include complete attribution, including live web site link. Please also notify me where the material will appear. The attribution should read: "By Steve Mezak, CEO of Accelerance, Inc. Please visit the Accelerance web site at http://www.Accelerance.com for more information and resources on outsourcing and creating great software products."