Software Engineering TutorialsSoftware Cost Estimation, Objectives, Methods and Process: The Software cost estimation can be defined as the process to judge the approximate cost for a software project. It is one of the most important tools that have effects on the project’s planning and budgeting. When the cost estimation performed at the beginning of the project, it helps in the determination of the resource constraints needed to be included in the project. The project manager and the people involved directly in the estimate are responsible for the entire cost estimation process.

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Software Cost Estimation, Objectives, Methods and Process

In this post we have provided complete details about Software Cost Estimation, its objectives, various methods and Process.

Objectives of the Software Cost Estimation

  • The main objective of this process is to introduce the schedule and cost estimation.
  • It describes different techniques of the cost estimation.
  • The problems related to the productivity estimation can be discussed.
  • The utility of algorithmic cost modeling and its applicability is also discussed during the cost estimation process.

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Cost Estimation During the Software Life Cycle: The cost estimation process is performed throughout the life cycle of the software. At first, it is performed at the start of the project and there is a chance it may be done more than once at the beginning. The process of cost estimation during the entire life cycle allows the estimate refinement due to availability of the more data. There is also need for the periodic re-estimation because it is a way to gauge the project’s progress and whether or not the deadlines will be able to meet.

Methods of Software Cost Estimation

In the software industry, there are lots of software estimation methods nowadays. We have listed some of them:

Software Cost Estimation
Software Cost Estimation
  1. Algorithmic Model: In this technique, the mathematical equations are used to complete the software estimation, which are based on the historical theory. The inputs are the Source Line of Code, Function Points and other cost drivers.

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Advantages: Here are some advantages of this model:

  • It is easy to modify the input data in this technique.
  • Under this technique, the formulas can be refined and customized easily.
  • The Repeatable estimations can be generated in the Algorithmic model.
  1. Expert Judgement: The experience and knowledge of the estimator are captured in this technique who can make an estimate based on their experience from the past similar projects, they have participated. Some of the examples of this technique are Wideband Delphi, Delphi and Work Breakdown Structure.

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Advantages: Here are the advantages of the Expert Judgement technique:

  • This technique is very useful in the absence of the empirical and quantified data.
  • The estimators can create better cost estimations due to their past project experiences. They have the knowledge of all the impacts caused by the new applications, languages and technologies.
  1. Estimation by Analogy: This technique is based on the utilization of the actual data, which is extrapolated from a past completed project. The utilized data is then compared with the data of the proposed project in the same application domain to find the cost of estimation.


  • The only benefit of this technique is that it is based on the actual project data.
  1. Price to Win Estimation: In this type of technique, the cost estimate is that price, which is necessary to win the project.


  • This type of technique is often rewarded with the contract or project.

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Estimation Process

The process of software cost estimation involves four steps:

  1. Estimation of the size of the product development: This step includes many sub-tasks, which may have been during the analysis phase. If it isn’t done during that time, it should be performed as a part of the estimation process. In order to insure the success of the estimation process, it is important to perform this task. It involves following sub-tasks:
  • Creation of a complete work breakdown structure which should include the size and complexity of each software module.
  • The gray areas should be clearly indicated or eliminated.
  1. Estimation of the effort in person-hours: All the results involved in the different tasks involving the first step is an effort estimate in person hours. The tasks in the person-hours also depend on the other factors such as technical resources, experience of the team members and development tools & technology firm familiarity.
  2. Schedule estimation in the calendar months: The planners of the projects work with the technical leads very close. A project schedule is created by the project manager and other stakeholders. The cost can be effected by the tight schedules, while developing the software application.
  1. Project cost estimation in currency: By using the above information, the effort of the project is expressed in the native currency. This estimate is total cost required to complete the software project.

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