A Comprehensive Guide on Software Development Cost and Time Estimation

Software development cost

TechsPlace | One of the biggest challenges faced in the process of software development is making accurate estimates. Estimation of the software development projects is extremely crucial as it gives an overview of whether or not the proposed plan matches the funds that are available in the required time frame.

Let us walk you through the two most vital estimations in the development process, i.e. time and cost estimation.


Top Software Development Estimation Approaches

Software owners often confuse estimation for a budget. The process of an estimation becoming a budget is always after the acquiescence of the project owner. It accounts for managing and developing a software project in an estimated time frame.

Before we dive into the time and cost estimations, here are a few software estimation methodologies to secure a budget and get the project started:


Estimation by analogy

With the help of the currently running software development requirements of a project and similar past projects, the cost of production is evaluated. The differences in custom software development factors such as complexity, scale, delivery date, inflation, exchange rates and location of the project are noted. The results of estimation by analogy can be fairly accurate.


Bottom-up estimates

The software development project is divided into various tasks and subtasks that can be managed with ease by a team of experienced software developers. Moreover, as the project is defined properly, it becomes easier to estimate from the bottom to the top to provide a final estimation.


Parametric estimating

Parametric estimation is similar to estimation by analogy. But, it involves pinpointing software development factors of development with a mathematical or statistical approach. The estimation is done by calculating the total units of a project and an empirical relationship between the factors involved using scalability.


Software Development Cost Estimation

In the process of software development, cost estimation gives an overview of the budget of work and hence it’s the key to successful software development. It does not matter how small or huge your development project looks, the cost estimation process is extremely crucial.


Types of Cost Estimation

When it comes to software development cost estimation, there are several categories of estimation as follows:

Ballpark estimate

An estimate representing a wide variety of software development costs that the project may fall into is known as a ballpark estimate. It is designed keeping the client in mind and helps them decide whether the software development project budget aligns with their spending plan.

Budget estimate

A comprehensive budget breakdown for a software project is known as a budget estimate. It generally includes a well-established budget plan.

Definite SoW estimate

A detailed document including all software project elements and their cost along with a contingency plan is known as a definite Statement of Work (SoW) estimate.


Useful Cost Estimation Tools for Software Development

Software development cost estimation tools can be a great help for the overall custom software project estimation. There is a wide variety of tools available in the market that aids in the estimation process.

Here are a few useful and subtle cost estimation tools for the software development process:

  • Google folder with all essential materials
  • Ballpark estimate template files
  • Dedicated Slack channel
  • Scrum poker applications


Software Development Time Estimation

Like software development cost estimation, time estimation simply gives an idea of the time required to successfully complete various phases of the software development life cycle.

Every software entrepreneur wishes to understand the time frame and financial implication for the completion of an intended process of software development life cycle.


Steps to Estimate Software Development Time Correctly

If a software development project exceeds its predefined time estimation, it results in not only an enlarged budget but also a loss in revenues. It also leads to missed market opportunities that are very important for a software development vendor.

Hence, to avoid such obstacles, remote developers need to have a well-structured approach to estimating the time to develop software projects correctly.


Define the software project’s complexity

Understanding and defining the complexity of your software project plays a vital role in determining the level of risks that may or may not influence the time of the project. Generally, the complexity of a project is divided into three primary types:


Complex: Complex projects involve innovative technologies and come along with questionable timelines and high risks.

Knowable: Knowable projects are predictable with smaller risks that are probable during the integration part.

Known: Known projects come along with the most accurate estimates as they have the lowest risks and are predictable in terms of requirements.


Impart ballpark estimates

To get into a detailed estimation of the time to develop software development, you must get a general prediction of the duration of your project to form clear expectations. Once you have figured out the project complexity, you can simply add ballpark estimates with the help of similar project benchmarks or past experiences.


Estimate scope of work

The detailed estimation of the software development time aids in developing the scope of work that describes and evaluates all the software requirements. By acknowledging the software development methodologies of your software development project, you can easily curate the work scope respectively.


Integrate risk buffer

You must add a risk buffer in the development process of approximately 10-20% of the overall project time aligning with the complexity of the project. The risk buffers include issues that are hard to foresee such as software failures and integration issues. It even includes differences of opinions that may lead to a conflict between two senior managers or remote developers with unique experiences.


Make room for time eaters

Last but not the least; you must not forget to make room for at least 20% of the software development project’s time eaters. This includes productivity drops, meetings between teams, gaps in communication and much more. Estimating a project’s duration can be done through one simple formula as follows:

E*risk buffer + Overall task time estimation (E) + E*time eaters= Project’s duration


Tips to Avoid Overshooting Cost and Time Estimates

Overshooting or undershooting happens all the time in software development. It either descends your profits or costs you a client. Here are a few tips to avoid overshooting time and cost estimation.

  • Try to make the most of the discovery phase
  • Choose the right people
  • Utilize historical data from past projects
  • Break down phases into smaller chunks
  • Score each phase with a complexity point
  • Try decreasing the inaccuracy risk level
  • Diminish bottlenecks



Both time and cost estimation is required to control the expenditure during the execution of your software development dream project.

The most important thing in software development estimation is to rely on the knowledge and experience of one of the best software development companies you can hire, as they are the ultimate key to a successful and accurate time and cost estimation for your software development requirements.