“Software Project Estimation is the compass guiding development- turning costs into an investment for success.”

Venturing into a software development project needs a clear roadmap.

Software project estimation gives you the vision to sail through the challenges and trials during the ongoing project development cycle. It includes time estimation, efforts, and resources required for developing a software project.

From setting realistic project needs to choosing the right tech stack and building a team of experts to finding external dependencies, we helped them overcome various challenges. With suitable budget planning, time management, resource allocation, and risk mitigation, we aligned their stakeholders’ expectations for a successful collaboration.

According to Statista, the revenue generation is expected to reach $858.08 billion in 2028, which constitutes of system infrastructure software, application development software, enterprise software, and productivity software.

Let’s explore what is software project estimation, its importance, key estimation processes, various types, and the practices.

What is software project estimation?

Software project estimation in software engineering is a crucial process that involves time and budget predictions of a project. In addition, it deep dives into the experience of the software development company and the techniques they use to define the perfect way to develop and finish the project.

For that, complex software estimation tools and mathematical knowledge help craft a suitable plan. Project estimation may be a cost for the company at the initial stage. However, this must be considered as a stepping stone for creating a final result that should be more realistic, credible, and customer-centric.

A well-planned software project estimation will help companies address several pain points through these actionable tasks:

  • Framing a detailed task sheet of what should be done and who will be responsible for every task
  • Building a solid task force that should be adequate to complete the project
  • Determining the estimated budget of the project cost centres, cost control areas, software cost estimation, and much more
  • Drawing the estimated deadline of the project

Why Software Project Estimation Is Important in Software Development Process?

key estimations of software project estimation

We need to consider the following six elements of a project to ensure the use of project estimation techniques will prove beneficial:

Cost of Software Project

Cost is one of the primary elements when estimating software project management. Lack of adequate funds may hamper the project continuity. In such a scenario, software project estimation techniques will enhance clients’ confidence, ensuring the efficient use of resources and materials to complete the work.

Estimating costs will give a clear picture of the fund usage at present and future.

Project Requirement Size or Scope

The second crucial project constraint is the scope of the project. You must analyze the total number of tasks needed to complete the project on time. By doing this, you can ensure the materials and expertise required for the project estimation and the amount of work involved.

A perfect understanding of the scope and schedule of the project will increase the chances of developing an accurate budget estimation.

Software Development Time

The following important constraint is to address the unavailability of sufficient time. Plan a project by estimating the overall project duration and timelines of each task.

This includes planning the people and resources required to make available at the exact time. Your client satisfaction ratio will also improve as you are ready with the actionable tasks to provide key deliverables on time.

No of Resource Requirement

Project resources such as people, tools, subcontractors, materials, software, and others help in project completion. Managing all these resources efficiently needs a lot of knowledge about the work dynamics as you cannot afford to keep any of these resources idle for a long time.

Common Risks in Software Projects

Taking project risks can either turn into a positive or a negative impact. When you estimate your risk-taking ability, you visualize the events that will occur during the ongoing project and the seriousness of taking the risk.

Analyze the potential issues that may come up and draw a risk management plan that will prevent hampering your project by taking unwanted risks.

Project Deliverables

Project estimation includes designing an ideal plan that meets quality standards and complies with environmental regulations. You may need additional money, time, and resources to adopt and implement your project as per the standards.

However, this will prove better than practising the lower standards. Ensuring the best product quality is available to the clients will call for a quality-level estimation plan.

When you implement all the above six elements in all your software project estimation techniques, you will observe an enhancing level of accuracy in the workflows.

Software Project Estimation Techniques

Different projects have different challenges. No solution available spot on can address the potential issues in a software development project. Developing software evolves programmers constantly and teaches them new technologies and innovations.

Let’s understand the most outstanding types of software development estimation techniques:

Top-Down Estimate

Your entire project development process breaks down into several tasks and phases and works according to the breakdown structure. We use the Top-Down Estimating technique for clients with a limited duration for the project completion. We estimate the overall timeline, dividing it into project activity tasks and giving deadlines to each.

Bottom-Up Estimate

In contrast to the top-down estimate, this technique focuses on individual tasks or smaller yet crucial aspects of the project. All the individual estimates are combined, creating an overall project estimate. The bottom-up is one of the type of estimates that provides more accurate results than the top-down estimate.

Even if the process is lengthier and more time-consuming, the project managers’ and business analysts’ efforts prove their worth during implementation.

Expert Judgment

The most popular project estimation technique is expert judgment. It is known for providing quick estimation results with simple methods. Many project experts and specialists design software project estimations based on their past experiences and intuition.

This works only if your team has worked on similar projects. Even top-down and bottom-up can provide expert judgment.

Parametric Model Estimating

The technique fetches crucial data from past project details and compares each project to draw differences between them. After pro-rating the previous project details, the current project is then estimated.

Comparative or Analogous Estimation

With comparative estimation and a top-down approach, we estimate the project duration based on past project data. If we find similar projects done in the past that took eight months to complete, we estimate the current project timeline with the same amount of time. We further find the lower-level work estimates, spreading each task and activity into eight months.

Three-Point Estimating

Three-point estimating generates bottom-up estimates by assigning three durations to a task instead of one. They are either optimistic, pessimistic, or most likely. We average out these three numbers to calculate the actual estimate.

We also use the PERT (Program Evaluation and Review Technique) method for three-point estimation. Generally, the weighted average method is used, and more weightage is given to “most likely”. This method reduces the chances of an inflated estimate.

PERT Distribution
Estimation = (p + 4m + o) / 6
P – pessimistic
O – optimistic
M – most likely

Software Project Estimation Based on Software Development Methodology

In general terms, software project estimation is a simple forecast of all the tasks and activities to be implemented within the timeline. However, McKinsey reveals that 66% of software development projects fail either because they deliver fewer features than expected or get skewed, beating the budget. Whereas, 33% of projects fail due to overscheduling.

Every project has different reasons to conduct project estimation. Let’s understand the process of software development that prevents late deliveries and going over budget:

Waterfall Method

Here, we run through the planning phase, followed by project initiation. In the traditional Waterfall method, we estimate the six critical aspects discussed in the above sections. We document the details during each stage and revise them as and when new information is received.

Agile Method

We practice the Agile methodology when given projects need a lot of iterations at different stages. We divide the project into iterations by using Agile frameworks. Firstly, we make estimates at the start of the project.

At this point, the project already has a backlog with raw features and requirements. Through Agile methodology, we update the backlog according to the sprint results by retrospecting each sprint estimated against the backlog.

Steps of Software Projection Estimation – A Quick Guide

steps involved in software project estimation
For each software project estimation case, there are several things that you should consider. There are new projects; team changes for an ongoing project, or new ideas for investment.

Hence, there are unending possibilities for defining the right way to estimate software projects. Our years of research and practice in designing some of the best project estimation software, we found the below steps that can help you visualize your future development plan:

Step 1 – Determine Project Type and Environment

We define the proper framework for executing the project. Either we choose the waterfall method or the Agile method for project sustainability. Several frameworks and methodologies are available for each type of project, like Scrum, Waterfall, Extreme Programming, and much more.

Step 2 – Know the Scope of Work

To know the exact size of your project, first of all, you must decide the set of activities to execute and the amount of time required to complete the project. Breakdowns and pitfalls are common. However, it would help if you designed a detailed scope of your project.

Here, we draw the probable scope and elements of the system that are realistic and actionable. We consider these factors to prevent the severity of the impact of future challenges and unpredictable situations.

For that, we encourage conversations for a better understanding of the project. We also understand about the existing products and compare it with our product.

Step 3 – Project Task Prioritization

Project constraints, workforce estimates, money, and time are common hindrances to achieving project goals. For focusing on the most critical tasks, we determine the value of each functional priority.

We make a precise estimate of the project priority from the very beginning. Prioritizing tasks and activities enables saving a lot of time and effort and reduces the chances of revisions.

Step 4 – Selecting the Estimation Technique

Software project estimation is a time-consuming and laborious process. Choosing the right technique for project estimation avoids client disappointment. Choose the most suitable estimation technique for your project from various software estimation techniques defined in the above sections.

Step 5 – Drawing Down Various Possibilities

Making a software project estimate is about predicting the uncertain future. Hence, we create estimations that get implemented and help prevent potential risks, enabling clients to get acquainted with the next possible incidents and tasks.

Step 6 – Revising Estimation

Working in a team while estimating a software project is always good, as combined input from the experts will help anticipate tasks quicker and more precisely.

You may spend more time brainstorming on the issues as a team, but it’s worthwhile. A software development consulting can generate more ideas, and the project manager can make informed decisions based on the suggestions.

Step 7 – Using Software Estimation Tools

For software project estimation, we use several handy tools that assist us in accomplishing complex project estimation tasks.

  • Use GitLab, Jira, and Agile task management services. You can track the person-hours spent on each task using tracking software.
  • Redmine is a cost estimation tool that can do complex calculations more simply. It allows you to define hourly rate task-wise and then sum up the total.
  • EcoSys is an excellent tool used to track the changes and is linked smartly with the person-hours to costs. It shows estimated data in a comprehensive table.
  • Microsoft Excel and Google Sheets can perform complex calculations and have a user-friendly interface.

Step 8 – Accommodating Client Requests

Our customers appreciate our work as we give them enough space to address their product concerns, needs, requests, and preferences.

We have provided the most transparent and diligent software development services worldwide for a decade. Similarly, we also have deep expertise in fulfilling all our clients’ expectations during the phase of software project estimation.

Take Your Development to New Heights with Our Software Development Team

Challenges Associated with Software Project Estimates Techniques, Methods, & Tools

Estimating software projects is an arduous task. You may face several common pitfalls and challenges for project teams. Managers, project owners, and stakeholders must be ready to mitigate risks and enhance the accuracy of estimations.

Some of the most common pitfalls are as follows:

  • Pressure of timeline
  • Inadequate requirements
  • Insufficient historical data
  • Optimistic Bias
  • Ignoring the risk assessment scenario
  • No stakeholder involvement
  • Lack of expertise and experience
  • Neglecting dependencies

How Excellent Webworld Can Help You with Software Project Estimation Planning?

A successful software project estimation calls for applying the right estimation technique. Companies that can determine the cost of software development are the true experts for developing robust software.

Every business entrepreneur has this burning question to address. In the last ten years, we have been helping our clients craft successful software project estimations. We found most project estimations were done by combining various estimation techniques.

Applying various software cost models with three different estimation techniques gives you a perfect software project estimation.

At Excellent Webworld, we provide reliable and scalable software project estimations that can define a broader scope of business for your software product. Our accurate solution estimations assist several startups and large enterprises in taking more significant software development initiatives.

We provide software development services with appropriate consultations that meet clients’ objectives at affordable costs with guaranteed project delivery.


Estimating a software project is difficult and time-consuming. Choosing the right estimation techniques can help you deliver projects on time and accurately. You can consider the following tips for software project estimation:

  • Breaking down work into smaller tasks.
  • Ask questions before assuming.
  • Suggest a better way to accommodate the request.
  • Choose to level up your degree of confidence.
  • Decide upon one sequence for estimating.
  • Set a deadline for each task completion.
  • Facilitates in setting realistic expectations about defining scope, timeline, and budget
  • The correct estimates help the team allocate resources and tasks efficiently.
  • Assists in managing risks by identifying potential challenges.
  • Prevents the risk of budget overruns, scope creep, and missing deadlines.
  • It avoids dissatisfaction among stakeholders.
  • Helps in achieving software development endeavor.

We recommend the below steps that can help companies evolve and develop innovative software development projects:

  • Determine Project Type and Environment
  • Know the Scope of Work
  • Project Task Prioritization
  • Selecting the estimation technique
  • Drawing down various possibilities
  • Revising estimation
  • Accommodating client requests

Defining the scope and budget involves collaboration among stakeholders, project managers, and clients. After the project scope is discussed by the client, project managers gather details, and subsequent phases for budget estimation, time determination, and resource allocation. Regular stakeholder-client communication is a key component to make it happen.

Mahil Jasani

Article By

Mahil Jasani

Mahil Jasani began his career as a developer and progressed to become the COO of Excellent Webworld. He uses his technical experience to tackle any challenge that arises in any department, be it development, management, operations, or finance.