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How ScienceSoft Estimates Software Development Costs

Incorrect cost estimation is one of the most frequent causes of project failures in software development. Learn how we calculate realistic estimates, optimize development costs, and prevent budget leaks.

How We Estimate Software Development Cost - ScienceSoft
How We Estimate Software Development Cost - ScienceSoft

ScienceSoft’s Three Pillars of Objective Cost Estimation

Clear and precise estimation of the required costs is critical for accurate project planning and uninterrupted development flow.

Having completed around 4,000 projects, ScienceSoft has experience in cost estimation for a wide variety of software and SDLC types and can provide accurate calculations for solutions of any complexity. Our approach to estimation rests on three key principles:

  • We never manipulate estimates to win a client.
  • We never hide the real scale of potential investments and risks.
  • We always make sure our customers understand what they are paying for.

Two Causes of Wrong Estimates — and How We Avoid Them

What can go wrong

How we make a difference

Problem #1: Estimation errors

Perhaps your vendor sticks to its standard cost sheets and doesn’t tailor estimates for each client. Or maybe they rushed through the interviews due to tight deadlines and missed a critical requirement for the project. Or they are just genuine optimists who believed they could work a miracle with minimal resources. In any case, you end up with the actual budget way over the baseline estimate.

We bind estimates to the project scope defined by each client’s unique needs. Our consultants conduct in-depth stakeholder interviews, study available software documentation, analyze the competition and relevant legal frameworks to elicit complete requirements for the solution. Our decades-long experience in custom development helps us objectively estimate resources to cover the agreed scope.

Problem #2: Deliberate deception

There is a dirty market practice of giving unrealistically low estimates to compete on price and win a client. During development, the vendor then gradually increases the project budget via change requests, often leaving a client no choice but to invest more to not lose the progress.

At ScienceSoft, we stay honest about the required investments and provide clear rationale behind the estimates to prove their viability. It helps our clients objectively assess their financial abilities and accurately plan expenses.

Presales Director, ScienceSoft

We are ready to provide a free ballpark estimate before the cooperation starts to help our potential clients quickly see if our cost ranges fit their budget and shortlist vendors faster.

Techniques We Use to Estimate the Development Project Cost

Top-down approach

Essence: We estimate the cost of the entire project based on the pooled experience of our experts (the consensus method), historical costs of similar projects we completed (the analogous method), and industry-average costs (the benchmark calibration method). After that, we split the entire budget between the major project activities to help the client understand time-framed investments.

Why we use it: Over the past 35 years, we’ve completed around 4,000 projects for 30+ industries. This means we’ve built all kinds of software of varying complexity, so there’s always a relevant reference project to feed the estimates.

When we use it:

  • To provide a ballpark estimate at the start of cooperation.
  • To estimate standard and fixed-scope projects.
  • To understand investments required for large-scale, long-term development projects (e.g., digital transformation, R&D projects).
See a fragment of our commercial proposal with ballpark estimates

Bottom-up approach

Essence: We prepare estimates for individual product scope units (e.g., user stories) or functional points (e.g., screens, logical files) and required resources and then compose granular estimates into a total budget. Our experts use historical costs to deliver similar scope units and functions as a reference point to produce estimates.

Why we use it: Tech experts responsible for a specific task take part in bottom-up calculations, helping accurately determine the resources for each planned unit. ScienceSoft’s tech leads, project managers, and QA experts with 7–20 years of experience combine their knowledge to ensure the highest estimation accuracy.

When we use it:

  • To give a highly accurate estimate based on the detailed work breakdown structure composed during the discovery stage.
  • To estimate the cost of each iteration in Agile development.
Explore a sample bottom-up estimate for agile development

How We Calculate Accurate Early Estimates

ScienceSoft’s Head of Enterprise Application Development

To calculate the exact staff hours for a precise estimate, we need to complete project discovery, but our clients often need to see the quote much earlier than that. That’s when we employ early estimation techniques that aren’t as precise but are accurate enough to inform decisions. For example, using the T-shirt sizing method, we create very approximate estimates and run a side-by-side comparison of each feature’s average cost against its business value. This way, we can promptly define and abandon low-value functionality and focus on calculating a more precise cost of feasible features. It makes estimation faster and more efficient. PERT (program evaluation and review technique) is another method we employ for early estimation: it focuses on estimates for the best, worst, and most likely project scenarios. We use PERT in highly uncertain projects with a limited budget to help our clients understand the expected investments for various cases and reconsider the scope early in case financial risks are too high.

Factors We Consider When Estimating Software Development Costs

Requirements for the software

  1. Solution type (web, mobile, desktop); the number of OS versions supported.
  2. The scope and complexity of software features.
  3. The number of user roles and role-specific UX and UI requirements.
  4. The number and complexity of integrations (with enterprise software, payment systems, messaging services, hardware, etc.).
  1. The need to migrate data from legacy software.
  2. Software performance, availability, scalability, and security requirements.
  3. Regulatory compliance requirements (e.g., HIPAA, GLBA, PCI DSS, CCPA, GDPR).
  4. Requirements for software quality (expressed in quality KPIs).

Approach to development

  1. Architectural decisions: building software from scratch, platform-based development, partial reuse of ready-made products.
  2. The solution’s tech stack: programming languages, development frameworks, advanced technologies (AI, IoT, blockchain, VR, etc.), cloud services.
  1. Deployment model: on-premises, cloud-native, cloud-only, hybrid (cloud + on-premises).

Cooperation mode and resources

  1. The chosen sourcing model (full outsourcing, dedicated teams, team augmentation).
  2. Team composition: skillset, seniority, and hourly rates of the assigned resources.
  1. Pricing model: fixed price, time & material, time & material with a cap.
  2. The customer’s priorities across the project constraints: e.g., minimized budget, faster time-to-market, simplified maintenance.

Operational expenses

  1. Fees for third-party services and components (e.g., cloud, authentication, messaging services), prebuilt components (functions, APIs), licensed software development tools, security tools.
  1. The need to perform security and compliance audits for software under development (necessary for regulated domains like healthcare, BFSI, or government sector).
  2. Frequency of software updates.

ScienceSoft’s Head of PMO

We always keep an eye on external risks and plan for the unexpected. When estimating, we count in pessimistic scenarios and estimate the contingency budget needed in case anything goes wrong. It helps our clients better plan their investments and ensure a steady project flow despite any arising obstacles.

Cost Is Only Fair When Optimized

In our projects, we proactively seek cost optimization opportunities across all development stages. Even before the project starts, we consider all possible development scenarios and provide estimates for each option so that our customers can choose the most budget-friendly approach.

Here are some of the practices we use to optimize the project cost:

Efficient iterative development

We rely on mature Lean and Agile cultures to establish seamless collaboration between the project stakeholders, speed up releases, and continuously optimize development processes.

Well thought-out functionality

We define an optimal feature set for the solution based on a client's specific needs to avoid investments in irrelevant and redundant functionality.

Modern architectures

We define and prioritize the most critical architecture attributes (scalability, availability, security, etc.) and employ flexible modular software architectures (SOA, microservices) that enable independent creation and modification of different solution components. It helps speed up development and reduce future operational expenses.

Low-code approach

Where possible, we opt for low-code development to streamline delivery and optimize project efforts. This approach helps make the software development process up to 4x cheaper and 10x faster.

Starting with an MVP

We are ready to develop an MVP of a solution to launch the most important functions first and enable faster payback from software implementation.

Ready-made components

We use ready-made building blocks for the software logic, proven open-source APIs, high-quality OOTB UI components, reusable deployment scripts, etc., to reduce the share of costly custom coding.

Cloud optimization

We employ cloud resources exactly matching performance and availability requirements for various software modules to reduce cloud fees.

Adequate talent seniority

We involve top-level experts for critical tasks like conceptualization, architecture design, and project management, and talents with lower rates — for less complex tasks.

ScienceSoft’s approach to optimizing software architecture, tech stack, and development team composition proved to help our clients achieve a 1.5x–12x reduction in the project cost. Learn more about the unique cost components of each development stage and ways to granularly reduce project expenses in our dedicated guide.

What Customers Say about Our Estimates

Star Star Star Star Star

Along with their high proficiency and experience in Magento, the team talked openly about the challenges and provided realistic time estimates.

We particularly appreciate ScienceSoft’s flexible, client-oriented approach to cooperation and pricing, which helped us get the required scope of quality services on time and on budget.

ScienceSoft’s expert advice helped us reveal cost optimization opportunities and define the functionality to increase the solution’s value for all target user groups.

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