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Cost of Estimation Error                                                                                                                                                 The Software Industry’s Estimation Problem
                                                                                                                                                                         Some people refer to the “software estimation problem”
                                                                                                                                                                         as though it were neutral: some project teams overestimate
                                                                      Cost, Effort, Schedule                                                                             and some underestimate. Research shows, however,
                                                                                                                                                                         that project teams almost never overestimate.
What’s the Harm?                                                             Underestimation: Undermined Planning                                                        The average project team underestimates by a factor
                                                                                                                                                                         of two! Software does not have a neutral estimation
“I need the software in three months, so I’ll
                                                                             Assumptions and Shortchanged
                                                                                                                                                                         problem; it has an underestimation problem.
tell the development staff that I need it in
                                                                             Upstream Activities
two months. I don’t think they can actually                                  When a project is underestimated to any significant
deliver it in two months, but at least that will                             degree, project plans will be based on the assumption
ensure that I get it in three months.”                                       of a smaller-than-actual project. This leads to planning
                                                                             mistakes including understaffing the development
This rationale is intuitive and appealing. But it
                                                                             team and underscoping important upstream work.
is ultimately destructive to software project costs
                                                                             This underscoping leads to mistakes that increase
and schedules. Projects that could have been
                                                                             defect rates and ultimately increase project cost and
completed in three months end up taking four
                                                                             schedule. It also leaves little time to address the
or five months because of the problems
                                                                             unforeseen issues that inevitably arise.
caused by such reasoning.

Underestimation causes a project to be
underscoped and underplanned. That increases
the number of mistakes that occur upstream.
These mistakes must be corrected eventually—
at much greater cost than if they had been                                                                                               Accurate Estimates:
corrected earlier. These mistakes erode cost                                                                                                The Holy Grail
                                                                                                                                                                                   Overestimation: Parkinson’s Law
and schedule and virtually eliminate mid-range                                                                                          Estimation errors of 5-10% in
to long-range predictability.                                                                                                             either direction create only             Overestimated projects can run afoul of
                                                                                                                                        minor problems. But the goal               Parkinson’s Law—the idea that work expands
Skillful project planners strive for accurate
                                                                                                                                         is “As accurate as possible.”             to fill available time. If a developer is given five
estimates, and they especially strive to
                                                                                                                                          Accurate estimates support               days to do a task that could be completed in
avoid underestimating.
                                                                                                                                           the most effective project              four days, somehow that work will expand to
                                                                                                                                           plans, shortest schedules,              fill five days. Parkinson’s Law is a valid concern,
                             Construx’s estimation consulting and                                                                            lowest cost, and most                 but strong project management is a better
                             training offerings are based on the
                             best-selling book Software Estimation:                                                                          predictable delivery of               response to it than biasing estimates is.
                             Demystifying the Black Art, by                                                                                 business commitments.
                             Construx’s founder, Steve McConnell.




S O F T WA R E D E V E LO P M E N T B E S T P R AC T I C E S

www.construx.com • Phone: 425.636.0100
Training • Consulting • Software Engineering Resources                  Underestimation                                                   Estimation Accuracy                                                Overestimation

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My pitch

  • 1. Cost of Estimation Error The Software Industry’s Estimation Problem Some people refer to the “software estimation problem” as though it were neutral: some project teams overestimate Cost, Effort, Schedule and some underestimate. Research shows, however, that project teams almost never overestimate. What’s the Harm? Underestimation: Undermined Planning The average project team underestimates by a factor of two! Software does not have a neutral estimation “I need the software in three months, so I’ll Assumptions and Shortchanged problem; it has an underestimation problem. tell the development staff that I need it in Upstream Activities two months. I don’t think they can actually When a project is underestimated to any significant deliver it in two months, but at least that will degree, project plans will be based on the assumption ensure that I get it in three months.” of a smaller-than-actual project. This leads to planning mistakes including understaffing the development This rationale is intuitive and appealing. But it team and underscoping important upstream work. is ultimately destructive to software project costs This underscoping leads to mistakes that increase and schedules. Projects that could have been defect rates and ultimately increase project cost and completed in three months end up taking four schedule. It also leaves little time to address the or five months because of the problems unforeseen issues that inevitably arise. caused by such reasoning. Underestimation causes a project to be underscoped and underplanned. That increases the number of mistakes that occur upstream. These mistakes must be corrected eventually— at much greater cost than if they had been Accurate Estimates: corrected earlier. These mistakes erode cost The Holy Grail Overestimation: Parkinson’s Law and schedule and virtually eliminate mid-range Estimation errors of 5-10% in to long-range predictability. either direction create only Overestimated projects can run afoul of minor problems. But the goal Parkinson’s Law—the idea that work expands Skillful project planners strive for accurate is “As accurate as possible.” to fill available time. If a developer is given five estimates, and they especially strive to Accurate estimates support days to do a task that could be completed in avoid underestimating. the most effective project four days, somehow that work will expand to plans, shortest schedules, fill five days. Parkinson’s Law is a valid concern, Construx’s estimation consulting and lowest cost, and most but strong project management is a better training offerings are based on the best-selling book Software Estimation: predictable delivery of response to it than biasing estimates is. Demystifying the Black Art, by business commitments. Construx’s founder, Steve McConnell. S O F T WA R E D E V E LO P M E N T B E S T P R AC T I C E S www.construx.com • Phone: 425.636.0100 Training • Consulting • Software Engineering Resources Underestimation Estimation Accuracy Overestimation