1. Software Cost Estimation
COMP 3663
D. L. Silver, Ph.D.

2. Software Cost Estimation
Predicting the resources required for a software development process

3. Topics covered Feasibility Analysis Productivity measures
Estimation techniques
Algorithmic cost modelling
Project duration

4. Feasibility Analysis
Feasibility – the measure of how beneficial or practical an information system will be to an organization.
Feasibility analysis – the process by which feasibility is measured.
No additional notes.

5. Three Tests For Feasibility
Technical feasibility – a measure of the practicality of a technical solution and the availability of technical resources and expertise.
Economic feasibility - a measure of the cost-effectiveness of a project or solution.
Operational feasibility – a measure of how well a solution will work or be accepted in an organization.
Teaching Notes
Emphasize that all candidates should be analyzed according to all of the above criteria.
Students should understand that rarely will any one candidate solution be the most feasible candidate according to all criteria.

6. Economic Feasibilty = Cost-Benefit Analysis
Costs:
Development costs are one time costs that will not recur after the project has been completed.
Operating costs are costs that tend to recur throughout the lifetime of the system. Such costs can be classified as:
Fixed costs — occur at regular intervals but at relatively fixed rates.
Variable costs — occur in proportion to some usage factor.
Benefits:
Tangible benefits are those that can be easily quantified.
Intangible benefits are those benefits believed to be difficult or impossible to quantify.
Teaching Notes
Our experience suggests that students will need examples of each. The chapter includes several examples. Try providing the students with a list of items and ask them to classify them as a cost or benefit and to distinguish between the type of cost or benefit.
While students tend to understand intangible benefits, they may have some difficulty in quantifying them. An exercise or two will help to reinforce the fact that intangible benefits can indeed be quantified.

7. Three Popular Techniques to Assess Economic Feasibility
Payback Analysis
Return On Investment
Net Present Value
The Time Value of Money is a concept that should be applied to each technique. The time value of money recognizes that a dollar today is worth more than a dollar one year from now.
Teaching Notes
While the textbook covers only the above popular techniques, it is important to stress that there may be others that organizations choose to use in assessing the economic feasibility of an investment.
Stress the importance of determining the investment decision-making process or techniques used by the organization. It should also be pointed out that sometimes the techniques vary according to the individuals involved.

8. Software cost components
Hardware and software costs
Travel and training costs
Personnel costs (the dominant factor in most projects)
salaries of people involved in the project
benefits and insurance costs
Must also take project overhead into account
costs of building, heating, lighting
costs of networking and communications
costs of shared facilities (e.g library, staff restaurant, etc.)

9. Costs for a Proposed System
No additional notes.

10. Fundamental estimation questions
How much effort is required to complete an activity?
How much calendar time is needed to complete an activity?
What is the total cost of an activity?
Project estimation and scheduling are interleaved management activities

11. Costing and pricing
Estimates are made to discover the cost, to the developer, of producing a software system
There is not a simple relationship between the development cost and the price charged to the customer
Broader organisational, economic, political and business considerations influence the price charged

12. Productivity measures
Size related measures based on some output from the software process. This may be lines of delivered source code, object code instructions, etc.
Function-related measures based on an estimate of the functionality of the delivered software. Function-points are the best known of this type of measure

13. Measurement problems Estimating the size of the measure
Estimating the total number of programmer months which have elapsed
Estimating contractor productivity (e.g. documentation team) and incorporating this estimate in overall estimate

14. Lines of code What is a line of code?
Productivity measures will vary from language to language – consider difference between lines of code in assembler versus Java
Relationship to functionality must be based on past efforts in the same language

15. Productivity estimates - LOC
System Category
LOC/person-month
Real-time embedded systems
40-160
Systems programs
Commercial applications

16. Productivity estimates – Function points
Based on a combination of program characteristics
external inputs and outputs
user interactions
external interfaces
files used by the system
A weight is associated with each of these
The function point count is computed by multiplying each raw count by the weight and summing all values

17. Function points
Function point count modified by complexity of the project
FPs can be used to estimate LOC depending on the average number of LOC per FP for a given language
LOC = AVC * number of function points
AVC is a language-dependent factor varying from for assemble language to 2-40 for a high-level languages
FPs are very subjective. They depend on the estimator.
Automatic function-point counting is impossible

18. Factors affecting productivity

19. Quality and productivity
All metrics based on volume/unit time are flawed because they do not take quality into account
Productivity may generally be increased at the cost of quality
It is not clear how productivity/quality metrics are related
If change is constant then an approach based on counting lines of code is not as meaningful

20. Estimation techniques
There is no simple way to make an accurate estimate of the effort required to develop a software system
Initial estimates are based on inadequate information in a user requirements definition
The software may run on unfamiliar computers or use new technology
The skills of people working on the project may be unknown
Project cost estimates may be self-fulfilling
The estimate defines the budget and the product is adjusted to meet the budget

21. Estimation techniques
Expert judgement
Estimation by analogy
Parkinson's Law
Pricing to win
Algorithmic cost modelling

22. Expert judgement
One or more experts in both software development and the application domain use their experience to predict software costs. Process iterates until some consensus is reached.
Advantages: Relatively cheap estimation method. Can be accurate if experts have direct experience of similar systems
Disadvantages: Very inaccurate if there are no experts!

23. Estimation by analogy
The cost of a project is computed by comparing the project to a similar project in the same application domain
Advantages: Accurate if project data available
Disadvantages: Impossible if no comparable project has been tackled. Needs systematically maintained cost database

24. Parkinson's Law
The project costs whatever resources are available (typically used within an organization)
Advantages: No overspend
Disadvantages: System is usually left unfinished

25. Pricing to win
The project costs whatever the customer has to spend on it
Advantages: You get the contract
Disadvantages: Costs do not accurately reflect the work required. Either:
The customer does not get the desired system, or
The customer overpays.

26. Pricing to win This approach may seem unethical and unbusiness-like
However, when detailed information is lacking it may be the only appropriate strategy
The most ethical approach:
The project cost is agreed on the basis of an outline proposal and the development is constrained by that cost
A detailed specification may be negotiated or an evolutionary approach used for system development

27. Top-down and bottom-up estimation
Any of these approaches may be used top-down or bottom-up
Top-down
Start at the system level and assess the overall system functionality and how this is delivered through sub-systems
Bottom-up
Start at the component level and estimate the effort required for each component. Add these efforts to reach a final estimate

28. Top-down estimation
Can be used without knowledge of the system architecture and the components that might be part of the system
Takes into account costs such as integration, configuration management and documentation
Can underestimate the cost of solving difficult low-level technical problems

29. Bottom-up estimation
Usable when the architecture of the system is known and components identified
Accurate method if the system has been designed in detail
May underestimate costs of system level activities such as integration and documentation

30. Estimation methods Each method has strengths and weaknesses
Estimation should be based on several methods
If these do not return approximately the same result and the differences cannot be reconciled, there is insufficient information available
Some action should be taken to find out more in order to make more accurate estimates

31. Experience-based estimates
Estimating is primarily experience-based
However, new methods and technologies may make estimating based on experience inaccurate
Object-oriented rather than function-oriented development
Client-server systems rather than mainframe systems
Many off-the-shelf components
Component-based software engineering
Use of new CASE tools and program generators

32. Algorithmic cost modelling
A formulaic approach based on historical cost information and which is generally based on the size of the software
Cost is estimated as a mathematical function of product, project and process attributes whose values are estimated by project managers

33. Algorithmic cost modelling
Effort in PM = A ´ SizeB ´ M
A is depends in on the type of software that is being developed (simple, moderate, embedded) [will vary ]
Size is an estimate of the code size or other functional assessmemt [thousands of lines of code, ie. 5,400 LOC 5.4]
B reflects the disproportionate effort for large projects over small projects [typically ]
M is a multiplier reflecting a combination of product, process and people attributes (e.g. desired reliability, reuse required, personnel capability and expereince, support facilities) [will vary up from 1.0]
PM = person months

34. Estimation accuracy
The size of a software system can only be known accurately when it is finished
Several factors influence the final size
Use of “off the shelf” components
Programming language
Distribution of system
As the development process progresses then the size estimate becomes more accurate

35. Estimate uncertainty Estimate uncertainty: As the project progresses
the probablilty of a difference in
actual to estimate decreases
Actual
person-
months
x = estimated person-months

36. COCOMO Constructive Cost Model
An empirical model based on project experience
Well-documented, ‘independent’ model which is not tied to a specific software vendor
Long history from initial version published in 1981 (COCOMO-81) through various instantiations to COCOMO 2
COCOMO 2 takes into account different approaches to software development, reuse, etc.
Can be used as a sanity check

37. COCOMO 81 Effort (PM) = A * SizeB * M
PM = person-months
KDSI = thousand of delivered software instructions

38. Basic COCOMO Formulae (Boehm)
Effort in Person-months = aKLOC b
Duration in Months = c Effort d
Where c = labour estimate, d = complexity of project type
These values are selected from a table such as the one below.
Software Project a b c d
Organic
Semidetached
Embedded
(See page 105 of text)
Due to Boehm [Bo]

39. Computing COCOMO Case Study Models
Adapted from Software Engineering: An Object-Oriented Perspective by Eric J. Braude (Wiley 2001), with permission.

40. Workshop Estimate Actual 80 60 , 1 error 52.5 44 , 1 error??
, 100% correct
, 1 error