Uncertainties in Cost Estimation

UNCERTAINTIES IN COST ESTIMATION

One can perform cost estimation at any point in the software life cycle. As the cost of the project depends on the nature and characteristics of the project, at any point, the accuracy of the estimate will depend on the amount of reliable information about the final product.

When the product is delivered, the cost can be accurately determined as all the data about the project and the resources spent can be accurately known by then. This is cost estimation with complete knowledge about the project. During the time of feasibility study, there is a great deal of uncertainty about the actual specification of the system.

Cost Estimation

COST ESTIMATION

Software development is a highly labour intensive activity. A large software project may involve hundreds of people and span many years. To complete the project successfully, the large workforce has to be properly organized so that the entire workforce is contributing effectively and efficiently the project.

Planning may be the most important management activity. Without a proper plan, no real monitoring or controlling of the project is possible.

For a given set of requirements it is desirable to know how much it will cost to develop the software to satisfy the given requirements, and how much time development will take. These estimates are needed before development is initiated. The primary reason for cost and schedule estimation is to enable the client or developer to perform a cost/benefit analysis and for project monitoring and control.

For a software development project, detailed and accurate cost and schedule estimates are essential prerequisites for managing the project. Cost and schedule estimates are also required to determine the staffing level for a project during different phase and are fundamental to any form of project management and are always required for a project.

Cost in a project is due to the requirements for software, hardware and human resources. Hardware resources are the computer time, terminal time, and memory required for the project whereas the software resources include the tools and compilers needed during development. Most cost estimation procedures focuses on the human resources needed. Most cost-estimates are determined in terms of person-months (PM).

The task of software cost estimation is to determine:

  • How many resources are needed to complete the project.

Usually, it is defined in person-month (PM)..

  • When to complete.
  • Cost of people.
  • Access the progress of the project.

Feasibility Analysis Process

FEASIBILITY ANALYSIS PROCESS

In any large-scale software development process the primary concern is information gathering, which is of two folds:

  • Interviewing process, where executives, managers, administrative staff and operational staff are interviewed.
  • Documentation process; where forms, reports, existing computer programs and databases are prepared based on interviewing process.

Steps in Feasibility Analysis

  1. Form a project team and appoint a project leader.
  2. Prepare a system flowchart.
  3. Enumerate potential proposed system.
  4. Define and identify characteristics of a proposed system.
  5. Determine and evaluate performance and cost effectiveness of each proposed system
  6. Weight system performance and cost data
  7. Select the best proposed system
  8. Prepare and report final project directive to management.

Feasibility Costs and Benefits

FEASIBILITY COSTS AND BENEFITS

The costs associated with feasibility analysis are:

Hardware: Remember backup

Software: for development, operation, documentation, training etc.

Operational costs: Maintenance

Client’s personnel: During development for operations.

  • Change over to new system
  • Software development. The benefits associated with feasibility analysis are:
  • New improved capabilities.
  • Efficiency of operations.
  • Accuracy
  • Timeliness of decisions
  • Cost savings.

The considerations for cost/benefit analysis are:

  • Do cost/benefit analysis on each case.
  • Make trade off explicit
  • Table of alternatives versus cost/benefits.

Operational Feasibility

OPERATIONAL FEASIBILITY

Operational feasibility is the measure of how well a proposed system solves the problems and takes advantages of the opportunities identified during the scope definition and problem analysis phases and how well it satisfies the system requirements identified in the requirements analysis phase.

Cultural (or political) feasibility

Cultural feasibility deals with how well the end users feel about the proposed system. It asks whether a system will work in a given organizational climate or not.

In an information. age, it is common to change the structure of how information is routed and controlled, changing to some extent the power structure of the organization.

The culture of an organization is multicultural. Employees and divisions may have been merged in from different companies with widely varying perspectives on how work should be structured and what information system should do and not do.

Technical Feasibility

Technical feasibility looks at what is practical and reasonable. Technical feasibility addresses three major issues:

  1. Is the proposed technology or solution practical?
  2. Do we currently possess the necessary technology?
  3. Do we possess the necessary technical expertise?

Is the proposed technology or solution practical? The technology for any defined solution is normally available. The question is whether that technology is mature enough to be easily applied to problems. Most of the firms prefer to use mature and proven technology. A mature technology has a larger customer base for obtaining advice concerning problems and improvements.

Do we currently possess the necessary technology? Technology availability is checked and if the technology is available it is checked if we have the capacity. If we cant afford the technology, then the alternative that requires the technology is not practical and is technically infeasible.

Do we possess the necessary technical expertise? This consideration of technical feasibility is often forgotten during feasibility analysis. Even if a company has the technology, that doesn’t mean it has the skills required to properly apply that technology.

Schedule Feasibility

Some projects are initiated with specific deadlines. It is necessary to determine whether the deadlines are mandatory or desirable. If the deadlines are desirable rather than mandatory, the analyst can propose alternative schedules.

It is preferable to deliver a properly functioning information system two months late than to deliver an error prone, useless information system on time. While missing deadlines can be problematic, developing inadequate systems can be disastrous.

Economic Feasibility

During the early phases of the project, economic feasibility analysis amounts to little more than judging whether the possible benefits of solving the problem are worthwhile. Costs are practically impossible to estimate at that stage because the end • user’s requirements and alternative technical solutions have not been identified. However, as soon as specific requirements and solutions have been identified, the analyst can weigh the costs and benefits of each alternative. This is called cost-benefits analysis.

Legal Feasibility

Information systems have a legal impact. There are copyright restrictions. For any system that includes purchased components, one has to make sure that the license agreements are not violated. License agreements and copy protection can also restrict how to integrate the data and processes with other parts of the system.

Union contracts can add constraints to the information system on how workers are paid and how their work is monitored. Legal requirements for financial reporting must be met.

Need of Feasibility Study

NEED OF FEASIBILITY STUDY

Feasibility study has to be measured against time and cost constraints that every project in every organization bound to have. Basically, a feasibility study is done to find out whether for the system that it is proposed, it will be :

➢ Possible

➢ Affordable

➢ Acceptable

Feasibility Study is carried out to select the best system that meets performance requirements. This entails identification, description and evaluation of candidate system and selection of the best system for the job.

Different Types of Feasibility

Feasibility study has to begin with the issues on hand, including the various organizational factors that may impact. the system. This is followed by looking at the proposed system from various angles to figure out whether it is worth pursuing the project further or not.

Below are the six categories of feasibility tests:

  • Operational feasibility is the measure of how well a solution meets the identified system requirements to solve the problems and take. advantage of the opportunities envisioned for the system.
  • Cultural (or political) feasibility is a measure of how people feel about a solution and how well it will be accepted in a given organizational climate.
  • Technical feasibility is a measure of the practicality of a specific technical solution and the availability of technical resources and expertise to implement and maintain it.
  • Schedule feasibility is a measure of how reasonable the project timetable is.
  • Economic feasibility is a measure of the cost effectiveness of a project or
  • Legal feasibility is a measure of how well a solution can be implemented within existing legal and contractual obligations.

Feasibility Study

FEASIBILITY STUDY What is Feasibility Study?

A feasibility study is a preliminary study undertaken to determine and document a project’s viability. The term feasibility study is also used to refer to the resulting document. The results of this study are used to make a decision whether or not to proceed with the project. If it indeed leads to a project being approved, it will — before the real work of the proposed project starts – be used to ascertain the likelihood of the project’s success. It is an analysis of possible alternative solutions to a problem and a recommendation on the best alternative. It, for example, can decide whether an order processing be carried out by a new system more efficiently than the previous one.

Importance of Project Feasibility Study

Feasibility Study is an effective way to safeguard against wastage of further investment or resources. If a project is seen to be feasible from the results of the study, the next logical step is to proceed with the full Business Plan. The research and information uncovered in the feasibility study will support the business planning stage and reduce the research time. Hence, the cost of the Business Plan will also be reduced. A thorough viability analysis provides an abundance of information that is also necessary for the Business Plan. For example, a good market analysis is necessary in order to determine the business concept’s feasibility. This information provides the basis for the market section of the Business Plan. Finally, a feasibility study should contain clear supporting evidence for its recommendations. Recommendations will be reliant on a mix of numerical data with qualitative, experience-based documentation. A Feasibility Study is heavily dependent on the market research and analysis. A feasibility study provides the stake holders with varying degrees of evidence that a Business Concept will in fact be viable.

Technical Feasibility Study

This involves questions such as whether the technology needed for the system exists, how difficult it will be to build, and whether the firm has enough experience using that technology. The assessmen’ is based on an outline design of system requirements in terms of Input, Processes, Output, Fields, Programs, and Procedures. This can be qualified in terms of volumes of data, trends, frequency of updating, and other areas in order to give an introduction to the technical system.

FEASIBILITY STUDY

Once a preliminary area of application has been identified, it may then be subjected to a more rigorous examination in the feasibility study. By the initial investigation, a user has recognized the need, user requirements are determined and the problems has been defined. Apart from this, an initial investigation is launched to study the present system and verify the problem in a systematic way. The next step is to determine exactly what the proposed system is to do by defining its expected performance. This activity is carried out in the feasibility study. A feasibility study is carried out to select the best system that meets performance requirements.

Before proceeding to commit on a large expenditure that is involved in the development of a new system, it is important for any organization to be sure that the proposed system is indeed going to deliver.the goods and solve the problems on hand, within the expected schedules and costs.

Feasibility is the measure of how beneficial or practical the development of information system will be to an organization.

When there is a felt need for a new system, we need to do some basic search to figure out what are the various possible options to try and build a new system and which would be the most suitable and cost effective solution for that organization. This process of evaluating the options and arriving at the best solution is called Feasibility Study.

Some preliminary investigation is done at this stage to find out whether this new system is actually feasible and viable to implement. System analyst prepares a feasibility report on the basis of which it is decided to whether to proceed with the project or to drop it.