I have given a guest lecture on estimating IT project for master students on the University of Twente.

1. Estimating IT projects
Frank Vogelezang
Manager Pricing Office
June 10th 2013

2. 2
Agenda
Estimating IT projects
 What is estimating
 How good is your estimate
 The only certainty is uncertainty
 Cost drivers for IT projects
 Reliable estimation

3. What is estimating
And why is estimating IT projects so difficult

4. IT has a bad track-record in project estimating
What is estimating
4
For a critical analysis of the Chaos reports see: www.cs.vu.nl/~x/chaos

5. IT has a bad track-record in project estimating
What is estimating
Any idea where this bad track-record comes from?
5

6. IT has a bad track-record in project estimating
What is estimating
Any idea where this bad track-record comes from?
 No clear project objective
 Start with an inadequate budget
 Too little time and/or resources
 No use of benchmarking
 No idea what an estimate is
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We can double
the estimate . . . . but then it will
ultimately be four
times as expensive!
on estimating

7. Definition of an estimate
What is estimation
How would you define an estimate?
An estimate is
 an analytical and unbiased prediction
 of how long it takes
 and what it will cost
The bias comes from the interplay with targets, commitments and plans
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8. Target, estimate, commitment and plan
What is estimation
 Target
 Desirable business objective
 When and what
 Estimate
 Analytical prediction
 With an uncertainty range
 How and what
 Commitment
 Promise to deliver
 Defined functionality and quality
 What and when
 Plan
 Bridging the gap between estimate and commitment and mitigating the risk involved
 When and how
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9. A typical estimate
What is estimation
9
Probability
Schedule / Cost
50/50 median result
First likely option

10. A good estimate
What is estimation
A good estimate is
 a prediction
 that provides a clear enough view
 of the project reality
 to allow the project leadership to make informed decisions
 about how to control the project
 to hit its targets.
Know where you come from, where you are and where you are going
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Software Estimation: Demystifying the black art: www.SteveMcConnell.com

11. Basis of Estimate
New standard practice by NESMA and AACEi
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RECOMMENDEDPRACTICE
Estimation
purpose
Engagement
Scope
Description
Estimating
methodology
(FP, expert,
etc.)
Estimate
Classification
(1,2,3,4,5)
Design Basis
(Components
lists, units, etc.)
Sizing Basis
Requirements
Functional
technical
Effort Basis
delivery
constraints,
service levels
Planning Basis
Working time
standby
Cost Basis
methods and
sources , units
Assumptions
internal,
external
Allowances
Not in the Basis
Exclusions
No costs
included for…
Exceptions
anomalies or
variances on
standard
Risks and
Opportunities
assumptions
Containments
cost elements
for mitigation
Contingencies
Uncertainty,
unforeseeable
elements
Management
Reserve
changes in
scope, effort
Reconciliation
Changes to
previous
estimation
Benchmarking
Comparisons to
similar
engagements
Level of detail
Stage, Deal
size/type, fixed
price/TM
Estimate
Quality
Assurance
Reviews
Attachments Attachments Attachments Attachments

12. How good is your estimate
A simple quiz with unexpected questions

13. A simple quiz
How good is your estimate
The rules
 You get 10 questions, about anything but IT
 Answer each question with an upper and a lower boundary
 The answer should be within these bounds with a 90% chance
The objective
 To finish the quiz with 90% correct answers
 So 9 answers to the questions are within the boundaries
13

14. A simple quiz
How good is your estimate
1. What is the surface temperature of the sun in ºC
2. What was the total throughput of the Port of Rotterdam in 2012 in metric tons
3. World-wide box office receipts of the Lord of the Rings trilogy in US$
4. What is the total area of the Asian continent in km2
5. What is the year of birth of Alexander the Great according to Christian calender
6. The number of book titles in the Library of the Congress since 1776 in millions
7. How heavy was the heaviest blue whale ever recorded in metric tons
8. How many Euro bills were in circulation at the end of 2009 in billions
9. What is the highest point in the kingdom of the Netherlands in m
10.What is the total length of the coastline of the Pacific Ocean in km
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15. Estimating psychology
How good is your estimate
How well did you do this quiz?
 The average score is around 3, in line with the CHAOS reports
 We are conditioned to believe that narrow ranges are more accurate
 We feel that wide ranges make us appear ignorant or incompetent
 In real projects estimates are often biased by knowledge about the targets
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16. Beating the estimating psychology
How good is your estimate
 If the objective is unclear, the answer cannot be precise
 IT suppliers want to do customers a favour by promising they can deliver,
although they have no idea whether it is realistic. Is that a favour?
 There are no bad suppliers, but enough substandard customers*
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* Joep Bröcker (KPN) : www.sogeti.nl/evenementen/2010/succesvol-aanbesteden-van-ict

17. The only certainty is uncertainty
Most IT projects deliver something else than initially intended

18. Managing the devil’s triangle
Balancing between cost, time and scope
Cost
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Time
Scope or Quality
Risk

19. Managing the devil’s triangle
Balancing between cost and time for a given size
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Paul Masson’s
Law
Parkinson’s
Law
Brooks’
Law
Minimal time
Optimal effort
Time
Effort/Cost
Realistic
Productivity

20. The devil is in change
Traditional fixed price, fixed date projects
Cost
20
Time
Scope or Quality
Risk
Risk
Risk
Risk

21. Let’s make room for change
The uncertainty in agile projects
Cost
21
Time
Scope or Quality
Risk
Doubt

22. Cost drivers for IT projects
Sizing and estimating

23. Estimating IT projects
Two essential routes
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Objective
Size
Effort
Cost

24. 24
Effort estimation
Estimating IT projects
 Sizing by analogy
Have we done something similar before?

25. 25
Effort estimation
Estimating IT projects
 Ask the experts to estimate using Delphi techniques
 Original Delphi:
Individual estimates | Distributed by a facilitator | Several rounds
 Wideband Delphi:
Group discussion | Individual estimates | Consensus on large variation
 Delphi – PERT:
Use Delphi to establish lower bound, higher bound and most likely value
Calculate the estimate by the formula (Lo + 4 * ML + Hi) / 6

26. 26
Effort estimation
Estimating IT projects
 Ask the experts to estimate using Delphi techniques
 Original Delphi:
Individual estimates | Distributed by a facilitator | Several rounds
 Wideband Delphi:
Group discussion | Individual estimates | Consensus on large variation
 Delphi – PERT:
Use Delphi to establish lower bound, higher bound and most likely value
Calculate the estimate by the formula (Lo + 4 * ML + Hi) / 6
 Planning Poker:
Estimate effort to produce a work item, related to a standard work item
Use cards with a Fibonacci (like) scale to reflect uncertainty for larger items

27. Estimating IT projects
The second route
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Objective
Size
Effort
Cost

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Size estimation
Estimating IT projects
 Sizing by proxy
Define repeatable elements
 Experience data per proxy element
 Technical elements: Lines of Code
Programs / Modules
Screens
Data files / Views
Interfaces
 Logical elements: User Stories / Use Cases
Processes in the Data Flow Diagram
Functional Size Measurement

29. 29
Size estimation
Lines of Code
What does the number of lines tell me about size?
13 LoC – 1 statement
Backfiring
Translation to Functional Size
Uncertainty range over 300%
20 LoC – 3 statements

30. 30
Size estimation
Functional Size Measurement – Function Point Analysis
 FPA stands for Function
Point
Analysis
 What the software should be able to do (functionality) Function
expressed in a number Point
based on an objectively described method Analysis
 Something intangible like functionality becomes a physical number that can
be used for calculations

31. 31
Size estimation
Functional Size Measurement – Function Point Analysis
External Input
External Output
External Inquiry
External input files
Internallogical files
Data oriented

32. Size estimation
Functional Size Measurement – Function Point Analysis
Counting function points
 Based on established criteria each element is
classified:
 Each classification has its own scores
Internal files 7 10 15
External interfaces 5 7 10
External input 3 4 6
External output 4 5 7
External inquiry 3 4 6
 A function point never travels alone
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Simple
Complex

33. 33
Size estimation
Functional Size Measurement – COSMIC
eXit
Write
Entry
Read
eXit
Read
Transaction oriented

34. Size estimation
Functional Size Measurement – COSMIC
Counting COSMIC function points
 Establish Functional Processes
 Determine the data movements
 # Entries
 # Writes
 # Reads
 # eXits
 Each data movement is scored
Entry 1 CFP
Write 1 CFP
Read 1 CFP
eXit 1 CFP
 A data movement can be identified alone
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35. Estimating IT projects
The second route
35
Size
Effort
Cost
Objective

36. 36
Translating size into effort
Project size as a cost driver
Size Early On time Late Failed
10 FP 11% 81% 6% 2%
100 FP 6% 75% 12% 7%
1.000 FP 1% 61% 18% 20%
10.000 FP <1% 28% 24% 48%
100.000 FP - 14% 21% 65%
Capers Jones : Applied Software Measurement

37. 37
Translating size into effort
Team size as a cost driver
MORE PEOPLE MAKE MORE NOISE

38. Translating size into effort
Team size as a cost driver
38
Paul Masson’s
Law
Parkinson’s
Law
Brooks’
Law
Minimal time
Optimal effort
Time
Effort/Cost
Realistic
Productivity

39. Translating size into effort
What can you do with Functional Size
39
 Translate functionality into a physical number that can be used to calculate:
 Required amount of hours / cost
 Schedule time
 Basis for a fixed price (per unit) that is still variable
 The calculation depends on the technology used (Java, eBS, . . .)
 But it is not a linear calculation!
Twice the size in function points is not twice as much hours / cost / time

40. Translating size into effort
How to manage all the relations
40

41. Reliable estimation
How good do we know what we must do

42. Reliable estimation
Case – Rebuild of Investment Fund Application
 Case (1 page)
 5 expert estimates (2 pages)
 Estimation approach (1 page)
1. Are the estimates complete?
2. Are the assumptions correct?
3. How relevant and reliable are the estimates?
4. Question the experts!
5. Are the estimates comparable? By accident or by design?
6. Can approaches be used to reinforce other estimates?
 Present the results of these steps
 Present the results of the final estimate
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frank.vogelezang@ordina.nl
WatKostIT.blogspot.nl
ThePriceofIT.blogspot.com
@FrankVogelezang
FrankVogelezang
www.linkedin.com/in/frankvogelezang