Ask Carol: What's the Point of Estimating?

QSM hosts a free advice column for software professionals who seek help to solve project management, communication and general software project issues. Carol Dekkers is a QSM consultant and IT measurement and project management expert who speaks internationally on topics related to software development. Send your questions to Ask Carol!

Dear Carol: 

I’ve been a member of many software development teams and I simply don’t understand the point of doing early project estimates before we know what are the requirements. It just causes problems once the project starts because the estimate becomes the budget and drives the schedule. Obviously, the estimates are wrong because they are based on flawed/incomplete data, so why would anyone even bother doing an estimate when the budget and schedule go awry as soon as the project starts? Estimates cause management and project managers to “stress out” trying to meet an artificial date and budget — we ought to abandon estimates and just get to work on the project! What am I missing here? 

- Looking for answers     

Dear Looking:

You’re not the first person to question the point of estimating before requirements are known; it can seem futile when it seems that they turn into budgets and schedules.  Even though there is uncertainty (and risk) with early estimates, there are reasons that companies do early estimates:

• The business wants to know if a project is even possible from a financial point of view. If the preliminary costs are prohibitive or have a lengthy ROI (i.e., too many years to pay off), management may reconsider whether to move past the idea stage.
• Management needs to plan budgets years in advance, and any estimate, even a ballpark estimate allows them to set aside funds.
• The business usually has a list of projects it wants to do and early estimates can help  prioritize which projects should be done first.
• Management wants to know whether there are enough resources on hand to do a given project (or whether additional staff will be needed).
• Projects proposals compete with each other on the basis of estimated cost (i.e., the choice may be to do two cheaper projects versus one large one); and corporate budgets typically allow for only a few of the projects proposed to go forward.
• Preliminary estimates illustrate those projects that should be broken up into phases or releases so that funding can be better managed.
• Ballpark estimates (e.g., bigger than a breadbox and smaller than a football field) are useful gauges when looking at the relative scope of projects.

Some companies solve the problems with early estimating by funding only the planning stage(s) of a project, then doing estimates after requirements are known. This allows for more accurate estimates on which budgets and schedules can be done. Looking, I hope that this helps you to see why early estimates are done and what value can be gained from them.