Project Cost Estimating and How Scrum Projects Estimate Cost

If you want to provoke an emotional reaction from a group of software development managers, ask them about their experience doing project cost estimation – WOW. I doubt you will find any of them who look forward to the task. Some of the managers may even become downright hostile. Estimating the cost of a software development for a contract or a proposal can be a punishing experience. And, almost every manager will admit that their estimate — especially for a complex project or one with a long duration — will be wrong (but hopefully not by much).

Why? Because

  • Requirements change during development, which changes the level of effort and therefore the cost
  • The operational environment is not, and cannot be, completely understood before work begins (Unless you have the Johnny Carson “Carnack the magnificent” genie)
  • In order to create a “price to win” in competitive programs, senior management reduces estimated cost and then pushes the team to “work smarter” (HA – can I hear all the groans from project members!).
  • There is a gremlin called “Murphy” who loves to show up on projects and create all kinds of problems*.

The History of Software Project Cost Estimation
In the beginning there was intuition and wishful thinking that drove software cost estimation. A project manager, often not a practitioner or software developer, reviewed high-level requirements and created a cost estimate from that – “I think this should take a couple months.” That approach did not always work well (:-).

In an effort to be more scientific in cost estimating, professionals developed many techniques over the years for performing estimates – historical analogous estimating, parametric estimating, three point estimating (PERT), expert judgment, etc.  In fact, PMI has produced a book called “Practice Standard for Project Estimating”.

The software industry developed one costing method that assessed a cost per line of written code and then estimated how many lines of code would be required to build the software. The success of LOC estimation methods suffered from the reasons listed above as well as the obvious problem that not all lines of code are equal in difficulty. I once asked a senior software engineer, how many lines of code it would take to develop X functionality. He replied, “How many do you want it to take?” He was not being a smart aleck, he was only acknowledging the fact that there are many ways in software development to skin a cat and those options require different amounts of code.

LOC-based cost estimating was followed by function point cost estimation. A function point is an output, inquiry, input, an internal file, or an external interface. In simple terms, you develop a cost estimate by counting the number of function points in a proposed system, assigning a cost per point, and multiplying. More involved function point counting included values for difficulty and importance to the eventual system.
There were many other attempts to develop fast, cheap and simple software cost estimation methods. I could go on for a long time – However, I won’t bore you with the details.  Let’s just say there is no magic book or formula for this critical process!

Cost Estimating in Scrum
Over the last few weeks, I have been writing about using the Scrum framework for software development. Scrum practitioners do not avoid cost estimating challenges, but they have methods to assess project cost that are consistent with Scrum’s approach to project execution. They do not, however, have the magic bullet, either.

All Scrum projects begin with a story (read “high level requirements” for the PMI crowd). What does the product owner want to be able to do when the project is complete? From that vision come the initial requirements. Scrum cost estimating methods use the wisdom of the team to generate estimated effort — acknowledging from the beginning that final cost and duration will vary as uncertainty and changing requirements are reflected in actual development.

When the Scrum team meets for its initial planning, the vision is laid out by the product owner. The team then considers how to create the desired functionality, which are called story points. Each story point is rated for relative difficulty.
Cristopher McSpiritt describes the process this way in “What is Planning Poker?”

The Steps:

  1. The product owner describes a user story/feature the team is estimating. The product owner may provide clarification on the feature in response to questions.
  2. Each team member chooses a development effort card from a deck of values to represent their relative estimate of level of effort. Cards are placed upside down on the table so that they do not influence others.
  3. After all estimates are on the table, the cards are flipped over.
  4. If there is a significant range among estimates, the team members who submitted the high and low values provide a rationale for their estimate.
  5. Once the discussion on the range has been conducted, steps 2 through 4 are repeated until a consensus is reached.

This team process has the advantage of sharing the vision, building the team and gaining buy-in from the Scrum team members who have to actually do the work.

In his book, Agile Estimating and Planning, Michael Cohn reports success using a Fibonacci sequence, such as 1, 2, 3, 5, and 8 … for a relative story point difficulty value scale. The team then considers how many story points it can accomplish during a sprint – called velocity. An experienced team can generate a useful sprint / project estimate from this process. However, an estimate is just that. During actual development (the Sprint), task difficulty and team velocity are routinely reviewed and modified. As (predictable) requirements changes are requested by the product owner through the product backlog, variations in the order of the product backlog (Requirements or features) can be accommodated over the life of the entire project without affecting the current estimates and sprint.

One of the big advantages of this method is that we don’t have to estimate the entire project in excruciating detail or even know the complete set of features at the beginning of the project – this is more real world than the traditional waterfall type of project planning and estimating.
I would love to hear your opinions and thoughts about estimating for projects, both traditional and Scrum.

* Capt. Edward A. Murphy is accepted as the reason for Murphy’s law

Scrum Project’s Biggest Risk – Where did the Product Owner go?

Today I continue my series dealing with Scrum.  I mentioned in previous Scrum posts that I appreciated the opportunity to talk in depth with Don McGreal, VP of Training at Improving Enterprise about his lessons learned as a Scrum master. One comment of Don’s that caught my attention because its truth is reflected in my experience as a project manager and project consultant is that the biggest risk to project outcome is the involvement (or lack thereof) of the client or product owner.  (How many PMs have had the “disappearing sponsor/stakeholder” experience before?)

I have had customers who create a product vision and a set of top level requirements and then disappear from interaction with the team (and sight) until the semi-annual review. Don reported on a product owner who did not reappear for a year during development. Scrum success depends on an actively involved product owner. “If the Product Owner is ineffective then the Scrum team will be too,” states the introduction to an Improving Enterprise LLC product owner training class.

10 Tips for getting better customer/product owner involvement

  1. Explain the essential role of the product owner in having a successful development beginning with your first interaction. Use examples that the owner or client can relate to rather than focus on methodology or abstract requirements. All of us have stories of success and failure that can be tied directly to the interaction with the client. Use some of those examples to persuade. Your goal is to help the customer or product owner believe that their active involvement is not a punishment, but an opportunity to make sure the final product meets their needs. The product owner must set the requirements for each sprint. Cast the product owner as a hero.
  2. Train product owners who are new to their role. No one is born knowing how to be an effective product owner. Training and feedback help improve skills and the resulting development. Not to mention that you might actually create a rapport with the product owner that helps improve the overall communications.
  3. Put customer involvement in the contract. This is not a threat to hold over their heads, it is a demonstration of the importance of owner involvement in developing a product that is useful and meets needs.
  4. Get users involved in requirements generation and testing. Because Scrum development is broken down into many sprints, each with a deliverable, product owners or users have many opportunities to interact with the development team. Remember, under the Scrum framework, the product owner “drives or influences” the tasks for each sprint by creating and maintaining the product backlog (which is ordered).
  5. Do prototypes, demonstrations or iterative deliverables. Each Scrum sprint produces a working, bug-free piece of software (Or other demonstrable artifact). Having the users or product owner review and test at the end of each sprint allows developers to confirm that they are creating what is needed or make corrections before there is too much investment in a feature or process.
  6. Tie features to the product vision. Each sprint review should begin by reiterating the final product vision and show how that sprint’s work is part of the whole solution.
  7. Explain decisions and trade-offs. A product owner sets the task priorities for the next sprint. Developers must help the owner in selecting how much can be accomplished during a sprint by explaining technical requirements and challenges.
  8. Communicate. Keep the product owner informed. Make sure they are invited to the daily Scrum “15 minute” status meetings and are participants in the sprint planning and review sessions.
  9. Let the client drive. If product owners do demonstrations of the product developed-to-date during management reviews, for example, their sense of ownership increases as does their feeling of accountability.
  10. Give the product owner credit for their valuable contribution to the project’s success.
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