Estimation & Requirements in Software Development

For developers in pursuit of a unified overview of the time and cost required to complete a project, abiding by the do’s and don’t’s of estimation & requirements in software development can be a real lifesaver. After all, when working coherently, estimation & requirements can remove major hurdles that developers commonly face.

Estimation & Requirements in Software Development

At a Glance

Estimation leads to an accurate forecast of potential costs, while requirements provide a sense of how the final product would function. Since both of these ensure a high-impact end product, let’s take a detailed look at how estimation & requirements in software development can keep every project member well-aligned with the goals and budget.

Estimation – A Brief Intro

For starters, estimation is unique for every software project. It helps in accurately determining the expected lifecycle of software development. You could say that estimation understands the techniques and processes your team of developers is familiar with, and, then predicts the time deliverables are likely to start rolling out. 

Estimation becomes easy with a sound knowledge of complex tools and mathematics. It gains further accuracy when developers leave a margin of 5% to 10% error. 

For any software project, estimation functions like make-or-break. It creates a forecast involving an upfront investment of time and money. Moreover, product developers get to put together a product that coincides well with consumer needs. 

Estimation is hard to get right on the first try – the reason why most developers tend to ignore it. However, once opted for it can enhance team communication while encouraging agile methodology. 

What Makes Estimation a Software Development Quintessential?

If you’ve always confused estimation with the cost of software development then we’re here to take that confusion away. The two do bear a remarkable resemblance to one another, but, here’s what sets them apart.

Stakeholders require quite a bit of convincing before setting aside the budget that’s likely to go into software development. Usually, they expect project members to present a comprehensive plan that explains expense distribution, along with insights into time limits and utilized resources. This plan is basically the estimation. 

Upon meeting approval from stakeholders, the estimated budget turns into actual, allocated funds. The funds are then utilized throughout the project.

So, what did we learn so far?

Estimation gives you a field to play along. The key intention behind the estimation is securing investment and getting the project started. 

As a project member, you must ensure that your estimation checks all the boxes of transparency and impartiality. Therefore, while you’re working on creating an estimation, be mindful of including the following:


Mention all the details of the tasks spanning the entire project.


Mention all the team members onboard. Remember to highlight the expertise of each resource and the tasks they’ll be handling.


Mention the ratio of cost to time.


Talk about the production hours or days that your team is likely to spend.

Use of Third-Party Services

Mention if any third parties are involved. 

Software Estimation Techniques 

Software estimation techniques enable project members to plan out project estimates that match the needs of stakeholders. Once you abide by software estimation techniques, you’d be able to give your clients/stakeholders a realistic outline of the time and budget going into the project.  

Bottom-Up Estimation 

In this estimation technique, project managers break down the main project into several tasks and subtasks. The tasks requiring the lowest-level activities or work packages are aggregated up to upcoming levels. This process repeats until all the work packages have been reviewed and the final cost estimates have been revealed. 

Around 52% of IT projects suffer due to cost and budget overruns. Thus, if you want your project to stay far from budget-related pitfalls then bottom-up estimation is the way to go.

Top-Down Estimation

This estimation technique evaluates the project on a holistic level and then separates it into several smaller tasks. 

Top-Down Estimation may yield less accuracy relative to bottom-up estimation because project managers ‘assume’ the total budget based on the size of the project, rather than defining the essentials. 

Analogous Estimation

In this estimation technique, project managers compare and review the production cost of past projects with ongoing ones. The resulting differences can be several including the project scale, complexity, deadline, current exchange rates, inflation, and more. 

The results of this technique rely solely on how well your project managers have performed the analogy. If you’ve read our previous blog about technical debt management, then you should be able to recall that one size does not fit all. The same happens over here. We’ll quickly elaborate.

Let’s assume your project size is twice or half of the results of the analogy. In this case, feel free to dial down or scale up the estimations to ensure they match your project needs perfectly. 

Three-Point Estimation

This technique involves three data points: optimism, realism, and pessimism. 

Project managers establish three estimation ranges: the best-case estimation, the most likely estimation, and the worst-case estimation based on the aforementioned data points. 

The three-point estimation provides an accurate cost of software development along with the total time required to complete the project. This kind of estimation technique works best for large projects since managers get to consider multiple scenarios to reach better and more accurate estimations. 

Parametric Estimation 

This estimation technique may seem to resemble analogous estimation, but it’s far more accurate. Parametric estimation utilizes a mix of statistics and mathematics to calculate the resources, the time required, and the cost of software development. By aggregating historical data, parametric estimation yields immaculate accuracy. Plus, the more data there is, the more credible the results would be. 

The best thing about parametric estimation is that project managers can easily reuse the formula models as a template for future projects. Plus, there’s also room for adjustments depending on the specific needs of a project. 

Level of Effort & Effort Estimation – Some Additional Particulars

Just like figuring out the cost of software development is crucial to estimation. There’s another thing equally important known as the Level of Effort. 

The Level of Effort offers support activities to all the key tasks of a project. While these support activities don’t exactly yield any deliverables, they’re responsible for accelerating the tasks that do. Overall, the level of effort is basically the accumulative effort required to complete each task.  

To give you a clear idea, let’s quickly walk through some LoE examples. 

  • Transparently communicating the ongoing progress to the stakeholders
  • Thoroughly documenting the progress in the form of timely reports
  • Maintaining communication with customers

Elaborating Further

Project managers usually calculate LoE during the initial stages when task creation is underway. Calculating the LoE earlier in the project development phase, allows PMs to anticipate the amount of work each task would require. Moreover, team members get to share an equal and less-overwhelming workload while meeting the desired deadlines in a timely manner.

Since we’re talking about tasks and the level of effort that goes within. Project managers can make their jobs relatively easy by practicing Effort Estimation. 

Effort Estimation – The More You Know

This paper over here defines effort estimation as a prediction of the effort required to develop high-quality software. 

Effort estimation is the process of quantifying the level of effort for different tasks along with their deliverables. By calculating correct effort estimation, project managers can gain clarity in terms of how much time, cost, and energy each deliverable would require. On the other hand, inappropriate estimation calculations may lead to badly executed software, and trust us, no one ever wants to be there. 

Right alongside resource and cost estimation, effort estimation fulfills a core purpose as well. Together, these estimations lay the basis of an all-inclusive, and infallible software project plan. 

Looks like we’ve covered estimations as thoroughly as we could. Now, let’s move towards another software development essential, i.e., the requirements. 

Requirements in Software Development – A Quick Walkthrough

Your estimations were perfect, and your product has made its way into the market. Does your job end there? Not really. With new hardware and software advances, the chances for your software or website to go outdated will always lurk in the corner. This is where updates step in and save the day, and to make these updates happen, project managers usually introduce some new requirements. 

As per  IEEE standard 729, a requirement is

  • A condition or capability needed by a user to solve a problem or achieve an objective
  • A condition or capability that must be met or possessed by a system or system component to satisfy a contract, standard, specification, or other formally imposed documents
  • A documented representation of a condition or capability as in 1 and 2., 

In easier words, a requirement is a new feature in the software that either fulfills a need, want, or command.

Categorizing Software Requirements

Software requirements are divided into two types: functional requirements, and non-functional requirements. Let’s get right into the details.

Functional Requirements 

Functional requirements usually target a specific function that software must offer. A function usually comprises the inputs that go into the software system. The inputs can be data manipulation, business processes, user interaction, or any other function that eventually enhances the overall usability of the product. 

Functional requirements pack several benefits. They help you check whether your application is offering all the required functionalities; define the functionality of a system or a subsystem; identify missing requirements to define the expected system or behavior; fix errors without causing financial damage and lastly, support user-related goals, activities, and tasks. 

Non-functional Requirements

Such requirements involve system characteristics including scalability, reliability, maintainability, performance, and security. Non-functional requirements are just as crucial as functional requirements. They uphold the usability and efficiency of the entire software project. 

Failure in meeting non-functional requirements renders the product incapable of meeting user, market, and business needs altogether. Implementing non-functional requirements leaves very little room for error. There’s no way you can overdo or underdo this. 

In case of overdoing, project managers might have to incur a multiplied cost of software development. Whereas, underdoing leaves the product incompetent to meet its intentional purpose.   

Why are Requirements Indispensable for Effortless Software Development?

Requirements play a vital part in software development for several reasons. They assist in determining the following things for a product: vision, cost, scope, and schedule. Additionally, the same components also ensure that the finished product is coinciding well with the quality and performance standards. 

Another reason that earns requirements a point is their ability to bring all the stakeholders on a single page. From marketing to software engineering, stakeholders from various departments get to work along a uniform set of goals. 

Sticking with requirements to the T yields an error-free and efficient product. Stakeholders and project managers meet with no surprising loopholes in design and functionality while progressing through the development phase.    

Estimation & Requirements in Software Development – What’s the Connection?

Let’s rewind a little. We took you through the estimation. Told you how it assists in predicting the cost of software development, the resources, their efforts, and the time the whole project is likely to take. Then, we took you across requirements and how they keep your final product afloat among the competitors.

Now it’s time to discuss the unified impact that estimation & requirements have on the process of software development.

Once estimations are in, project managers use requirements to identify what business units would be functioning as the key stakeholders, and what business units would be keeping their hands on the project, from start to finish. 

Requirements allow project members to monitor actual expenses v/s the allocated budget. Moreover, project members can effortlessly track the progress and milestones completion. In case things begin to seem a bit ambiguous. Project managers can always refer to the original requirements and figure out their progress. 

There’s another highlight of the requirements, and we’d like to explain it with an example. Let’s assume, after creating estimation, dividing tasks, and handing over duties to everyone on the team. You decide to outsource some activities to a third-party solution provider. In such a situation, besides keeping a track of the progress, requirements also assist in reaching the ideal quote. 

Estimation & Requirements in Software Development

The Conclusion

Estimation & requirements in software development are quintessential for leading the product to success.

The duo protects against exceedingly optimistic assumptions, sets realistic project goals, and allows project managers to deliver an impactful product without running into delays & cost overruns.

Harris Solangi
Key Contributor:
Harris Solangi

VP Engineering
Disciplined with over 10 years of experience, Harris is highly regarded in the Technical Debt and Technology Asset domains.
Edited by Tissam Khan – Putting spellchecks behind bars, and producing tech-centered content from the Bat Cave read: home