A lack of experience in estimating is one of the biggest reasons why information technology cost estimates are inaccurate. People with little estimating experience tend to underestimate project costs because they don’t understand the scope of work that is needed to develop a software product.
Using the right tools and methods in estimating can help increase accuracy. One smart way to improve IT project estimation is to use a time tracking software, which gives you precise data about how long it takes your team to complete tasks. This enables you to create more accurate estimates for future projects.
Documentation is another important aspect of improving IT cost estimating. Ensure that your estimate documents include the details of how you acquired the data, calculations and methodology used to put together the information. This allows stakeholders to verify the accuracy of your information and replicate the process for future projects.
Uncertainties about project scope can significantly affect the accuracy of an initial estimate, especially when intangible factors like customer satisfaction or brand reputation are involved. Similarly, market fluctuations and economic factors can introduce uncertainty into the costs of materials and labor.
Performing a sensitivity analysis and a risk assessment can help identify these uncertainties, so you can revise your estimates to more accurately reflect operational reality. Furthermore, reviewing and discussing the results of previous projects – both successful and unsuccessful – helps your team learn from their mistakes and prevent them from occurring again in the future.