RCC Institute of Information Technology Department of

Computer Science & Engineering Academic session 2024 -

2025
TECHNICAL REPORT WRITING

NAME: Amitava Das

UNIVERSITY ROLL NUMBER: 11700122037
CLASS ROLL NUMBER: CSE2022084
SEMESTER: 5th
PAPER NAME: Software Engineering
PAPER CODE: ESC501

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A Technical Report on Software Cost Estimation Technique.

 Table of Contents

1. Abstract
2. Keywords
3. Introduction
3.1. Overview of Software Cost Estimation
3.2. Importance of Software Cost Estimation
4. Software Cost Estimation Techniques
4.1. Expert Judgment
4.2. Analogous Estimation
4.3. Parametric Estimation
4.4. COCOMO (Constructive Cost Model)
4.5. Function Point Analysis (FPA)
4.6. Use Case Points
4.7. Machine Learning-Based Estimation
5. Factors Affecting Software Cost Estimation
5.1. Project Complexity
5.2. Team Experience
5.3. Technology Stack
5.4. Project Size
5.5. Requirements Stability
6. Comparison of Estimation Techniques
7. Conclusion
8. References
 Title: Software Cost Estimation Technique.
Amitava Das

Dept. of Computer Science and Engineering,

RCC Institute of Information Technology,

Canal South Road, Beleghata, Kolkata 700015

West Bengal, India

[email protected]

Abstract
Predicting the time, effort, and resources needed for software development through software cost
estimation is essential for project management. This report examines different methods for estimating
software costs, such as expert judgment, analogous estimation, parametric models, COCOMO, function
point analysis, and machine learning-driven estimation. Every method is evaluated considering its
benefits, drawbacks, and suitability for various project categories. The text also mentions factors that
impact accuracy in estimation, including project complexity, team experience, and requirements
stability. The significance of choosing suitable estimation methods for effective project planning and
implementation is emphasized in the report.

Keywords
Software cost estimation, expert judgment, analogous estimation, parametric estimation, COCOMO,
FPA, use case points, machine learning, project complexity, team experience, technology stack, project
size, requirements stability.

Introduction
Software cost estimation is a fundamental process in software development that helps stakeholders
understand the resources, time, and budget required to successfully deliver a project. As software
systems become increasingly complex and integral to business operations, accurate cost estimation has
become more critical for ensuring project success. Software cost estimation provides an early assessment
of the effort involved in developing the project, which is crucial for setting realistic schedules, planning
resources, and controlling project costs.

This report explores the most common and effective software cost estimation techniques, providing a
detailed comparison of each method’s applicability. Additionally, it examines the key factors that
influence the accuracy of these estimates, such as project size, complexity, and team experience.
Understanding these factors and selecting the appropriate estimation method helps ensure effective
project planning and successful software delivery.

Overview of Software Cost Estimation

Software cost estimation is the process of predicting the resources, effort, time, and overall financial
investment needed to complete a software development project. It involves determining the size of the
software, the complexity of the tasks, and the necessary resources, which can include developers, testers,
hardware, software licenses, and other costs associated with the project.

Effective cost estimation is crucial for successful project management and helps ensure that software
projects are delivered on time and within budget. It plays a key role in decision-making, planning, risk
management, and stakeholder communication. The primary objective is to provide accurate forecasts to
help organizations allocate resources appropriately, avoid overspending, and set realistic timelines.

Cost estimation is typically carried out during the early stages of project planning, but it can be refined
as more information becomes available throughout the project lifecycle. The estimation process can vary
depending on the size, complexity, and type of the project, and it often involves both quantitative and
qualitative techniques.

Some of the common methods for estimating software costs include expert judgment, parametric models
like COCOMO (Constructive Cost Model), analogous estimation, and newer machine learning-based
approaches. Each technique has its strengths and is applicable in different contexts based on the
availability of historical data, project characteristics, and the level of detail required.

Importance of Software Cost Estimation

 Project Planning and Scheduling: Enables accurate task scheduling and resource allocation to
prevent delays.
 Budgeting: Ensures the project stays within financial limits, avoiding overruns or unnecessary
resource allocation.
 Resource Allocation: Helps in predicting and efficiently using necessary resources, including
personnel and tools.
 Risk Management: Identifies potential risks early, allowing for contingency plans.
 Decision-Making: Provides data for informed decisions on project feasibility, scope, and
alternatives.
 Stakeholder Communication: Sets clear expectations on budget and timelines, preventing
conflicts.
 Preventing Overruns: Avoids cost overruns and project failure by improving accuracy in time
and budget estimation.
 Defining Project Scope: Clarifies project deliverables and reduces the chance of scope creep.
  Monitoring and Control: Acts as a baseline for tracking progress and taking corrective action.
 Contract Negotiations: Helps in clear contracts, minimizing disputes over project costs and
scope.

Software Cost Estimation Techniques

Expert Judgment

Description: Involves consulting with experts who use their experience and knowledge to estimate
project costs.

Advantages:

 Relies on experienced personnel.

 Can provide quick estimates.
 Useful when historical data is unavailable.

Disadvantages:

 Subjective and prone to bias.

 May lack precision without supporting data.

Analogous Estimation

Description: Uses historical data from similar past projects to estimate the current project’s costs.

Advantages:

 Efficient for early-stage estimation.

 Provides cost references based on real data.

Disadvantages:

 Relies heavily on project similarity.

 May not account for unique project complexities.

Parametric Estimation

Description: Involves using statistical models based on historical project data to estimate the effort and
costs. Models include factors like lines of code (LOC), function points (FP), or story points.

Advantages:

 Quantitative and repeatable.

 Effective for projects with historical data and measurable metrics.

Disadvantages:

 Requires accurate historical data.

 May not be flexible for different software methodologies.
COCOMO (Constructive Cost Model)

Description: A model-based estimation technique that uses the size of the software, measured in LOC
or function points, along with other factors to estimate cost. It has three levels:

 Basic COCOMO: Provides a rough estimate.

 Intermediate COCOMO: Includes cost drivers that influence software development.
 Detailed COCOMO: Incorporates all phases of the development process.

Advantages:

 Widely recognized model with a solid mathematical basis.

 Adjustable for different project types and sizes.

Disadvantages:

 Requires detailed input, which may not be available early in the project.
 Can be complex to apply.

Function Point Analysis (FPA)

Description: Estimates software size by counting function points based on user requirements, such as
inputs, outputs, user interactions, and data files.

Advantages:

 Focuses on functionality and user requirements rather than LOC.

 Provides a better estimate for projects where LOC is difficult to measure (e.g., object-oriented
projects).
 Disadvantages:
 Subject to interpretation.
 Can be time-consuming to apply.

Use Case Points

Description: This method estimates the cost based on the number and complexity of use cases in a
system. It takes into account both technical complexity and environmental factors.

Advantages:

 Easy to apply for object-oriented systems.

 Provides a structured approach.

Disadvantages:

 Requires detailed use case documentation.

 May not be as effective for non-object-oriented systems.

Machine Learning-Based Estimation

 Description: Utilizes historical project data and machine learning algorithms to predict the cost based
on patterns and correlations in the data.

Advantages:

 Can be highly accurate with sufficient training data.

 Adapts well to new types of projects as more data becomes available.

Disadvantages:

 Requires large datasets for training.

 Implementation may be complex for small teams.

Factors Affecting Software Cost Estimation

The accuracy of software cost estimation is influenced by several factors:

Project Complexity: More complex systems require more effort and resources.

Team Experience: Teams with more expertise tend to complete projects faster, impacting cost.

Technology Stack: Different technologies have different development costs and resource requirements.

Project Size: Larger projects often require more resources and longer timelines.

Requirements Stability: Frequent changes in requirements can lead to higher costs.

Comparison of Estimation Techniques

Effort
Technique Accuracy Complexity Best for
Required
Low-
Expert Judgment Low Low Small, simple projects
Medium
Analogous
Medium Low-Medium Low Early-stage estimation
Estimation
Parametric Medium-
Medium Medium Data-driven projects
Estimation High
COCOMO High High High Large, complex projects
Function Point Functionality-driven
High Medium-High Medium
Analysis projects
Medium-
Use Case Points Medium Medium Object-oriented projects
High
Machine Learning-
High High High Data-rich environments
Based
Conclusion
Software cost estimation is a crucial aspect of software development, serving as the foundation for
effective project management, budgeting, and resource allocation. The accuracy of the estimation
process directly impacts a project's success, influencing its timelines, costs, and outcomes. As software
systems grow in complexity and scope, the ability to reliably estimate costs has become more important
than ever, enabling businesses to plan and execute projects efficiently.

This report has explored various software cost estimation techniques, each offering different strengths
and weaknesses. Expert-based techniques, such as Expert Judgment and Analogous Estimation, provide
quick and intuitive results but can be subject to bias and limited accuracy. Data-driven methods like
Parametric Estimation, COCOMO, and Function Point Analysis offer more structured and quantitative
approaches, making them more suitable for larger, more complex projects with historical data available.
Additionally, the emergence of Machine Learning-based Estimation introduces a cutting-edge approach
that leverages large datasets to enhance prediction accuracy, making it a promising option for
organizations looking to refine their cost estimation practices.

References
1. https://www.geeksforgeeks.org/cost-estimation-models-in-software-engineering/
2. https://7pace.com/blog/software-cost-estimation-techniques
3. https://www.javatpoint.com/software-cost-estimation
4. https://www.professionalqa.com/cost-estimation-techniques
5. https://www.creolestudios.com/software-cost-estimation-guide/
6. Boehm, B. W. (1981). Software Engineering Economics. Prentice-Hall.
7. Jorgensen, M., & Shepperd, M. (2007). A systematic review of software development cost
estimation studies. IEEE Transactions on Software Engineering, 33(1), 33-53.
8. Park, R. E. (1988). Software Size Measurement: A Framework for Counting Source Statements.
SEI Report, Carnegie Mellon University.