When planning for an Agile project, always keep the project specifications and requirements handy; to calculate the time & cost. When following agile, you will also need to keep allowances for any change requests and iterations.

There are two main types of iterations:

  • Adding new features
  • Incorporating changes as per stakeholder’s feedback

We have to keep the agile predictive in order to keep the budget flexible and not go way over budget.

Two factors that determine budgeting in Agile software development

When considering your budget, there are two crucial things to keep in mind:

  • The project scope should account for the necessary features, and should be segregated into critical features and good to have features. It’s essential to think through the features carefully and choose only the important ones.
  • There will always be new features, improvements and bug fixing. Keep allowances for any such adhoc changes while defining the project goals.

How to estimate an Agile software development project

One of the most popular model is Cost-of-Time / T&M estimation.

You may get an approximate time estimate from the development team or technical consultant on how long it will take to develop a specific scope or functionality. This then needs to be multiplied by the average cost of engineers. This calculation will give you a rough idea of how much is needed for the development process.

Now we need to include and account for all the non-development activities!

Method of discovery by building a MVP

Discovery using a MVP (Minimum Viable Project) is a process where a team discovers all technical requirements related to the project, and prototype the application to estimate the budget for the full scale application and deployment. In this method, not only do the stakeholders discover all the technical requirements, but they can also see how an app would look like and figure out more accurately how much the entire process is going to cost.

As an added bonus the prototype can also be handed off to potential users for their feedback!

On the basis of the MVP project, the team can make a step-by-step plan for how the project can be run to achieve on-time and on-budget delivery. Using this method the estimates are so precise that budget overruns rarely happen.

Other challenges:

There are also non-development activities that one needs to consider when dealing with software project budgets, such as:

Communication overhead: Communication is something no one thinks about when budgeting. Communicating takes up a significant amount of working time and includes planning, meetings, and unplanned communication (for example, when seeking clarification on a feature).

Application quality management: Certain actions are necessary for assuring quality and maintainability, like running testing procedures, fixing bugs, application maintenance etc.

Marketing: Marketing complements software development by helping bring your application to market and making it visible to potential clients. Marketing may include advertising, search engine optimization (SEO) and so on.

Hardware: Hardware costs, such as hosting or dedicated infrastructure; should be a part of the technical budget estimate.

Finalizing the estimate:

By the end of the the project estimate activity, you will have the following chalked out:

  • Requirements definition and analysis: These elements offer a review of key aspects, critical functionality, and core technical features.
  • Recommended technological stack: An outline of the programming languages and technologies that will best suit the requirements.
  • Functional and nonfunctional requirements: This captures the details of the potential product, including vision, scope, and a description of user functionality.
  • Project plan: A step-by-step plan for how the project should be executed by the development team.
  • Cost estimation: A detailed cost estimate that provide granular analysis and maps the costs against key project milestones.

Following practical and industry standard agile software development budget-setting mechanisms, one can avoid budget overruns and achieve successful project completion.

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