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Software cost estimation is always challenging. We are humans, so it might not be easy to anticipate how much effort and time the project may need. Every project is unique and requires a different approach to estimating software development cost. However, we can provide some recommendations that can help you evaluate the project and estimate software development costing. Without further ado, let’s consider them.

Agile Contracts for Software Development Projects

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When defining the software development cost, it is important to correctly estimate the time and the team’s effort. Add more development hours or employees involved in a project, and you will get an increase in the costs. Naturally, it’s always avoided if possible. 

The Agile development system is oriented at providing a cost-effective solution by balancing the time and the team and considering them as the variables. It allows providing different price options depending on these variable components. What does sound better to you? The fixed-price or variable cost? Of course, we should be flexible and keep in mind that it might be senseless to keep up with a precise price and time if the product doesn’t address the client’s needs at the end. 

However, we should also consider that the fixed cost option usually gives more confidence to the stakeholder. There are several standard contract pricing and project estimation systems in Agile product development. Agile contracts imply the next things:

Fixed price work packages 

In this case, the entire project is typically broken down into small releases. Each of them contributes to the goal of the project. Every mini-release is a package of services priced accordingly. Once this work package is done, further releases are re-assessed, considering what we have already learned from earlier development stages. It enables you to provide much more effective work re-prioritization and helps the client decide on the new features to be developed in the next package.

Early termination

Early termination implies that the client can terminate the project earlier if there are enough services and results. There is no need to involve the team in further development, as there is no ROI to be achieved anymore. This kind of collaboration is only allowed and possible if there are long-term and trust-based relationships between the company and the client. The appealing advantage for the customer is that the project might be stopped, delivering enough outcomes to present a viable solution without spending extra-money.

Flexible changes

The change is the blood of the Agile development system that is flowing through its different processes and stages. Our team doesn’t expect that we know absolutely all needed to create a successful product from the very beginning of the project. We learn it gradually, as we dig deeper into the process. That’s why a range of changes and complements are required during development. 

We promote not just flexibility and adjustments for the top results, but we also offer changes based on data. Some changes lead to the creation of fewer features. Until the change is equal to the initial solution or is even cheaper, it may add to the overall costs of developing software. Flexible changes are also usually possible in projects with long-term and proven relationships between the client and the team.

Additional work

Sometimes, you may find out that more features are needed to be developed during the project. In this case, we talk about additional work that causes additional costs. We recommend including such an option in your project since it allows you to stay flexible and build a better product involving additional costs if it’s impossible to achieve within the fixed price.

Our approach to software development pricing and costs

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Our software developers work closely with our customers and apply price evaluation techniques that provide more confidence to the customers. At Fireart Studio, we have devised our own approach to software development cost estimation and would be happy to share it with you. So, let’s consider it in detail.

Initial high-level scope

At the beginning of the project, it might be challenging to evaluate the precise number of features and options our clients may order. First of all, we take into consideration your business goals and KPIs. They help us set the initial scope of work. 

Later, we agree on a set of the key features that are fundamental for a software product. After that, we apply the MoSCoW analysis to define what is really important for great results and what is just good-to-have. They can be referred to as “Must,” “ Should,” “Could,” and “Won’t.” The last type of features could be important one day; however, it’s currently out of scope for this work package.

Proposal

To decide whether to proceed with the project, you must have enough data about the time and price. Once we get this information from the client, we are ready to prepare a proposal. We pick software developers with a specific skillset that corresponds to the project requirements.

Product launch planning

At this phase, we create a product backlog, estimate features, conduct task and work prioritization, and release planning. Now, we identify how long it takes to deliver a releasable software product. Together with the client, our team determines what can be reached and how fast the scope of work can be completed to create a plan for the product launch.

Signing a fixed price contract

When a product launch plan is prepared, our experts can provide you with a precise project quote. The quote for a fixed price contract is provided along with a statement of work and agreed payment schedule.

Final Thoughts

Are you looking for the best practices and software project estimation examples? Here we have outlined our process of software development cost estimation. Hopefully, our insights will help you better understand how the development process begins, what to expect from it, and how to evaluate the price for your software creation. 


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