How Overestimation Could Kill Your Project

why IT projects are often delivered late or over budget

Have you ever wondered why IT projects are often delivered late or over budget?

When launching a new project, the software development team will estimate the work required to deliver its key milestones. This gives them an indication of how long it’ll take to deliver the work, which translates directly into costs. And in many cases, only the team has visibility around those estimates or the discussions that led to them.

As a SDaaS (Software Development as a Service) firm, we have the benefit of insight into how internal software development teams work. And some recent experience with a number of software development firms has taught us that project teams commonly overestimate the time it’ll take to deliver tasks.

It’s not always intentional, but it’ll increase the cost of delivery for the project. This can be down to a number of reasons:

  • Project teams commonly overestimate by around 20% to account for unknowns. It’s a taught principle in some of the biggest project management frameworks.
  • Depending on which company or team is chosen, they may be engaged in other projects concurrently, which can redirect efforts elsewhere.
  • Developers may be inexperienced in a particular task, slowing down the team’s velocity as they lean on colleagues for guidance or have to learn or relearn new concepts.
  • The development team may have a spread of abilities, where certain developers have little to no experience in a particular programming language. Equally, there may be newer members of the team who are still getting up to speed on working practices or systems.
  • Senior management often inserts other project, defect resolution, or BAU work to the team, which affects their capacity to complete your work.
  • The company simply wants to bill more hours, resulting in a greater profit from delivering the project or product.

While some of these factors are common among project teams who deliver work as an external firm, businesses can still face delays, and thus higher costs also from their internal development team, or from freelancers they use for help.

Underestimation Can Also Be a Problem

While overestimation of tasks can result in a higher overall costs, underestimation can be a problem too. If working with a limited budget and having agreed to the cost of sourcing the development work, underestimation of project tasks can lead to further, unexpected costs, or a poor-quality outcome. Businesses either have to pay for additional billable hours, or they have to reduce their expectations in terms of product or project scope.

Again, underestimation can come down to a number of causes, many of which are similar to those outlined above:

  • The technologies being developed by the team haven’t been used before.
  • Estimation is done while there are still ambiguities or unknowns.
  • The development team is still relatively new to estimating work, and there are very few former examples of “estimated vs. actual” to compare against.
  • The agency is in financial difficulty and needs to appear an attractive option in order to win new clients.

So, in summary, both overestimation and underestimation could kill your project, or at the very least cost more than budgeted for.

As a self-contained SDaaS firm, we’ve begun noticing these trends fairly often across the industry. Of course, delays such as these increase the time and thus the cost of delivering a product MVP or project.

So, what’s the alternative?

The NerdCloud Difference

Our service model is similar to cloud services, but instead of boundless computing resources we offer boundless development resources. It means we have no technology limitations, giving our customers freedom to operate - even if the programming languages would be niche.

We function like a development factory, where the customer needs are managed by a technical lead who has no other obligations or reporting lines that may threaten to derail project progress with unexpected requirements and changes in direction.

Drawing on our combined expertise, we can provide realistic expectations of how long it’ll take to deliver the work that you need. What’s more, we’ll even discuss the estimates with you and the process used to get there. We’ll also keep you apprised of project progress on a day-by-day basis, ensuring transparency throughout.


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