Decoding Your Custom Software Estimate

One of the hardest things you need to tackle out of the gate when building a new software product with a software partner is how to compare software estimates.

It is tempting to skim proposals and evaluate on price alone. And why not? You’ve had similar conversations with each of your prospect companies. You might have even provided each company with your documented software requirements to compare apples to apples.

But just as there are different ways to build a 4 bedroom, 2.5 bath house with a finished basement and sunroom, there are different ways – and associated costs – for building your application.

Below are a few tips for evaluating your software estimates in order to determine the value of each solution.

Software Estimates – Features & Scope

The very first step is figuring out what is, and is not, included in each proposal. The challenge you will have is that not every firm will categorize the work in the same way, and use the same terminology.

It’s time to take out your sleuthing gear and get to work. The best way we have found to go about it is a simple, detailed spreadsheet.

In the first column of your spreadsheet, list out your requirements and functionality using your own words. Then for each estimate, indicate if they have included this feature in their proposal, with a short note on how they will meet the requirement.

With your matrix complete, find a way to score the completeness and value of each proposal vs. the cost. List the different approaches, and decide how important pluses and minuses are for each approach relative to your business.

You may have some follow-up questions for each vendor as you look at each proposal. Why is Vendor A recommending this and Vendor B isn’t? Feel free to ask and gain the clarification you need.

Approach & Technology Relevancy

Software can be created in a variety of ways. Two approaches are writing a fully custom application or leveraging an existing platform and customizing it.

There are pros and cons to both approaches. Simply speaking, fully custom means you have greater design capabilities, you can get exactly what you want, but it may take longer and cost more. Leveraging an existing platform or product is a great way to speed up development and reduce costs, but you are tied to the features and capabilities of that product.

In either case, it is worth looking at the exact technology stack (programming languages and database) or product that is being recommended. How relevant is the technology/product in the marketplace today? Does it have an active community around it and is it still being updated on a regular basis? Will you be able to find another partner with the same skillset who can take over the project if needed, or will you be stuck?

Also, ask if there are any one-time or on-going software fees for the technologies or products being recommended.

Software Firms Experience/Desirability

Just like when buying a car, some software companies have more experience or prestige than others.  You will need to ask yourself, what is the experience of each of the vendors, to what degree do they specialize in exactly what you want, and is there a factor of desirability/prestige from their track record and position in the industry?   Are these factors of value to you? Are you willing to pay more for them?

If you are creating a mission-critical platform for Fortune 100 companies, you probably want the reputation of a top international consulting firm for your product. If you are building a locally used website for a non-profit organization, the cost may be your leading factor. Most people are somewhere in the middle.

Intangibles

Beyond scope and experience, there may be some intangibles you will want to consider when comparing software proposals and estimates. We’ve listed a few below.

• Will there be a project manager coordinating the project?
• How often will you be shown demos along the way?
• Can you make changes while the project is underway?
• What level of involvement is expected of you?
• What is the communication plan for the project?
• Is testing included, and if so, how is it done?
• Is there a warranty or guarantee for the project work?
• Is ongoing software support offered after the project is over?
• What are payment terms?
• Will you own all the source code and deliverables produced during the project?
• Will the work be done locally, or off-shore?
• Are there any additional costs with hosting, licensing fees, maintenance fees, software fees that should be considered?

Compare Software Estimates Conclusion

Rarely will software estimates from different firms have pricing for the exact same solution. Each custom software provider will have their own preferred approach on how to best build your application and their cost for doing so.

When looking at multiple estimates, know you are comparing apples to oranges. Try to understand the merits of the different solutions that are being offered, and the value to you of the entire package: the solution, the technologies, the approach, the experience of the company and all the intangibles combined.

Evaluating software is a lot like picking a house. You have to weigh what you do like and don’t like about each option against the cost, to see which is the best fit for you and your business.

If evaluating your software proposals is causing you grief, feel free to reach out to us. We can help you evaluate your choices in a systematic way, and highlight the pros and cons of each. You can reach us at 404.601.6000 or by filling out our Contact Us form.