A typical IT project will involve IT people resources, of course;analysts, designers, programmers, testers, trainers, etc… The titlesmay be different at your company, but the people will be performingthese roles. The question, of course, is how much of the valuable timeof these people will be needed, and how much that does that time cost?This is when the estimating begins.
Estimating the cost of IT projects is a whole discipline in ofitself. I highly recommend the writings of Vitalie Temnenco on thistopic, such as “Software Estimation, Enterprise-Wide – Part I: Reasonsand Means (June 2007), at
where the author is described “an architect for the Ontario, Canadagovernment’s Workplace Safety and Insurance Board, where he providesarchitectural mentoring on implementation projects and helps teamsembrace RUP and the Enterprise Architecture concepts.”
In this article, he covers the most well-known techniques,classifying them as top-down or bottom-up, and continues on to cuttingedge techniques like neural networks and Dynamics-based techniques.
My experience with estimating has led to always determining up-fronthow close to accurate an estimate needs to be. When using costestimates as part of a gating process, I find a reasonably supportedestimate done in a short time will suffice. I have heard an initialestimating being referred to as “t-shirt sizing”; is it small or mediumor large or extra-large, etc. Even this needs some context for acompany, usually by classifying past project actual efforts the sameway.
This helps with the simple approach of “Is this new Project X thesame size as a previous project we have carried out?” Assuming yourcompany has kept the metrics about previous projects, and that is a bigassumption, you can then extrapolate the size and cost of any similarnew projects.
True, some one has to lay it on the line and decide if a new projectis reasonably similar to previous projects, and the person doing thatshould probably define some assumptions about why they believe so. Thisallows the decision makers to agree with or challenge the assumptionsas needed, until all are agreed on the assumptions and accept theresulting estimate.
If you have no metrics/history to use, you may need to do someproject planning to define the tasks likely to be carried out. Again, awhole other big discipline exists for project planning and management,and use of techniques of like Work Break-Down Structures (WBS). Asimple web search or a visit to the Project Management Institute (PMI)website will get you started on that as needed. The only thing Iemphasize in this approach is that as much as possible, people whowould do the work should help in defining the necessary tasks, and thenthey most certainly should do the estimating of effort (usually inhours or days) of those tasks. They know best what will be needed, andwill make sure they are happy with the estimate because they willlikely have to work to that estimate when the project starts.
This planning approach must also make assumptions, mainly about whatthe project would deliver that will provide the expected benefits, andthat may not always be very clear when a project heads into the gatingprocess. So again, define assumptions that the decision-makers willaccept and then go from there. In the end you will have a number ofeffort hours or days, and then you need an accepted price for an houror day. Some shops will use a flat rate for all hours, while otherswill group the hours by role or seniority to get a range of rates. Ineither case, you multiply the hours/days by the price(s) and you have acost. Other costs may be involved as well, especially one-timepurchases of equipment or software needed by a project.
To go along with this cost, you will need an estimate of elapsedtime for the project to execute and finish, because most benefits willnot be realized until a project is over, and (later on) we will want tocompute a present-value of future costs. More assumptions are needed;how many people will be assigned, what work can be done in parallel,etc. If you have used a project planning approach, you will have theadvantage of defining many of these things already and will have comeup with a project duration along with the project effort.