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Summary – Recurring budget overruns on custom ERPs, industry platforms, or complex SaaS arise from overly fragile initial estimates, jeopardizing your CAPEX/OPEX trade-offs, schedules, and contract negotiations. In 10 steps—from precisely defining objectives and scope to modeling software size and integrating risks—you build a transparent, data-backed baseline fueled by historical data. This estimate evolves into an operational execution plan with daily monitoring and continuous knowledge capture to ensure reliable decisions and stronger delivery control.
Complex software projects, whether a custom ERP, an integrated business platform, or a technically sophisticated SaaS solution, often experience significant budget variances. These overruns are not due to development failures but to overly fragile initial estimates.
Adopting a rigorous, traceable, and defensible approach is essential to secure business decisions, whether addressing CAPEX/OPEX trade-offs, resource planning, or contractual negotiations. This 10-step checklist formalizes best practices for producing a reliable estimate that can withstand executive scrutiny, internal audits, and delivery realities.
Define the Scope and Clarify the Budget
Establishing a clear foundation avoids hidden risks and later misunderstandings. Distinguishing between types of estimates ensures an approach tailored to each decision-making phase.
1. Clarify the Why Before the How Much
The estimate must first meet a specific objective: provide a Rough Order of Magnitude (ROM, ±30%), a formal contractual commitment, or an Estimate at Completion (EAC). Without this distinction, the same figures cannot apply both to an internal assessment and to a solid proposal for an executive committee.
In practice, confusing these levels creates misunderstandings among IT departments, finance departments, and service providers, leading to frequent budget revisions. It is therefore crucial to specify from the outset the purpose of the estimate, the expected level of accuracy, and the acceptable margins.
For example, a Swiss financial services company responding to an ERP tender initially submitted a ROM without clarifying that it was non-binding for the vendor. During the budget review, the stakeholders expected a firm commitment, resulting in the proposal’s rejection and the project’s postponement.
2. Establish an Explicit Technical Baseline
A reliable estimate relies on a precise technical definition: target architecture, functional scope, integration constraints, and assumptions about existing systems. Any undocumented element becomes a potential risk and may lead to latent additional costs.
Formalizing these elements in concise documents validated by stakeholders locks down the framework and reduces uncertainties. This baseline then serves as the reference throughout the project, from contractualization to management.
An industrial manufacturer transitioning from an on-premise solution to a cloud platform neglected to list its production machinery interfaces. Midway through, integration required an additional month of studies and doubled the budget to ensure compatibility.
3. Gather Actionable Data, Not Intuitions
Estimates based on intuition expose you to major variances. It’s better to rely on the history of similar projects, productivity benchmarks, and documented assumptions. Every figure must be justified by a source or calculation.
By systematically recording time spent, recurring tasks, and complexity levels encountered, you create an internal reference repository that can be reused and refined with each new project. This traceability becomes a powerful argument when dealing with executives or auditors.
Relying solely on intuition led to underestimating testing and load-testing time by 40%. The schedule was pushed back by three months, incurring contractual penalties.
Measure and Model Size and Risks
Software size is the primary driver of cost, far more than the estimated person-days alone. Building a quantitative reference and integrating risks as variables protects against the unexpected.
4. Estimate Software Size, Not Just Time
Functional or technical volume—defined by new development, reuse, modification, legacy, or commercial off-the-shelf components—is the true cost driver. A function point approach, weighted user stories, or simple complexity metrics can objectify this size.
Quantifying each module or macro-feature precisely yields a level of granularity that limits variances and facilitates management. This metric also serves as the basis for tracking progress during delivery.
5. Build a Quantitative, Defensible Baseline
A solid baseline answers the question: “Why does this project cost this amount and not 20% less?” It comes from a quantified model where each item (analysis, development, testing, infrastructure) is detailed and linked to a specific metric.
This process requires making explicit the productivity rates used, complexity coefficients, and margins applied. Every assumption must be documented so it can be reviewed or challenged transparently.
6. Integrate Risk as a Variable, Not an Excuse
Identified risks must either be included in the estimation model with a weighting factor or explicitly excluded and assumed by the client. This distinction prevents perpetual responsibility shifts onto the delivery team.
Mapping major risks (technological, human, organizational) and assigning a probability or additional cost factor produces a defensible estimate. In the contractual phase, you can then choose a mitigation plan or allocate a dedicated contingency budget.
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Validate and Turn into an Execution Plan
Consistency between productivity, staffing, and schedule must align with organizational reality. Turning the estimate into an operational plan makes the figures immediately actionable.
7. Validate Overall Consistency
The estimate is not just a cost; it must be contextualized with internal resource capacity, skill availability, and global scheduling constraints. A mismatch between the theoretical model and staffing reality can cause delays or increased external rates.
A joint review between IT, project managers, and service providers helps verify workload plausibility, adjust profiles, and ensure no critical availability windows are overlooked.
8. Turn the Estimate into an Execution Plan
A useful estimate breaks down into milestones, detailed staffing, and a roadmap of upcoming decisions. Each interim delivery should correspond to a verifiable outcome, associated cost, and a precise timeline.
This approach supports incremental management, offers clear visibility into progress, and enables scope or priority trade-offs without jeopardizing the overall budget.
9. Document to Build Knowledge
Each estimate becomes an asset when documented and archived in an internal repository. Identified variances and lessons learned form a continuous improvement base.
By analyzing feedback, you can refine productivity benchmarks, adjust complexity ratios, and gradually reduce safety margins while strengthening commercial credibility.
Continuous Project Monitoring and Adaptation
A fixed estimate quickly loses value once the project begins. Ongoing tracking, comparing forecasts to actuals, ensures budget control.
10. Daily Monitoring and Variance Management
Throughout delivery, it is essential to regularly compare actual person-days consumed and deliverable volumes against initial forecasts. Variances must be analyzed, explained, and reallocated within the schedule or budget.
Weekly check-ins supported by a simple yet comprehensive dashboard allow you to detect deviations early and implement corrective measures before financial impacts become significant.
Change Management and Trade-Offs
Change requests during the project are inevitable. They should be handled via a formal change process, with additional estimates or adjustments using uncommitted options.
By structuring these trade-offs, you maintain decision traceability, preserve budget alignment, and keep stakeholders and management informed in real time about the impact of changes.
Continuous Improvement and Knowledge Building
Throughout delivery, every adjustment, estimation error, and success should be recorded. These experiences feed the estimation repository and improve the accuracy of future assessments.
A consulting firm, after evaluating and managing three projects using this method, reduced its average estimation lead time by 20% and improved internal satisfaction thanks to greater budget visibility.
Rigorous Estimates for Controlled Software Projects
By applying this 10-step method—from clarifying objectives to continuous adaptation during delivery—you secure investment decisions, CAPEX/OPEX trade-offs, and IT credibility with finance departments. You achieve a traceable, defensible, and immediately actionable estimate to manage your ERP, business platform, or complex SaaS projects.
Whether you are a CIO, CTO, or SME leader, our experts are at your disposal to help you implement this excellence and continuous improvement framework.
