The risk of the hourly estimate

One of the most common risks on software projects is cost overruns.

Many projects begin with a simple idea for a feature improvement, for which you would then get an estimate of work, to be billed hourly.

The big unknown here is in the estimate — after all, it's just an estimate.

Nobody, and I really do mean nobody, can know if that estimate is accurate, until the project is done.

So it should be obvious that nobody knows what the total billables will be, until the work is complete.

Naturally this leads to a significant risk of cost overrun.

How can we mitigate that risk?

Simple:

Stop relying on hourly estimates.

Find a provider who's willing to give you a price. For a specific set of deliverables. Which you’re confident will help you meet a specific business goal.

That price may come out a little higher, or even a lot higher, then whatever lowball estimate you might get from someone who “really needs the work.”

But we're not just hoping for the best here. We're creating plans to mitigate risk. And then it's up to you to decide whether that mitigation is worth it. (Hint: It usually is.)

All the best,
A.