Cost Estimation in Agile Software Development Projects

Numerous studies over the years have shown that information systems development (ISD) projects often run over budget or fail entirely. Such failures are not restricted to certain industry sectors or project types; rather they occur with some regularity in systems development projects and organizations of all types and sizes. Cost estimation has long been a difficult task in systems development, and although much research has focused on traditional methods, little is known about estimation in the agile method arena. This is somewhat ironic given that the reduction of cost and development time is the driving force behind the emergence of agile methods. This study looks at how classical problems which adversely affect cost estimation in traditional ISD are managed within the agile paradigm. A qualitative approach was followed, based on data collected from four companies. Amongst other findings, the study revealed that estimation inaccuracy was a less frequent occurrence for these companies. A number of recommendations can be drawn from the research: estimation models are not a necessary component of the process; fixed price budgets can prove beneficial for both developers and customers; and experience and past project data should be documented and used to aid future estimation efforts.