Cost Management Software

I have to say that my foray into blogging has been an interesting one.  By definition, the Chief Scientist should be a nerdy sort of geek too high brow to pontificate on topics in such a pedestrian format.  Actually I kind of like it.  In part because I enjoy writing and I'm not picky about what I write - technical documents are OK but pontification works as well.  And in part because I know that in order to be a good writer in a particular genre one must read extensively from that genre.  In other words I now have a good excuse to surf the web for related blogs and have found great ideas that have fueled my imagination

Today I want to share an article I found on 'Quips On Software Development' by David Longstreet called "Ancient Wisdom for Software Estimating".  In it Longstreet traces the need for good estmating all the way back to the Bible.  From Luke 14:25-33 Jesus says to the crowd of discipleship "Which of you wishing to construct a tower does not first sit down and calculate the cost to see if there is enough for its completion?  Otherwise after laying the foundation and finding himself unable to finish the work the onlookers should laugh at him and say, 'This one began to build but did not have the resources to finish'"

Of course this was posted on April 1st so my first thought was of practical jokes. After thinking about how cool it would be to get this kind of powerful buy-in on the importance of estimating I figured I would check it out.  So I powered up another browser and went to Bible.com (who knew!).  Sure enough it was the real deal.

So what's my point here?  Regardless of your religious beliefs - it seems prophetic that a document representing life and times more than 2000 years ago recognizes the importance of estimation and resource management.  And further acknowledges the fact that people will notice if you say you're going to do something and then don't finish it because you've run out of time or money.  Even before there were machines or factories, computers or software; before the words process improvement had ever been uttered - people understood that estimation was important when embarking on a project. 

The next time you think about starting a project with a WAG (Wild A** Guess) or with the number your boss wants to hear - first stop and ask yourself... "What Would Jesus Do?"

Here’s a great article I happened upon while doing research for a paper I’m writing.  “Lessons Learned: IT’s Biggest Project Failures”  In this article we are treated to stories of IT projects that “first make people laugh and then” (hopefully) “make them think.”  As a long time student of the failed software project, I was neither surprise nor disappointed with the projects relayed.  The projects noted failed for reasons such as:

• Failure to perform a should-cost analysis before selecting a supplier
• Failure to recognize an unhealthy project before it was too late
• Unrealistic and aggressive timelines
• Scope creep.

1. Value models - enabling analysts to estimate the value and benefits of project once it is delivered, and over its lifetime
2. Business Case Analysis - enabling analysts to prepare and score a case for the project including the cost/benefit analysis, payback period, investment rate of return, strategic benefits, and other evaluation criteria scoring.  The business case tells the story of the project.
3. Analysis of Alternatives and Portfolio Analysis - enabling decision-makers to view Risk/Reward charts of alternatives and planners to reconcile total project estimates to budgets.

                     
Like many others, I was astonished last Thursday by the images on my browser of those 155 extremely lucky people standing in the Hudson River.  And they certainly were very lucky last Thursday.  If you’re destined to fly on a flight bound for collision with birds, you want it to be piloted by a hero like Captain Sullenberger.  The incident made me think about what a hero is and how we all have the opportunities to be heroic in our chosen professions.

According to Wikipedia, a hero refers to a character that, in the face of danger and adversity or from a position of weakness, displays courage and the will for self sacrifice.  As a project manager you may not encounter danger daily, at least of a physical nature, but you certainly deal with adversity on many levels.  And courage is essential!

An heroic project manager is one who makes project decisions based on facts and who stands behind those decisions.  He or she defends the project team from those who wish to impose unrealistic deadlines and stands up to those who want to abuse or ignore the Project Management Triangle.  In order to be heroic, a project manager needs to have the tools necessary to plan a project right the first time as well as manage it with agility as situations change.  TruePlanning from PRICE Systems is just such a tool.  TruePlanning is the worlds leading solution for software cost estimation and IT Project Planning.  It gives project mangers the cost estimates they need to plan projects successfully and the courage necessary to defend those numbers to the naysayers.

Although the use of TruePlanning is unlikely to lead to instant fame or enable people to walk on water, a project manager who uses it regularly will be a hero to the team!
 

Today, change is in the air.  As I write this, Barack Obama is about to be sworn in as our new U.S. President and the space community, among others, should be braced for change.  A recent LA times article reported that of the 74 questions asked of NASA by the Obama transition team, over half were on basic spending issues, including cost overruns.

The Obama team and the NASA Administrator Michael Griffin clearly do not see eye-to-eye.  Monday, it was announced that Mr. Griffin will step down from the post.  Griffin characterizes himself as an engineer and states that NASA shouldn't be evaluated by how well it estimated the cost of projects.

"We start these things out, and we admit up front we don't completely know how to do them. That is what makes them interesting," Griffin said recently.

"If we are to judge the worth of our work by our ability to estimate, then that is a standard I am not ready to apply or to accept," Griffin said.

Others are more realistic about NASA's obligation to create credible expectations for spending taxpayer money.

"Our space program is running inefficiently, and without sufficient regard to cost performance," wrote Alan Stern, a former NASA associate administrator who has been mentioned as a possible replacement for Michael Griffin, the current NASA administrator.

In a recent op-ed piece in the New York Times, Stern called the cost overruns a "cancer" that has cost the agency's science program about $5 billion over five years.

Agency officials said they had improved financial controls -- including forcing managers to better estimate costs.

Considering NASA's great technical achievements, one must wonder, "Is accurate estimating harder than rocket science?" 

I don't think so.  I believe the clue to accurately estimating the cost, uncertainty and risk associated with large, complex space projects can be found in a recent Defense AT&L article by Col. Brian Shimel, USAF.  Col. Shimel states,

"We cannot relieve ourselves of the need to plan for the future just because the future is uncertain. For our plans to be reasonably accurate and reliable, it is prudent we base them on rational analysis and not on wishful thinking.", and...

"We must think clearly about uncertainty and risk, and we must fight the temptation to discount those factors when communicating the real conditions of our management situation. We don't get in trouble because of risk and uncertainty. We get in trouble for not admitting to ourselves - and those who rely on us - all of the risk and uncertainty that inherently exist in everything we plan to do."

Our TruePlanning estimating and cost management software gives managers metrics and benchmarks of previous projects, and methods to realistically quantify uncertainty and risks.  TruePlanning's reports and charts expose over-optimism and show managers the real conditions of the situation.  I routinely recommend that government agencies quantify all the risks and uncertainties of each project in their portfolio and budget to the sum of the 70% confidence levels of each project, yielding 80% confidence that the projects can meet taxpayer expectations for the budget.

President Barack Obama just finished his acceptance speech.  He called upon us all to increase our service to the country.  Government managers can help by stepping up to the estimating challenge.

Accurate estimating is not rocket science.  There are sophisticated cost estimating models to accurate estimate software development costs, hardware development costs, IT project costs, and operation and support costs - we just need to be realistic, responsible and courageous about presenting the results for our analysis. Contact us and we'll help you get started today.

This was a fun and gratifying week at PRICE Systems. In our Mt. Laurel, NJ headquarters we had our annual holiday gift wrapping of presents we donated for needy children and families in the area.  The PRICE team gathered in our classroom and the wrapping began with no pre-instruction or guidance - but much merriment.  What a study in production process and learning!  Wrapping that first present was awkward.  It had been a while since I wrapped last.  How to measure the paper?  Where to cut?  How to keep the cut straight?  Which way do I fold first? How to fold?  What to do if I have too much paper on the ends?  Where do I put the tape?  ...and so on.  Needless to say that first present took some time, I wasted a lot of paper and tape, and the final product had some wrapping defects.  After reflecting on the results, I looked around at others to see what they were doing, asked some questions, processed that information along with my own experiences, and set out on the second package.  I did much better.  I wrapped faster, I wasted less, and the final product was an improvement over the first.  With each new gift I got better and better.  I "learned" how to be more productive, reducing the effort and materials with each present.  By the eight present, I started to focus on how I could reduce materials.  How can I use less paper?  How can I use the least amount of tape and still keep the paper form coming off?  I was improving the overall process.

Productivity increases like mine occur with each and every production process and it is an essential part of cost and schedule estimating.  The method most commonly used to model this effect is called "learning curve", and we use it in all of our models. You can find hundreds of references and equations on the web, but generally the model uses a "learning curve parameter" (LC) to estimate the cost for a certain production quantity.  The LC is expressed as a percentage, and (1-LC) represents the amount the production cost is reduced every time the quantity doubles.  For instance, if I say an 80% learning curve applies to the process, then every time the quantity doubles the cost to produce is reduced by 20%.  So if the first unit cost $100, then the second would be $80, and the fourth would be $64, and the eighth would be $51.20.  For the same starting point, a 90% learning curve represents less learning and higher costs, while a 70% learning curve steeper learning and lower costs. 





If I had timed my wrapping and measured the materials used, I could have used simple math to determine the learning curve that applied. I suspect it was close to 70%.  Determining the learning curve for everything from paper clips to space ships is more complicated, but that is one of the things we do at PRICE.  We perform operations research and analyze data to keep our models as accurate as possible, and embed that research in our cost management software.  Accurate learning curve estimates help our clients optimize their investments, prepare better budgets, plan more effectively.  And as part of this most recent study, we made  a lot of kids happier for the holidays.  Happy Holidays to you. 

Technology readiness is a critical cost driver of development programs.  Many high technology programs fail because initial cost and schedule expectations were based on the assumption that the technologies employed were proven,  when actually they were not. Space programs have the most dubious history in this regard.  I once listened to a Lockheed Martin executive explain how the X33 space shuttle was a great vehicle, but was canceled because it was, "two inventions short of meeting the requirements". Canceled after over one billion dollars were spent.




Starting development projects that have constrained budgets and schedule with unproven technology is a bad idea, one that has not gone unnoticed.  The Defense Acquisition Performance Assessment 2006 (DAPA) report states,

"Technology maturity or “knowledge-based” development has been a subject of considerable discussion between the Department and the Congress. However, although there is agreement concerning the advantages of ensuring that technology is mature prior to proceeding to development and production, there are no clearly definable measures of technology readiness.", and,

"Incorporating high-risk technology in systems generally leads to significant cost and schedule impacts."

So, have decision-makers learned their lesson by now. Recent news suggests not.  It was just published that NASA's Mars Rover mission was delayed two years and is over budget because,

"problems developed in the design and operation of the 31 actuators that control the mechanics of the craft, including the steering mechanism and its robotic arm"

Probably a few inventions short.

Technology should be matured in a lab environment with a sustained level of effort before it is employed in a development project with cost and schedule constraints.  Anything else is extremely risky and will most likely fail.

The PRICE TruePlanning models each have a method evaluating the cost and risks associated with technology maturity.  Our cost management software helps our clients decide among  alternatives with varying technology maturity and let them know the risk of overrunning cost and schedule.  Most of the time our analysis can dissuade executives from starting a project "two inventions short".

Software cost estimation is hard.  I have learned this the hard way – as a software developer and later as the manager of software development projects. Today, as a builder of cost estimating software, I learn something everyday about software development that reinforces the fact that software cost estimation is hard.

I attend a lot of trade shows and I talk to a lot of software people about how they estimate software costs.  Many of them have no formal process, many don’t collect data as projects progress, many of them perform estimates off the cuff, and many of them, not surprisingly, are unhappy about the outcome of their software development projects.

Many of these same people are quick to point out, when presented with possible help in the form of TruePlanning for Software, why it will never work for them.  Nine times out of ten, the reason they give me has to do with the uniqueness of their product, their customer base, their market or their software development process.  They question the data behind the model and suggest that this data can not be successfully translated to properly model their specific situation.

And I can’t fight the uniqueness argument – it’s most likely true.  Every software project has factors that make it different from all the other software projects that have occurred in the past.  No two software projects are the same.  I can however argue about the suitability of the data behind my model. The majority of software projects are not defined by their uniqueness.  There is much more about most projects that is similar to other projects than is different.  A good software estimation tool like TruePlanning for Software capitalizes on this fact by allowing the user to take advantage of industry or organizational data for those many places where a project is not unique.  Further, it offers expert systems like guidance to transcend those areas where a software project veers from commonplace to extraordinary.

In software, as in life, we tend to put the most focus on the parts of a project that are challenging and interesting with much less focus on the parts that are ordinary.  If, in doing this, we are discounting the lessons we can learn from history, we are doing ourselves and our software projects a disservice.

Jacob has a great comment to my recent post on getting it "right the first time".  He notes that requirements are often fuzzy and that estimates rely on peoples' opinion of cost and duration - and that the are often wrong.  He asked what silver bullet we have. Our silver bullet is a proven discipline that makes people better estimators and sheds light on fuzzy requirements.

It starts with the people. Becoming an accurate estimator requires the same step-by-step approach as any learned skill such as golf or tennis or swimming (things I am currently struggling to do well). First you need the right tools, then you need to learn the right way, then you need to be mentored by experts as you practice what you learned until it becomes second nature. Recently, I was struggling with my breathing while attempting to swim. Lap-after-lap I was breathing hard, swallowing water - it was a miserable sight.  Then I consulted an expert that got my head turning the right way and got me into an rhythm of breathing every third stroke.  My swimming quickly improved by 40% - more laps in less time.

We do the same for our clients.  First we arm them with the right tools.  Our TruePlanning software provides a proven step-by-step discipline to do an estimate the right way,  TruePlanning asks the right questions and covers all the bases, including risks.  Then we train people not just how to use our software but how to be great estimators.  Sizing methods, interview techniques, and requirements elicitation are part of our training.  Then our experts are by their side as they hone their skills through email, live-meetings, a 24/7 hot-line, and on-site visits.  Throughout we provide people with benchmark measurements of other similar efforts and tips to guide them. Suddenly fuzzy requirements become clearer. People are doing more accurate estimates in less time. Typically our clients improve their estimating accuracy by 50% within three months and several of our clients now produce estimates that average within 5% of actual scope, cost, and schedule.  Our clients leverage our cost estimating software and cost management software to estimate software costs and schedules, IT infrastructure costs, and custom hardware to improve their overall project and portfolio management.  By the way, I just finished a mile in the pool and improved by another 10% - practice makes perfect.

As I prepare my remarks for the first PRICE Systems International Symposium and User Group Meeting in Asia hosted by the PRIGENT corporation, I am astounded by the recent globalization of the Defense Industry.  Worldwide weapon systems acquisition has been permanently changed by: 

Today, BAE Systems is the sixth largest U.S. defense contractor, U.S. defense contractors dominate European Defense top-ten lists and S. Korea is building its global customer portfolio, including Turkey. Among of the greatest challenges to this newly globalized industry are communication and understanding between customers and contractors, and among the internal organizations within a multi-national corporation. Defense procurement agencies and contractors wishing to succeed in this new world must adopt new communication strategies. 
One of those strategies will be evident at our event.  Negotiations to set the right price and to determine the ensuing operation and support costs are difficult in this environment.  Cost models, which work in the precise global language of mathematics, are the Rosetta Stone in the procurement Tower of Babel.  At our Symposium TruePlanning and the PRICE models will be the common language among Defense procurement professionals from around the world. And they will have little trouble communicating and understanding because the models distill their differences down to a universal set of cost drivers, activities, and resources common to all projects. We will discuss estimating software costs, IT project cost estimating, the effect of software development tools, the challenges of project planning and budgeting - and there will be understanding. When we used acronyms to name our model parameters, an arcane term like ECMPLX (engineering complexity) became the global term for describing the technology maturity and engineering experience of a development task.  Today, our clients from around the world have a universal understanding of our model parameters and can communicate and negotiate effectively using our cost estimating software.  Everyday, I see evidence of vast productivity improvements when multi-national companies and international procurements standardize on our models and cost management software, establishing a common language in the midst of diversity. 

Is it like a Tower of Babel where you work? Consolidation is occurring in nearly every industry today, so think about the efficiencies that can be gained through standardization?  ...communication?  ...immediate understanding?  As you improve communication and understanding, you will become more productive and estimate more accurately.  

A good point is made in a comment to my last post, Chris Carter says, "As estimators I think it is our duty to tell our customer (management) what we assess the possible range of outcomes to be so that they can make use of this information ".  I agree that we should always deliver an indication of accuracy every estimate.  Uncertainty and risk analysis is an integral feature of TruePlanning and we educate our clients on the value of estimate ranges to optimizing project and portfolio performance. The uncertainty-based probablistic confidence-level of an estimate that our products produce is an effective means of addressing the issue. Your cost estimating tools and cost estimating software should address uncertainty and confidence so that weapon system project planning and IT budget planning can be optimized.

Many times estimating software cost is the major challenge. I recently came across a strong case for estimating accuracy and the value of risk ranges in a recent Forrester Research report titled,  “Debunking IT Project Failure Myths,” by Lewis Cardin, a former CIO and currently senior analyst. The twelve-minute Podcast is worth a listen. Mr. Cardin found that among the top reasons projects failed were:

[Begin quote]
1. An unrealistic project plan, which dooms the best project.
All too often, when these projects go on the rails of the original project plan, PMs must spend more time on damage control with steering committees and project resources rather than on execution — doubling their work when it is least desirable to do so.

2. First-number syndrome, which makes business execs forget it’s an estimate.
When projects are first sized, which is likely to occur before they are approved, estimates of cost, time, and resources are preliminary with a wide confidence interval…. But business execs remember the number and forget how uncertain it is…[and] may see this simply as increasing costs, not as the inevitable result of greater knowledge.
[End quote]

I have seen these two factors kill many good projects and ruin the careers of many good people.  I served on the "Intenational Space Station Management and Cost Evaluation Task Force" (IMCE) for NASA and this was exactly the situation with that program.  My experience there prompted me to compile "Six Steps to Program Success" where, "Getting the estimate right the first time" is the most important step. It is so important that you create the right expectations at the beginning of project by presenting the possible outcomes, good, bad, and ugly.

Estimating accuracy is not just about one number. It applies to risk ranges and confidence-levels so that management can determine the right number that goes into the bid or budget.

Martin Woodward ‘s comparison of software development to Sudoku does an excellent job of explaining why software cost estimation is hard.  We constantly hear about software development projects that are unsuccessful because they have violated one or more aspects of the Project Management Triangle  - they are either delivered late, delivered over budget or fail to deliver the capability that users require. And while I firmly believe that software development is an engineering discipline, software project estimation is often more complicated than estimation for other engineering disciplines because software project output is not nearly as easy to quantify and because there are other intangible factors that impact the software development process - the same kind of intangibles that Woodward mentions in relation to a Sudoku puzzle.

Woodward also does a great job in describing how agile software development practices help with software project estimation.  When employing agile development practices, an organization effectively embarks on a new software development project with every iteration (an iteration is a small chunk of time -  usually one or two weeks long - during which the next 'release' of software is completed). The tenets of agile require frequent releases and frequent customer reviews.  These reviews often trigger reprioritization and re-estimation. The agile team develops its own system of software measurement and quickly becomes good at estimating the work required for any given iteration. Agile also promotes good development practices to ease recovery when intangibles threaten to unhinge the Project Management Triangle.  

If every software development project is a two week venture and the development team is very good at estimating the next iteration, why would an organization require a software estimation tool like TruePlanning by PRICE Systems?  This, of course, is an excellent question.  It is true that the software development team doesn’t need a software estimation tool but the organization still does.  The organization needs to be able to put together credible a credible product roadmap.  Customers and sales people still want to know what’s up next and when it’s going to be available.  And although the nature of agile development indicates that content might change, the knowledge of the agile development team will actually help the organization use a software estimation tool successfully. 

Agile is all about measurement.  Successful software cost estimation, even with a great tool, requires good measurement practices.  The tool is the framework for success, but good metrics customize the framework for a specific organization.  Agile organizations that can combine their data with a framework like TruePlanning  can optimize their ability for successful long term planning.