HOW MUCH DOES AN IT PROJECT COST?

Based on numerous inquiries from potential clients interested in implementing an IT project, I decided to write a short post that will answer the most frequently asked questions and doubts, to make it easier to understand how a software house such as Exaco works.

Contact with the IT service provider usually begins with the signing of an NDA agreement (confidentiality agreement), and then the provider receives a brief from the client with a description of the project. Such a brief is usually a document consisting of a few or a dozen pages of text, pictures, charts that describe the unique idea of ​​the client. The brief allows the supplier to see the idea, understand the concept, define the contractual size of the project, and decide whether the project is feasible within the technologies in which the software house specializes.

Does the brief allow for a reliable project valuation?

The answer is not clear cut, but our experience shows that most often it is not. Based on the experience from previous implementations, an order of magnitude can be determined, but these will most often be very wide ranges, e.g. 100-500 thousand, which will allow us to determine whether we are dealing with thousands or millions.

The implementation of an IT project is in many respects similar to the implementation of a construction project. Anyone who has had the opportunity to build a house, and in particular by a very popular economic method in Poland, knows that when going to a bricklayer to give us the cost of our dream building, you must have a project from an architect with you. No construction worker will estimate the cost of his work on the basis of a description that will say that we want a door, we want windows and maybe even a fireplace. Reliable valuation requires precise information – otherwise we will get something completely different than we imagined, or we will make mistakes that can no longer be corrected.

And here the IT industry has a certain advantage, because in IT you can always make changes, you can always improve and rebuild something.

When commissioning a project to a software house, we can expect one of two approaches to the valuation and implementation:

  • Agile with Time and Materials billing
  • Waterfall with Fixed Price settlements

Which is better? The answer is simple – none. Each has its own advantages and disadvantages. There is no need to believe that the given approach will be cheaper – the IT project will cost as much as there is actual work to be done. Attempts to save excessively most often end with delays in implementation or a decrease in the quality of the final product.

So the question is, which approach to implementation should be chosen? Below, I will try to describe the advantages and disadvantages of each of them in a few words. I will not delve into the methodology of project management – I will focus more on financial and organizational aspects.

The agile approach is ideal for customers who do not yet have a clear vision or the project is so innovative that it is necessary to verify the design assumptions with the market and users very quickly and very often. In this case, for the implementation of the project, we most often use the SCRUM methodology and 2-week sprints, in which the project team works together with the client on a given functionality that is to be delivered at the end of the sprint. The team consists of people who provide all the competences needed at a given stage of the project, which makes the team self-sufficient and can freely change direction, modify assumptions and adapt the project to the actual needs of the user during the project. In such a project, we do not produce excessive documentation at the beginning,

Settlements in this model are made on the basis of Time and Materials – i.e. the customer pays for the team’s working time, which is dedicated only to this project.

The biggest advantage of this approach is the constant response to change, as well as the ability to quickly enter the market with the new solution in order to receive feedback from end-users.

In the waterfall model with fix settlements, we work with clients who have very specific requirements and the project works in a more hermetic environment, e.g. projects for large organizations that digitize well-known and unchanged business processes for years. Such a project is preceded by a detailed business analysis, which decomposes the general assumptions of the originators into specific business cases, which can then be evaluated and implemented in the created system.

Thanks to this approach, it is possible to carefully plan the project and eliminate some errors already at the preparatory stage and locate gaps in the processes.

The advantage of this approach is a much more accurate approximation of the final budget that must be spent on the project. I am writing an approximation because even in spite of the analysis, as the users will use the system, there will be some needs that the originator simply did not foresee.

In this model, we pay for the entire project on the basis of the valuation, or if the project is large, it is implemented in stages, which are valued separately. The cost of business analytics, which must be carried out at the beginning, usually constitutes about 10-20% of the final value of the project, and it is a key and inseparable element of the project implemented in this way. In this case, business analytics can be compared to the architectural design of a building. It is at this stage that the client’s vision is transformed into specific business processes and the business model to be implemented is checked. You can still change a lot here and eliminate potential gaps and inconsistencies in the project.

I hope that this short comparison of the different approaches will help us better understand the supplier we choose to implement the project and, as a result, implement the project successfully!

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