Excerpts from the whitepaper - Estimation/Costing Techniques for the Software Services Industry
A whitepaper that discusses the boom of the
software services industry, the future that is beckoning at
this Industry and highlights some of the lessons that could
be learnt from other parallel industries. This whitepaper discusses
some of the best practices of the parallel industries in the
area of estimation, costing and provides insights into the adaptability
of these techniques to the Software Services Sector.
India is today branded as the Global hub for the Software Services
market. It is also poised very well to take on the next league
of Services, ‘Engineering Services’, among many other derivatives
of the Services paradigm. Having established its credentials
over the last decade as the software services hub of the world,
India has a secure future considering the upcoming services
markets in areas other than software development.
A distinguishing fact of the upcoming market and the ongoing
business is the competitive edge that India has to offer based
on its pool of knowledge workers. With a young workforce that
is equipped to take on the Globe by storm in these areas, organizations
today are faced with the challenge of quality, timely deliveries,
attrition and accurate effort estimation. While most organizations
are striving and deriving methods to face these challenges,
it would be a good idea to go back in time and see how certain
markets/industries both in India and in other parts of the Globe
have raced to be the ‘leaders’ in their fields.
A key competitor and a fierce one indeed on the manufacturing
sector has been close, yet not so close neighbor of India, China.
If we carefully analyze the way in which China took the world
by storm in the manufacturing sector, there is quite a bit of
inputs for all of us to learn, imbibe and put to practice in
what we are good at today, Software Services.
In the recent years, Software Services Organizations
have incorporated constant evaluations, agile development practices,
controlled project environments, and a few other initiatives
and techniques to overcome the adrenaline rush and have a sustained
business model. Ideally, the Indian Services market by this
time could have had data with which it would have been possible
for most organizations to estimate projects, right the first
time and every time. The challenges highlighted above and various
other limitations posed by external factors have been a deterrent.
It would be good for us to step back a little and think how
other industries, like Manufacturing, Engineering Services use
techniques to estimate cost. One of the earliest methods used
in this area has been the ‘Activity Based Costing (ABC)’, which
was based on an important aspect of the growing complexity of
Industrial systems, which gradually led to a situation, where
joint costs constituted an increasing part of the total cost
mass. Earlier, the lion’s share of cost was attributed to direct
material and labor, the overhead costs were allocated, which
was then differentiated to the method used in ABC. This method
found its way very well into the manufacturing industry and
a large degree into the services industry as well, when it was
introduced in the late 80’s.