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.
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