The costs of software projects : an analysis

Abstract

The aim of the research is to identify whether software development projects have a tendency to exceed their allocated budgets and if this is the case, which factors lead to a cost overrun in such projects. The research also investigates the use of different software development approaches and how these impact the outcome of software development projects. A qualitative study was carried out by conducting semi-structured interviews with project managers and project leaders from local software development companies. All interviews were transcribed and coded using the open-coding technique for deeper data analysis. The findings revealed the specific characteristics dominating the software industry which make it potentially more risky than other industries. The cost estimation techniques used by local software development companies were looked into and a lack of awareness and knowledge about industry standard cost estimation techniques was identified. The research continued by looking into the risks considered when estimating software projects and identified those risks leading to cost overruns. This was followed by mitigation techniques which are used to mitigate risks and address issues arising during the execution of projects. Lastly, different software development approaches were studied together with their potential impact on software projects and the respective outcome. The research revealed that the software industry is a highly competitive one, dominated by complexity and uniqueness factors making software projects risky and prone to cost overruns. If not managed properly, the risk of a cost overrun is highly likely however there are a number of mitigation techniques that can be applied to address risks and factors leading to overruns. It has also been concluded that software development methodologies have an impact on the cost outcome of software projects as well as the duration of projects and the overall quality of software. While iterative development approaches improve greatly the quality of software products, traditional plan-driven approaches have the tendency to be less costly and deliver the full product earlier overall as long as no major project risks materialise.