Software Development
The cost of software development is defined by factors such as business requirements, non-functional requirements and the complexity of environments, politics and technology. It is common to use proprietary methods, calculations and algorithms to estimate software development costs based on rankings of requirement complexity such as story points, number of screens and integrations. Unusually complex requirements may be estimated by subject matter experts and added in. The following is a simplified example.
Services
Services may calculate internal costs and customer price quotations using parameters that correlate with effort and expenses. In the following example, a moving company estimates the price of an office move using a base cost and variable cost based on the number of employees and distance. Unique complexities such as moving an air conditioning system is added as a separate cost. This base cost is multiplied by surcharges for moving to a multi-floor premise and working on a weekend.
Construction
A construction company generates parametric estimates for building a house based primarily on the size of the house in square meters. They multiple this by a "luxury factor" based on the quality of materials. They also multiple by a "complexity factor" that captures any unusually costly elements of the architecture. Unique items such as landscaping, systems, furnishings and interior design elements are added in separately.
| Overview: Parametric Estimate | ||
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