Solution Based Estimation - iceaaonline.com€¦ · Solution Architecture and Solution Costing. Presented at the ICEAA 2017 Professional Development & Training Workshop -

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Solution Based Estimation (SBE)

Estimating the costs of heterogeneous solutions

Estimated training time: 60 minutes

Presented at the ICEAA 2017 Professional Development & Training Workshop - www.iceaaonline.com/portland2017

© ICEAA Solution Based Estimation (SBE)

Objectives

• Understand the link between architecture and estimation

• Introduction of Solution Breakdown Structure (SBS)

• From SBS to WBS

• Solution Breakdowns Structure and estimation

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Solution Architecture and Solution Costing



• applications• embedded systems• infrastructure• SOA implementation• systems integration• outsourced services• ...

Metrics-based estimation techniques assume homogeneity

Enterprise-level Solutions are Heterogeneous


Solution CostingModels and responsibilities

5


Solution Based Estimation



Solution-Based EstimatingAn approach to estimate heterogeneous solutions

• Break down solution into homogeneous components• Use Solution Architecture as basis• Strong involvement of Solution Architect in estimating process• Document Solution Architecture in Costing View

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Solution Based EstimationChallenges

• Fuzzy scope / solution as input for the estimates• Bespoke solutions instead of standard (repeatable) solutions• Limited availability of capable solution architects / estimators• Incompleteness of the estimate• Complexity under-estimated• Lack of historical data• Balance between market price and actual costs

• Without a clear scope and solution you will not get an accurate estimate

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Solution Based EstimationRecommendations

• Clearly define the scope of the project• Ensure tight scope control on delivery Day 1 (change management)

• Do not confuse cost and price (cost model; price model)• Consolidate as early as possible all cost-related assumptions• Review the solution and solution costing to identify and reduce risks

• Set realistic timelines for the project• Be realistic on staffing ramp-up (hiring, offshoring) • Verify the availability of key resources; lock down commitment

• Agree on acceptance criteria with the client

If the solution has been defined, you can start with the estimate

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Solution Based EstimationHow it should not work

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Solution Based EstimationAccuracy of estimates

Primary characteristics

Secondary characteristics

Estimate class Maturity level of solution definition (% of completion)

End UsageTypical purpose of

estimate

MethodologyTypical estimating

method

Expected accuracy range

Typical variation in low and high range

Class 5 0 to 2% Screening orfeasibility

ROM L: -20% to -30%H: +30% to +50%

Class 4 1 to 15% Concept study orfeasibility

Unit costs; Parameters

L: -10% to -20%H: +20% to +30%

Class 3 10 to 40% Budgetauthorization orcontrol

WBS; Unit cost; Parameters (high level)

L: -5% to -15%H: +10% to +20%

Class 2 30 to 75% Control orbid/tender

WBS; Unit cost; Parameters

(assumptions)

L: -5% to -10%H: +5% to +15%

Class 1 65 to 100% Check estimateor bid/tender

WBS; Unit cost; Parameters

(detailed level)

L: -3% to -5%H: +3% to +10%

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Based on: AACE International Recommended Practice No. 56R-08; Rev. December 5, 2012; TCM Framework: 7.3 – Cost Estimating and Budgeting



• Resourcing• Risk management• Project control• Collection of actual data (solution elements, process)• Re-estimation due to scope changes

EstimationIn the project lifecycle

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• Scoping • Due diligence• Solution defined by architects• First cost indication

EAS

Solution

Estimating

Engagement execution /

control

Metrics collection

• Solution based estimates• Standard solution elements

• Fixed unit costs• Parameter based costs• WBS based estimates

•Effort, duration, quality, peak staff• Probability• Costs vs Market prices

• Collect and analyze actual data• benchmark prices against market• verification costs vs prices• lean analysis on processes

• Maintain data as input for new estimates

E&M



Estimating process

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Project/Delivery ManagerEngagement management

Estimating

Solution

Estimation

Targetedsolution

ScheduleDeliverystrategy

Capacity planning

Basis ofEstimate

(BoE)

WBS

Architecture SBS



Solution Based EstimationSolution Breakdown Structure (SBS)

• Estimating the solution requires a Solution Breakdown Structure

• The SBS is a deliverable-oriented hierarchical decomposition of the workto be executed

• Each component

• Should be clearly and completely defined

• Has a defined specification and validation approach

• Will have an assigned responsibility for fulfilling requirements (part of the scope)

• Has defined cost drivers and estimation approach

• Can have a different implementation approach

• Is delivered by a single organizational entity

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Solution Based EstimationSolution Breakdown Structure (SBS)

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• Estimate the costs for each element in the SBS• Activity based costs (WBS)• Fixed unit costs• Parameter based costs

Solution

Infrastructure Tools MaintenanceApplications

$

$ $ $ $

Appl-1 Appl-2 Appl-3$ $ $



Solution Based EstimationSBS => WBS

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SBS-item-1

SBS-item-2

SBS-item-3

SBS-item-4

SBS-item-5

SBS-item-n

Processtep-1

Processtep-2

Processtep-3

Processtep-4

Processtep-5

Processtep-6

WBS

Developmentapproach



Solution Based EstimationWBS principles

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SBS-item-1

SBS-item-2

SBS-item-3

SBS-item-4

SBS-item-5

SBS-item-n

Processtep-1

Processtep-2

Processtep-3

Processtep-4

Processtep-5

Processtep-6

WBS

Solution items may require different processes

/ activities

Solution items that need to be developed / set-up


Package implementation example



Solution CostingExample: Package Implementation

1. Configuration2. Custom built functionality3. Core module(s) / standard

functionality4. External interfaces5. Internal interfaces6. Data

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Solution CostingExample: Package Implementation SBS

Package Implementation

Configuration

Finance config

Order config

Custom built functionality

Internal Clearing

Order Routing

Core modules

Finance

Order

External interfaces

Payments

Mail

Fleet

Internal interfaces

Finance Order

Data

Converted Ledger

Converted Catalog

Converted Stock

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Solution CostingExample: Package Implementation WBS

Package implementation Requirements Build Test Deploy Configuration

Build Test

Custom built functionality Build Test

Core modules Build Test

External interface Requirements Build Test

Internal interface Requirements Build Test

Data Requirements Build Test Deploy

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Package implementation Configuration Custom built functionality Core modules External interface Internal interface Data

Requirementso Requirements document

Workshops

Document requirements

Review requirements document

Build Test Deploy

Prod

uct v

iew

Proj

ect v

iew

Phases consist of deliverables (e.g.documents) and activities required todeliver the solution elements in the SBS.The level of detail depends on the requiredaccuracy of the estimate and the type ofproject control

Example breakdown till activity level


SBEFixed unit costs / Parameter based costs

Input(Solution Breakdown;

Towers; #; Params)

Parameters / Metrics

Standard components

Estimation Tooling(Input; Historical data;

Parametric models)

Reporting(Effort, Duration, Costs,

Probability, Labor, Quality)

Estimation process

Metrics process

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Solution based estimationOverview

SBS-item-1

SBS-item-2

SBS-item-3

SBS-item-4

SBS-item-5

SBS-item-n

Processtep-1

Processtep-2

Processtep-3

Processtep-4

Processtep-5

Processtep-6

WBS

Streams

SBS

Activity based costs

Fixed unit costs /Parameter based costs

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Developmentapproach



Summary of Key Points

• Architecture and estimation are strongly related• SBE: structured way to link heterogeneous architectures to cost

• Benefits:• Better scope definition more detailed underpinning of estimate• Improved understanding impact of solution on planning & budget• Enhanced traceability between cost and (non-)functional requirements• Better consolidation of partial estimates

• Costing model, Financial model and Pricing are separate models• The price can’t be reduced by just reducing the costs• Costs can be reduced by changing the solution or delivery model

• Healthy projects require transparency and traceability

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Thanks for attending this workshop




Questions



Documents

Solution Based Estimation - iceaaonline.com€¦ · Solution Architecture and Solution Costing. Presented at the ICEAA 2017 Professional Development & Training Workshop -