For all the words written and posted around estimating or not estimating - and I've contributed my share - the basis of estimates has yet to be addressed outside of a few people. @PeterKretzman @aritanninen @kalapaistos@fscavo come to mind.
The gap here is simple. No one seems to ask - or even want to ask - Who are the estimates for? They are not likely for developers, who rightly, so in some cases see estimating as taking away from their valuable development duties.
Who Are Estimates For?
Estimates are for business managers providing the money that appears in the developers paycheck. Estimates are for those same business managers accountable for the Profit & Loss statement of the firm employing the developers writing the code. Those estimates forecast confidence intervals of profit or loss on a project or service before that profit or loss arrives and is irrevocable.
Estimates are for the business marketing staff in a product firm, who are forecasting the "break even" plan for the sunk cost of developing software that will be sold in the market. Whose revenue will pay back the short term loan (line of credit) used to pay the salaries of the developers. Without this forecast, decisions about spending or further spending have to be made in the dark.
Estimates are for the business development staff in a professional services and development firm to forecast the confidence in the assure that the contractual obligations to provide working software will not cost more - including management reserve and contingency - than they quoted the customer during the early phases of the project. Since all forecasting are probabilistic, this confidence is - or should be - discussed as the probability of cost at of below or completing on or before. The dysfunction of using estimates as commitments, is recognized as just that - dysfuntion. But as a dysfunction, it's classified as Bad Management. Don't Do Stop Things on Purpose is good advice for any business.
Estimates are for the internal business finance staff accountable for managing and forecasting costs for internal software development or procurement used to run the business - and likely used to generate revenue - and assure the senior finance people that the "value" produced by this software measured in monetized units of "money" will exceed the cost to achieve that value when the project completes. And some sense of when the date will be, so those monetized benefits can start to appear on the balance sheet using FASB 86 accounting rules.
The estimates are not for the developers
Those talking about #NoEstimates from the developers point of view are talking to the wrong people. They appeat to be talking to their own self-selected group and not the group that provides the money for their work. As my former NASA Cost Director colleague reminds me "follow the money." So follow the money. Unless the developers are providing the money themselves, the question of estimating or not estimating is a self-referencing conversation in the absence of these people. Because of that, those best to say if estimates are of value or not are not in the conversation.
So Back To The Original Question
Ignoring for the moment the observed or perceived dysfunctions found in low maturity software development organizations of the misuse of estimates. Ignore for the moment the preception that making estimates of the future cost, duration, and probabilistic outcomes of development work is part of normal engineering processes. Ignore the emotional rhetoric of the Dilbert approach to management.
The core principle of Microeconomics of software development requires we have some approximation of the future to make decisions about alternatives. The opportunity cost, the trade-space of decision making, requires we approximate the cost and outcomes of our decisions.
Now add the core business process of managing expenditures against a planned and targeted Return on Investment, which has both Value and Cost in it's equation.
Then ask those conjecturing there are:
- Decision making frameworks for project that do not require estimates
- Investment models for software projects that do not require estimates
- Project management approaches of dealing with risk, scope management, progress reporting that do not require estimates
To connect the dots to those conjectures with Microeconomics of software development and ROI assessments of standard business processes.
