Causes of Inaccurate Software Development Cost Estimates

Software Development Cost

When you’re working on a software project, you can get into trouble if your cost estimates are wildly off. It’s not just about the money for the initial development work; it’s about everything else that goes into building a piece of software. 

Let’s say your client is going to build a new website and they ask you to estimate how long it will take. You make a software development cost estimate based on past experience and general knowledge of what goes into building websites (like HTML5). Your answer might be something like “about six weeks.” But then they tell you they want to add some new functionality or address user needs (or both). So now we have a revised estimate: “about eight weeks.” If we assume that developer productivity hasn’t changed much over time (it has), then those two estimates should be pretty close!

Client Knows All The Answers

There is an assumption that the client has all the answers at hand — about, for example, what the project is going to do, who the users will be, what the desired functionality will look like (including any APIs or libraries that are required), etc.

This may or may not be true. Clients may not know what they want until they see it. There is a possibility that they don’t have time to think about it much before showing up on your doorstep with their budget already in hand and a list of requirements ready to go off. They’re just too busy with other things (like running businesses) and don’t have time for this kind of thing. Hence, you will not always get all your queries answered which will impact software development costs. 

Software Development Team is Super Duper Confident

The software development team assumes that it knows how to build most of the required functionality from scratch. And if they don’t know something, they assume they can learn it quickly.

For example, a client might have an existing application that uses a database as its main data store and an agile tooling pipeline for managing changes in that data store—but the client might not fully understand what those tools are doing or why they’re important for their business processes. If your team doesn’t have any experience with these kinds of environments (and by virtue of being new to them), this will affect how you estimate costs for building new features into your product or service offering.

The Development Team Can Magically Predict Future Events

When you’re trying to estimate the software development cost, it’s easy to fall into the trap of thinking that you can predict what will happen in the future. For example, if your project has an estimated budget of $100 million and takes two years to complete, then your team might think they can predict how much time each stage will take.

But this isn’t possible! Software projects are unpredictable by nature. There are many unknown factors involved in any given project that cannot be accurately predicted or forecasted based on past data points (such as previous experiences). If we could accurately predict these things then why would companies continue investing billions into them?

Client Wants To Expand Functionality

At some point in time the client will want to expand functionality and/or address new user needs (or problems). There are many reasons why this can happen:

  • The client may be constrained by resources such as personnel, budget or equipment. They do not have the ability or time to develop a robust product that meets all their requirements.
  • The developer has limited experience with this type of software development and does not know how much effort it will take for them to complete the project successfully

Making Cost Estimates Based on Over-Optimistic Assumptions.

The following are some common causes of inaccurate cost estimates:

  • Using overly optimistic assumptions about what other people will charge for similar services (e.g., estimating that someone else will make all the changes required by your project)
  • Making assumptions about future events that aren’t likely to happen (e.,g., predicting an increase in demand)


In conclusion, we can’t say that one cause of inaccurate software development cost estimates is more significant than the others. All five factors play a role, but none of them are bad or good. They just are what they are. The key thing is to understand how each factor influences your project and make informed decisions based on that knowledge.