September 28, 2023

Reasons Why You Pay for a Software Estimate

When you see McKinsey reporting that close to 50% of software development projects go over budget estimates, it can make you nervous and hyper-focused on the budget for your next software project.

One of the best ways to avoid unknowns and minimize budget creep is to complete a formal estimate and discovery process. That said, when clients learn that it will cost money to complete discovery and get an accurate estimate, many of them reply with the same question:

Why do I have to pay for a software development estimate?

While it may seem counterintuitive to pay someone to give you an estimate, recognize that you’re not just paying for a random quote. You are paying for a valuable service.

When you work with a software development company to create a detailed estimate, they will take you through the discovery process. During this process, they will: 

  • Become intimately familiar with every aspect of your business related to the project.
  • Conduct interviews with employees, customers, and leadership teams. 
  • Build an inventory of your existing technology stack. 
  • Identify the tech maturity level and capabilities of your business.
  • Verify potential unknowns that could come up during the project.

At the end of the discovery process, not only do you get a formal estimate of the budget and project timeline, but you also get a step-by-step plan of what needs to happen in the business to implement the software solution successfully.

As you can see, this service includes a lot of time and knowledge from business and technology experts. The fee you pay for a detailed estimate compensates them for their time and effort.

But does their effort translate into real benefits for your business?

To answer that question, let’s review the benefits you get from paying for an estimate.

4 Benefits from Paying for a Software Development Estimate

#1: De-risk Your Software Development Investment 

With software development, there’s always a degree of risk, whether that be the risk of building a product that the market doesn’t want or developing a solution that will not solve your business problems.

Of course, you cannot know the level of risk unless you fully analyze your business, the market, and software development options. 

When you work with a software development company, part of the estimate and discovery process includes investigating and analyzing these elements before even starting the actual project. Taking the time and spending the money to conduct this analysis can save you significantly down the road.

For instance, let’s say that even though it will cost money, you agree to work with a software development partner and go through a formal discovery process. What you want to do is have this tech partner modernize your business and get rid of all the legacy tools you believe are tanking your profits.

The software development company starts their analysis of your business, and it doesn’t take long before they uncover some key problems that have nothing to do with your legacy equipment and everything to do with your business processes and workflows.

It turns out your team members don’t monitor data the same way companywide. Many teams are running reports on outdated information, and none of the reports have consistent data about your business. All of these limit forecasting capabilities, create inconsistencies with revenue reports, and cause repetitive errors in customer service.

Instead of spending hundreds of thousands of dollars on brand-new equipment, results from the discovery process suggest you should reevaluate business processes and align data monitoring practices first. From there you can better determine whether your legacy system needs to be completely replaced or simply updated.

By paying for discovery, you just saved loads of cash and uncovered the root problem that’s the real risk to your business. 

#2: Ensure Ideas Are Valid and Fit Your Market

Even if you’re not a tech expert, you understand your company and your customer, so you can come up with ideas on products or services that could help you be more successful. But if you have a new idea you’ve never tried, it can feel risky to go through with it as you have no proof of concept.

This situation is the ideal time to invest in a formal estimate and discovery process. Not only can it de-risk the situation, as described in the previous section, but it can help you validate the merit of your software development ideas and verify if it’s going to be a good fit in your current market.

For example, imagine your team members want to build a new mobile app that helps your customers buy a specific group of products more easily. Since your company sells a lot of products, customers often miss out on certain items, so it makes sense to provide an easier way for customers to find what they need.

The problem is your company has never built an app like this, but your team says everyone has an app, so how hard can it be? Now you have the choice: spend money for a formal discovery process, or pay someone to build the app as fast as possible.

Instead of choosing the formal discovery process, you decide to just hire a team to get the app built. 

Four months later, you launch the app and run marketing campaigns to attract interest. After a solid week, not a single customer has made a purchase. 

It turns out that the group of products never really sold well in the first place. Creating an app to make the products easier to find didn’t address the problem that no one wanted to buy them.

Now, not only have you lost 4+ months building an app that no one uses, but you also wasted a significant amount of money to pay for app development and marketing campaigns. 

Had you decided to spend the money and do a formal discovery, you would’ve learned that this idea was never a good fit for your market. From there you could have pivoted to a better concept that would have brought in more revenue.

#3: Get a Step-by-Step Software Plan

Having a team of experts build you a plan or a technology roadmap may be the most valuable benefit to come out of the discovery process.

If you’re unfamiliar with the term, a technology roadmap is a practical plan that establishes where you are today, where you want to get in the future, and the steps you will have to take to get there successfully. Such steps could include improving business processes, updating workflows, migrating to the cloud, upgrading legacy systems, building new digital products, or going through a digital transformation, to name a few.

Having this plan completely fleshed out in a shareable format gives visibility to everyone at your company. Such visibility can make it easier to commit to the plan, reference it when needed, and maintain momentum as you strive to achieve your software development goals.

Items included in a step-by-step software plan generally include the following:

  • Statement of work
  • Explanations of solution features
  • Integration services
  • Assumptions
  • Risks
  • Delivery process and expectations
  • Timeline & technology roadmap
  • Budgets
  • Wireframes & mockups
  • User’s journey & experience flow
  • User research
  • Solution development agreements

You’ll notice that many of these items cover the typical topics you would present to your leadership team if you were giving a software project proposal

At AltSource, we include these items deliberately because we know the type of information you’ll need to get approval for your software project. While it does cost money to complete the in-depth discovery process and get this information gathered, having all this information can significantly increase your chances of getting full project and budget approval for your next software development proposal.

#4: Build a Professional Relationship with a Potential Software Partner

Another important benefit that you will gain from paying for a software development estimate includes the opportunity to test drive your professional relationship with a potential software partner.

By only committing to the discovery process, you are not yet pot-committed to any one software development partner. Therefore, you can think of the discovery process as a trial period.

During this time, you must verify if the partnership and communication style will work to your benefit. If you notice any red flags, such as a lack of prompt replies to your requests, a lot of rescheduling of important meetings, or the inability to give you definitive answers, then you may want to question whether you want a relationship with this company after the discovery process has concluded.

That said, if the discovery process goes well and you find yourself in sync with this software development company, then you may have just found a long-term software partner to help support your ongoing business goals. It’s a win-win in getting the plan you need and the right people to implement that plan