How To Accurately Estimate Projects for IT Services and Consulting

In the worlds of IT services and consulting, it’s not enough to provide great projects that benefit clients. These projects need to be planned in detail so that companies can keep budgets and timelines in check while providing clients with work that meets their high expectations. But in a hectic, fast-paced industry, it can be easy for teams to devalue the estimation phase.

When organizations rely on spreadsheets to arrive at the appropriate scope and price of a project, or build proposals without the support of experts and reliable data, the result is usually bad estimates that hurt the profitability and effectiveness of projects.

The ability to accurately estimate projects that align with what will actually be delivered translates to healthy profit margins, satisfied clients, and team members that aren’t under constant stress from runaway projects. The steps in this blog will help you create estimates you can count on.

Common Project Estimating Pitfalls

Before we get into the step-by-step process of project estimation, here are some of the ways inaccurate project estimates can impact your business.

• Scope creep expands project tasks and costs beyond the statement of work
• Insufficient budget that can’t compensate for the cost of team member salary
• Confusion over project task needs and timelines impacts due dates and deliverables, frustrating customers
• Mismatched task needs and resource skills undermine the quality of projects
• Impractical deadlines don’t align with team capacity and can’t be met, even with sacrifices
• A lack of risk management increases the likelihood of mistakes that compromise work

Building a project estimate isn’t just about coming up with a sensible price – it requires using data to understand and mitigate these risks. A good project estimate accounts for the fact that nothing ever goes precisely to plan, and has built in contingencies that provide multiple paths to success. Knowing that issues may arise in your project, and creating a plan to deal with them is a critical part of the risk assessment and contingency planning aspects of good project estimation.

7 Steps For Accurate Project Estimates

Whether you are looking to improve your existing estimation process already or you are seeking a new estimation framework to orient your bid teams around, the following steps will help you reliably predict project demands before you begin.

1. Look At Past Projects – Use the hours logged in previous similar projects to determine how long future projects will likely take. Importantly, resources must accurately log their time worked for projects in order to have a true understanding of project timelines. This should then be kept in a database of actual hours worked, which can be compared to past estimates for refinement of estimates in future projects. Over time, more hours logged and more robust data will lead to more accurate estimates. 

2. Analyze Tasks In Detail – Looking at projects without a granular focus on team members and assignments will never give you the right estimate. Instead, managers should assess every task that makes up the project, determining hours needed to complete each part of the project, as well as the resources needed to support that work. When totalled up, this will provide an accurate estimate that reflects the realities of work.

3. Include Risk Assessment – Every project has risks, even ones that have been done over and over. These risks include losing team members, experiencing sudden delays in timelines, and missing due dates that impact both your company and your client. Every project will have its own unique risks, but having a realistic risk assessment that your team members understand will help them make informed decisions that provide the best chance of consistently healthy project outcomes.

4. Create A Contingency Plan – Estimates should plan for the best, but also prepare for the worst. Create a contingency plan that will go into action in the event that something goes wrong. This includes extra hours of work and more resources, as well as the additional funds that are kept to the side to pay for these sudden needs. While these plans may never be needed, they will make a huge difference in the success of your projects and help make unexpected complications into expected changes in direction.

5. Consult Delivery Experts on Estimates – Ensure that pre-sales activities like scoping and estimating include experts from the delivery team who can vet proposals and make sure the underlying plan is realistic and achievable. ​As businesses grow, sales and delivery teams can become increasingly siloed from each other, creating a promise-makers/promise-breakers paradigm that is unsustainable for both the business and its clients. Accurate scopes require close collaboration on cross-functional bid teams. An unachievable scope will lead to an inaccurate estimate, and the business will be sure to lose out on profit.

6. Include the Finance and Legal Team – Don’t let your project estimation work be done in a bubble. If your company has a finance and legal team, include them in the estimate process at the right time so they can provide any additional tasks that need to be part of the project – that way these essential tasks which are often required for compliance reasons don’t unexpectedly create complications later. These teams can also give feedback from a unique point of view and strengthen estimates in regards to the company’s fiscal and legal requirements.

7. Put Someone in Charge of Estimates – Estimating projects is too important of a job for it to be passed around between team members without a plan. Instead, businesses should have a designated project estimator position, placing one experienced individual in the role to ensure estimates are completed accurately and in a timely manner. This may be a full-time position if the company is big enough, or it may be part of a person’s official role at the company. In any case, this will help estimates improve through repeat experience and increased clarity into the needs of the role.

Elevating Project Estimations in IT Services and Consulting with the Kantata PS Cloud™

In the nuanced world of IT and consulting, the precision of estimates often steers the course of projects. An accurate estimate isn’t just a prediction; it promises delivery, efficiency, and client satisfaction. The Kantata Professional Services Cloud revolutionizes this aspect of the industry. It offers a comprehensive view of projected outcomes with tools like the Task tracker to quickly build your estimates, advanced resource allocation to get early views into your resource capacity, and the Estimate Overview Tab for consolidated project summaries to share internally or with your clients. Kantata enables decision-makers to confidently shape their estimates, ensuring they meet and exceed expectations.