Direct and indirect Cost Estimation Methods (2)

Indirect Estimations with Story Points

Any direct estimation (see: Expert Estimations) depends on the estimator’s individual skills and experiences and does usually not consider the capability of the team planned for the development. Contrary to this, indirect methods first determine the size of the objects respectively requirements to be developed and then put it in relation to empirical values of, ideally, the same team from earlier sprints. 

In case of the story points method, estimators rate the size of user stories relative to each other and not in an absolute unit of measurement. Example: “The selection of the destination airport and the date is a one. Relative to this, the query for available flights is a three. Accordingly, booking a selected flight is an eight.” The scale of story points is aligned to the Fibonacci sequence: 1, 2, 3, 5, 8, 13, and so on. This avoids many discussions about details and makes decisions between the valid numbers easier. At the same time it is obvious that, using this scale, the accuracy of estimations decreases with the increasing size of stories.

The calculation of the prospective development costs on basis of story points also requires an empirical value of how many story points the team can develop per increment or sprint under comparable conditions. This empirical value is called velocity and is updated after each completed sprint by determining the size of all successful developed stories in relationship to the required time.

Advantages of the story point method are its quick use and that it is being based on the current team performance instead of the ability of individual experts. Due to the periodical recalibration, velocity can be fit to changes in team composition or other basic conditions within few sprints.

A disadvantage is the detail level of the object to be estimated: a user story which describes a requirement by only one sentence. Any unexpected complexity first discovered during the implementation often results in exceeding the estimated effort.

Alternatives:

    Expert Estimations
    Indirect Estimations by measuring the Functional Size

Book recommendation: "Cost Estimation in Agile Software Development"