Type of Estimate

An estimate, in the context of information technology, refers to a calculated approximation of effort, time, resources, or cost required to complete a specific task or project. It is an essential component in planning and managing IT projects, enabling organizations to allocate resources efficiently and make informed decisions.


Estimating is an integral part of various stages in the software development lifecycle, such as project initiation, planning, execution, and monitoring. IT professionals, including custom software developers and project managers, rely on different types of estimates to minimize risks and ensure successful project outcomes. These estimates provide a basis for budgeting, scheduling, and resource allocation, allowing organizations to effectively manage their IT initiatives.


Accurate estimates play a crucial role in the success of IT projects. They offer several significant advantages, including:

  1. Planning and Budgeting: Estimates enable organizations to plan and allocate resources effectively, ensuring that projects are completed within set financial limits. By estimating costs and efforts, organizations can make informed decisions and optimize their budget allocation.
  2. Risk Management: Estimating helps in identifying potential risks and challenges associated with IT projects. By considering uncertainties, project managers can develop contingency plans, mitigating the impact of unforeseen events. This enables proactive risk management and ensures project success.
  3. Resource Allocation: Estimates assist in defining the number of resources required to accomplish project tasks. They provide insights into capacity planning, allowing organizations to assign suitable personnel and manage workload distribution efficiently. Effective resource allocation minimizes bottlenecks and maximizes productivity.
  4. Stakeholder Communication: Estimates facilitate effective communication with stakeholders, including clients, partners, and team members. By providing realistic expectations about project timelines, costs, and outcomes, estimates build trust and foster collaboration, leading to successful project outcomes.


Different types of estimates find application in various aspects of IT project management. These include:

  1. Effort Estimation: This type of estimate calculates the amount of work required to complete a specific task or project. Effort estimation is used to allocate resources, estimate project timelines, and determine project feasibility. Techniques such as Function Points Analysis and Expert Judgment are commonly employed for effort estimation.
  2. Time Estimation: Time estimation focuses on determining the duration needed to complete project tasks. It helps in creating reliable project schedules and ensures that projects are delivered within set timeframes. Techniques including PERT (Program Evaluation and Review Technique) and Three-Point Estimation are frequently used for time estimation.
  3. Cost Estimation: Cost estimation involves forecasting the financial resources required to successfully deliver an IT project. It considers factors such as labor costs, infrastructure expenses, and software licensing fees. Techniques like Bottom-Up Estimation and Analogous Estimation are commonly utilized for cost estimation.


In the dynamic field of information technology, accurate estimates are fundamental for successful project management. By providing insights into effort, time, resources, and costs, estimates allow organizations to make informed decisions, manage risks, and optimize resource allocation. From software development to project management, the use of different types of estimates ensures that IT projects are efficiently planned and executed. Emphasizing the importance of estimating in the IT sector enables organizations to achieve their strategic objectives and deliver solutions that meet client expectations.

This glossary is made for freelancers and owners of small businesses. If you are looking for exact definitions you can find them in accounting textbooks.

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