Since I work for a software metrics and estimation company, many people ask me questions regarding capacity planning and demand management. Most of the project managers that I speak with are using project portfolio management tools for very detailed, task-level resource capacity planning. They spend a lot of time planning the person hours for each task and then these task-level plans are prioritized and viewed across the organization. These are useful tools and methods and they usually require a sizable investment.
The problem is that many of these project managers don’t have a good way to support demand management. That is to say that they aren’t able to accurately estimate the key drivers that go into their PPM tools. They need to be able to answer key questions like: Should we commit to 6 months or 9 for the project duration? Do we need 10 software developers or 20 to finish in 9 months? How much is the overall project going to cost? What alternatives do we have? Has anyone ever achieved that duration in the past? Should we even go forward with this project; what is the risk?
Oftentimes the project manager comes up with this information informally based on experience. Unfortunately, when they don’t use a scientific approach to estimating, they leave out key factors that affect the estimate and project success, like project complexity, team efficiency, and overall project uncertainty.
This is where top-down estimation methods come into play - they leverage historical data and forecasting models to estimate software development projects. The best top-down methods allow for re-forecasting when requirements change; they take into account project complexity and team efficiency; and they allow the user to plan for uncertainty. They actually help the analyst or project manager assess and manage the project risk, before the project even starts and before any detailed planning occurs. These approaches also allow for sanity-checking with industry, and provide the ability to look at project trade-offs when big decisions need to be made.
Some of these top-down estimation tools, like SLIM-Estimate, work with PPM tools so the project manager can assess the overall project risk before trying to figure out the person hours for each task. When this happens, the project manager has the best of both worlds!