It is one of the important and successful estimation techniques. In this process the team will first divide the project into multiple activities (tasks) and then estimate each activity separately. All the activity level estimates are then aggregated to arrive at the final project estimate.

Facts

At the end of the project if you do a postmortem it will be noticed that some of the activities got slipped by more than 100% and some got completed well within the estimated time.  The advantage of this technique is the estimation errors on higher side and lower side will get cancelled each other resulting in an overall acceptable outcome.

Let us consider the following example to understand the concept

There are five activities in a project and based on decomposition techniques the estimated completion time is 36 days.  But the project took 40 days to complete which is a variation of 4 days (11.11% extra). If we analyze the variation at activity level, it varies between -20 % to +75%.  The Feature-1 took extra 60% effort whereas Feature-3 took less time than planned.

The Law of Large Numbers

The example shows the importance of decomposition in estimation as we will get the benefit of – The law of Large Numbers

It is a statistical property which highlights the following facts.

• The error in coming up with one big estimate will either fall on the higher side or in the lower side
• The estimation based on decomposition will minimize the estimation errors to a greater extend as some of it on the higher side (Feature-1 and Feature-5) will get neutralized  by those at the lower side (Feature-2 and Feature-3).

Steps to estimate based on Decomposition

Step-1:  Preparing Activity based Work Breakdown Structure (WBS)

At the initial stage of the project, requirements are at a higher level and so it has to undergo further detailing and clarifications. Once the requirements are clarified the team needs to identify multiple tasks involved in the completion of that user story which is known as the activity based WBS.

Step-2: Three-point Estimation for each activity

To simply the process I am recommending Three-Point Estimation.

The team needs to estimate each activity identified in step-1 using “Three point Estimation”.  In this process, team will identify three estimates for each activity – Best Case, Most Likely and Worst Case. The final estimated is derived based on a weighted average as follows

(Best Case + (4 * Most Likely) + Worst Case) / 6

Assume that for an activity the Best Case is 2 days, Medium case is 5 Days and Worst case is 7 days. Then the estimate for this activity based on three point estimation is (2 + [4 * 5] +7) /6= 4.5 days.

We need to find the estimates for each of the activity as mentioned above.

Step-3: Re-composition

This is a simple process which is the SUM of all activity WBS estimates identified in Step-2

Requirement Estimate = Sum (Estimate of each activity)