A project will have a specific budget which must include all the costs of the project. This will include

• Software licenses
• Hardware
• Human resources / wages
• Running costs of the developer
• Profit

The hardware and software costs are fairly straight forward and are unlikely to change much. This is a well known static cost and can be easily estimated. Human costs are the most variable and also will account for the majority of the budget. The staff cost will be based on the number of people on the project, the amount they earn, the length of the project and also any contractors which are used. This cost can be vary variable for example what happens if someone gets a pay rise or someone leaves and you have to get someone more expensive or a contractor. What happens if the project is delayed. It is important, therefore, to know up front which staff you will need. Also it is important to build in some flexibility based on a risk assessment.

Profit is also very important for a project. The developer will want to make a profit as well as making enough to cover their costs. It is up to the company what their profit margin will be but it is very important that it is not too small. After all it is unlikely to be able to get extra money out of the project once it has started so if it does overrun then the extra costs would cut into the profit. If there is no more profit left then the company will make a loss.

Economic feasibility will consider the overall budget and the overall costs. It will then decide if enough profit can be made to make the project worth doing. If they make a loss or just break even then it would not really be worth while taking the project on.