Cost Estimator

Cost Estimator

Provides frameworks for estimating infrastructure costs, development effort, and total cost of ownership (TCO) for technical projects.

When to Use

• Planning infrastructure budgets
• Evaluating build vs. buy decisions
• Projecting costs at different scale points
• Comparing technology options by cost
• Creating business cases for technical investments

Cost Categories

Total Cost of Ownership (TCO)

TCO = Infrastructure + Development + Operations + Opportunity Cost

┌─────────────────────────────────────────────────────────────────┐
│                    TOTAL COST OF OWNERSHIP                       │
├─────────────────────────────────────────────────────────────────┤
│                                                                  │
│  Infrastructure    Development    Operations    Opportunity      │
│  ────────────────  ────────────   ──────────    ────────────     │
│  • Compute         • Engineering  • Support     • What else      │
│  • Storage         • QA           • Monitoring  • could team     │
│  • Network         • DevOps       • On-call     • be building?   │
│  • Third-party     • Management   • Training                     │
│    APIs/SaaS       • Contractors  • Incidents                    │
│                                                                  │
└─────────────────────────────────────────────────────────────────┘

Infrastructure Cost Reference

Cloud Compute Pricing (2024-2025)

AWS EC2 On-Demand (US regions)

GPU Instances

Savings Options

Database Pricing

Managed Database (AWS RDS PostgreSQL)

Add for storage: $0.115/GB/month (gp3) Add for IOPS: $0.02/IOPS/month (over 3000 baseline)

Redis/ElastiCache

Storage Pricing

Network Costs (Often Overlooked!)

Development Cost Estimation

Engineering Cost Framework

Development Cost = (Hours × Hourly Rate) × Complexity Factor × Risk Buffer

Hourly Rate (Fully Loaded):
- Junior Engineer: $75-100/hr
- Mid-level Engineer: $100-150/hr
- Senior Engineer: $150-200/hr
- Staff/Principal: $200-300/hr

Complexity Factors:
- Greenfield, known tech: 1.0x
- Existing codebase, known tech: 1.2x
- New technology for team: 1.5x
- Complex integrations: 1.3x
- Regulatory/compliance: 1.4x

Risk Buffer:
- Well-defined requirements: 1.2x
- Ambiguous requirements: 1.5x
- Experimental/R&D: 2.0x

Story Point to Cost Mapping

Team Cost Calculator

## Monthly Team Cost

Engineering Team:
- 2 Senior Engineers × $15,000 = $30,000
- 3 Mid-level Engineers × $10,000 = $30,000
- 1 Engineering Manager × $18,000 = $18,000

Overhead (benefits, tools, etc.): 30%
Monthly Burn: ($78,000) × 1.3 = $101,400

Annual Team Cost: ~$1.2M

Build vs. Buy Analysis

Decision Framework

Build vs Buy Decision Matrix:

                    LOW Differentiation    HIGH Differentiation
                   ┌────────────────────┬────────────────────┐
    HIGH Volume/   │                    │                    │
    Usage          │     Consider       │       BUILD        │
                   │      Build         │    (competitive    │
                   │   (cost savings)   │     advantage)     │
                   ├────────────────────┼────────────────────┤
    LOW Volume/    │                    │                    │
    Usage          │       BUY          │       BUY          │
                   │   (no question)    │  (then consider    │
                   │                    │   build if scales) │
                   └────────────────────┴────────────────────┘

TCO Comparison Template

## Option A: Build Custom Solution

### Initial Development
- Engineering time: X months × $Y/month = $Z
- Infrastructure setup: $A

### Ongoing Costs (Annual)
- Infrastructure: $B
- Maintenance (20% of dev time): $C
- On-call/support: $D

### 3-Year TCO
Year 1: $Z + $A + $B + $C + $D
Year 2: $B + $C + $D
Year 3: $B + $C + $D
Total: $XXX

---

## Option B: Buy SaaS Solution

### Initial Costs
- Implementation/integration: $X
- Training: $Y

### Ongoing Costs (Annual)
- License fees: $Z/year
- Per-user costs: $A × users
- API costs: $B

### 3-Year TCO
Year 1: $X + $Y + $Z + $A + $B
Year 2: $Z + $A + $B
Year 3: $Z + $A + $B
Total: $XXX

Common Build vs Buy Scenarios

Cost Projection by Scale

SaaS Application Cost Model

Cost Per User Benchmarks

E-commerce Cost Model

## Monthly Infrastructure Cost by GMV

$0-100K GMV/month:
- Basic infrastructure: $500
- Payment processing (2.9%): ~$2,000
- Total: ~$2,500

$100K-1M GMV/month:
- Scaled infrastructure: $2,000
- Payment processing: ~$20,000
- Fraud protection: $500
- Total: ~$22,500

$1M-10M GMV/month:
- HA infrastructure: $10,000
- Payment processing: ~$200,000
- Fraud/security: $5,000
- CDN/performance: $3,000
- Total: ~$218,000

Hidden Cost Checklist

Often Missed in Estimates

Infrastructure:

• Data transfer costs (egress)
• Backup storage
• Log storage (CloudWatch: $0.50/GB)
• SSL certificates
• DNS queries
• Load balancer hours

Development:

• Code reviews (add 20-30% to dev time)
• Documentation
• Testing infrastructure
• CI/CD pipeline (GitHub Actions: $0.008/min)
• Staging environments

Operations:

• Monitoring tools (Datadog: ~$15/host/month)
• Error tracking (Sentry: $26+/month)
• Log management
• On-call compensation
• Incident response time

Third-Party Services:

• Email (SendGrid: $0.00025-0.001/email)
• SMS (Twilio: $0.0075/message)
• Video (encoding, streaming)
• Maps/geocoding (Google: $7/1K requests)

Cost Optimization Strategies

Quick Wins

Architecture Optimizations

Cost Estimation Templates

Project Budget Template

# Project: [Name]
# Duration: [X months]

## Development Costs

| Phase | Duration | Team Size | Cost |
|-------|----------|-----------|------|
| Discovery/Design | 2 weeks | 2 | $X |
| MVP Development | 8 weeks | 4 | $X |
| Testing/QA | 2 weeks | 3 | $X |
| Deployment | 1 week | 2 | $X |
| **Total Development** | | | **$X** |

## Infrastructure Costs (First Year)

| Component | Monthly | Annual |
|-----------|---------|--------|
| Compute | $X | $X |
| Database | $X | $X |
| Storage | $X | $X |
| Network | $X | $X |
| Third-party APIs | $X | $X |
| Monitoring/Tools | $X | $X |
| **Total Infrastructure** | **$X** | **$X** |

## Ongoing Costs (Annual)

| Category | Cost |
|----------|------|
| Infrastructure | $X |
| Maintenance (20% of dev) | $X |
| Support/On-call | $X |
| Tool licenses | $X |
| **Total Annual** | **$X** |

## Summary

| Metric | Value |
|--------|-------|
| Total First Year | $X |
| Annual Run Rate | $X |
| 3-Year TCO | $X |
| Cost per User (at scale) | $X |

Quick Estimate Calculator

## Quick Infrastructure Estimate

Inputs:
- Expected users: [X]
- Requests per user/day: [Y]
- Data storage per user: [Z GB]
- Growth rate: [W%/month]

Calculations:
- Daily requests: X × Y
- Monthly requests: Daily × 30
- Required compute: (Monthly requests / 100K) × $50
- Storage: X × Z × $0.10
- Database: (X / 10K) × $200
- Estimated monthly: Compute + Storage + Database × 1.3

12-month projection with growth:
Sum of (Monthly × (1 + W%)^month) for months 1-12

References

• Cloud Pricing Calculator - Detailed cloud provider comparison
• Build vs Buy Framework - Extended decision framework

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