Software development can be an expensive luxury for some organizations. The truth is software development is an essential part of an overall business strategy. Even if software costs seem too high, the company gets long-term benefits including automation of business processes, workflow optimization, and many more.

In any project, price is a key factor in determining perceived value. When most businesses begin to consider investing in custom software, the discussion centers on calculating software development costs.

The issue is custom software development costs are rarely predictable. Pricing can vary wildly depending on specific features, i.e., timeline needed to develop, test, and release them.
Even if you come up with an example, there will be nuances. Hence, software development costs for similar solutions will give you little insight to your project costs—unless you ask for help from those who have done it for years!

This post briefly describes how the price of custom software development is formed. Average software development costs help you get a bigger picture on how software development works.

There is no definitive answer on how much your custom software will cost you.

But is it possible to guesstimate costs? Yes. Keep reading.

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Why do average costs of custom software development not apply to all projects? What should you do about this?

Sometimes, there is not much value in trying to give a vague estimate for what software development costs “on average”. In practice, costs of custom features could fluctuate from those of “average” features.

A much more useful approach might be to look where some of the main software development costs typically occur.

Ask yourself the following five questions when planning a software development project:

Custom Software Development Cost

Write down your answers. This list of answers will significantly affect custom software development costs now and in the future. Some of these costs will be immediately obvious. Some costs become evident only after thorough study. This is why it is important to discuss your answers with the development team and put them into perspective as soon as possible.

What factors affect software development costing?

Now when you have a list with your answers, let’s figure out what cost factors are hidden inside. All of them can significantly increase software development costs.

outsource programmingScope and size of software/appThe main cost factors include size and complexity of the planned software. This cost depends on a feature list, number of users, industry regulations, and security measures for safe data storage. (Do you still remember your answers from the 5-point questions above?)

A rich feature list takes longer and/or requires involvement of more people to produce quality source code. Also, increased complexity has a knock-on effect right across the rest of the development and delivery schedule. Greater complexity tends to demand more effort—more structured approach to UX, more coordinated development processes, more rigorous testing, etc.

Moreover, “complexity” and “size” can reside in an app’s back-end. Not only the app itself but also its back-end can be complex, i.e., require considerable effort from the development team.

Consider this: apps that involve many different screens are generally more expensive than those that don’t. And, a small app that involves a complex logic and nuanced behaviors might end up costing more than larger, more basic ones.

Complexity also depends on specific challenges of the chosen programming language(s) or technologies. In its turn, the choice of technological stack depends on aims and feature list.

outsource programmingCompatibility with existing systems and third-party integrationThis is another crucial pricing factor.

A client company can have its own infrastructure and solutions they use daily. In this case, newly developed apps need to play well with older hardware and software architectures. Development teams might have to spend a significant amount of time making seamless integration possible.

The same goes for third-party services. Some third-party systems are quite easy to integrate and work with. Others can be far trickier and more time consuming. In cases when new apps do work with existing user data, migration and storage compatibility issues need to be eliminated. Automated testing processes must also be more robust.

This adds significantly to the delivery timeline.

outsource programmingDelivery timelines and development stylesIn any transaction, cost is closely related to speed of delivery. If you need something fast, it often costs more. Then again, something that demands a lot of time is always more expensive than something quick and simple.

This can be a tricky area. Some details might not be apparent at the very beginning of a project. Things become clear as the project progresses. Developers figure out where smoother sections and potential sticking points might be. The latter might require more time and effort. Be prepared for flexible budgeting.

To handle costs, some clients prefer a so-called “waterfall” model. When using this method, planning, scheduling, and budgeting are determined up front. All flow sequentially. It works best with fixed-priced projects having a clearly defined scope.

The Agile approach leaves more room for adjustment and troubleshooting. Using this approach, a development team divides a project into smaller parts. The team develops these project parts within Sprints so the product owner can see immediate results of the work and even test functionality. The team can also change requirements if needed by the business owner. The result is much smoother. Overall, the delivery experience is better, too.

How much does custom software cost after launch?

Costs of custom software development do not end at launch unless you do not plan to use the new software.

Long-term software costs include maintenance. Costs are based on initial development budget, ranging from 15 – 20% per year.

Important maintenance and support considerations include:

These activities can demand a surprising amount of time and energy resulting in an increase of total cost of ownership (TCO). It is always wise to keep the TCO impact in mind when considering custom software development costs and budgeting.

Should a company hire the same outsourcing team or an in-house developer? The answer depends on scope of maintenance work.

One thing for sure is the company needs to prepare a software maintenance strategy to calculate future costs of custom software development and maintenance more precisely. The strategy must be in place before the guarantee period ends. Software maintenance is a regular activity.

Software development cost estimation: a lot to consider!

As you can see, costs of custom software development have no simple or straightforward answer. This applies to cheap software development for a quick and simple project. And is relevant for something far more customized, ambitious, and complex.

You need to consider and discuss with the development team a wide range of factors that directly affect custom software development costs. These factors include but are not limited to:

The key to successful outsourcing is knowing exactly what you want beforehand and to have a defined budget range for it. There will likely need to be some adjustment and compromise on both counts, but it is a good place to start the conversation.

Of course, if you have no clear plan, the development team can help you out. A skilled development team will be able to put your ideas to the best possible use within your allocated budget.

Here is a quick recap of questions for you to figure out software development costs:

1) Do you have a clear feature list? Do you need help to figure it out?

2) Are there any regulations in your industry?

3) Do you need to store data?

4) How many users are going to use your software? Do you plan to expand?

5) Do you want to outsource software development? Or do you need software maintenance, too?

If you need help in working out exact numbers, contact us for your free quote. Let’s discuss your vision!

FAQs:

How much does software development cost?

You need to multiply the number of development hours by a company’s hourly rate to get a cost estimate.

The number of hours on a project is estimated by a development company. The hourly rate depends on its geographical location.

Do you want an estimate? Contact us and get it. It is non-binding for you!

Can I capitalize software development costs?

Yes, this is possible. Companies can capitalize costs to develop internal-use software. Expenses can include coding, testing, and software installation. However, we advise you to consult your accountant to comply with the legislation of your country.

How do hourly rates for custom software development differ from “average projects”?

Not much. Hourly rates depend on a company’s location and focus rather than on project complexity or degree of customization

How does a company’s location affect software development costs?

Directly. The prices grow from East to West. Eastern-Asian developers have the lowest hourly rates; US / Australian developers have the highest.

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I have a limited budget. What should I do if software development costs significantly exceed it?

In this case, we suggest you start small. Discuss your financial concerns with the team and find out what is possible with your budget. In case of a limited budget, our development team usually focuses on delivering basic design, flexible architecture, and core functionality. You can add other features later when you expand your budget

We do not suggest you hire the cheapest team only because they have promised to deliver the entire scope while the other team refused.

If you need help in working out exact numbers, contact us for your free quote. Let’s discuss your vision!