Custom Software Development Costs – Your Budget Guide for 2024

Avantika Shergil By Avantika Shergil  |  Jun 15, 2023  |  Software Development
Software Development Cost

The cutthroat competition in the present day has made companies choose custom software development over anything else. The sole reason for that is the user experience that every company wants to tap uniquely. A customized one would reflect a specific brand as per the business and that is why most entrepreneurs prefer a tailored solution. But then, entrepreneurs must learn what’s custom software development, how much it costs, and what are outcomes you can expect. This estimate software development cost guide will help you gain confidence in dealing with the market.

Average Custom Software Development Cost

The average cost to develop custom software can start from $20,000 and go as high as $500,000 depending on features and functionalities. SaaS-based software Product development cost starts from $50,000 to $200,000. There is no universal price when the concern is about building custom software, as various factors affect the development process. There are many factors that help to break down the overall cost estimation of custom software development.

Let’s understand them in detail.

Software Development Cost Estimation by Size of the Company

The size of the company also matters because a smaller size company would require a simple software tool whereas an MNC would have more data and complex operations and, therefore, it would require multi-tier software solutions.

Here are the general types and their impact on the software development cost.

For Startups:

Startups cannot drain their pockets on building custom software and may opt for cost-effective solutions. Custom software development for startups often costs between $10,000 and $100,000, depending on project complexity and the business requirements of the brand.

For Small & Medium-Sized Businesses:

SMBs often devote greater resources to software development. Cost to develop Custom software for SMEs can range from $50,000 to $500,000 or more, depending on the scope and complexity of the project. They mostly target solutions as they need to offer a seamless experience to their users.

For Enterprises:

The custom software development cost for large corporations can be quite higher when compared to SMBs and Startups. One of the prominent reasons for higher costs is there is a lot of data integration and error handling, which can raise the cost of software development. Large corporate software projects with complex needs and broad functionalities may incur much higher development expenses. Enterprise software initiatives might cost anything from $100,000 and several million dollars.

Software Development Cost Estimation by Type

A lot depends on the type of software solutions or tools. For instance, a website would cost you a bit lesser as compared to a full-fledged mobile app solution. Hence, the costs depend on which type of software solution you are seeking for. Broadly, on the market, you have three types of software solutions for custom development.

  • Web Applications: The cost of developing a custom web application range from $10,000 to $500,000 or more, depending on the features and complexity. Cross-platform software development can increase the development cost.
  • Mobile Apps: The cost of developing a custom mobile app range from $20,000 to $250,000, depending on the platform (iOS, Android, or both), features, and design complexity. Building a hybrid application can be quite expensive compared to a native application.
  • Desktop Applications: The cost of developing custom desktop software starts from as low as $10,000 to as high as $250,000, depending on the requirements and complexity.

Here are the overall (rough) costs of some of the major enterprise-level software solutions:

  • A CMS software could cost you somewhere between $5000 to $50000
  • A SaaS could cost you somewhere between $50000 to $300000
  • An overall mobile app cost could go between the range of $10000 to $200000
  • A healthcare mobile app could cost you $10000 to $500000

Software Development Cost by Location

Geographical location impacts the cost of building custom software due to variances in labor rates. The cost of the software depends on where you are building or from which country a custom software development firm you are hiring.

The following are some general software development cost breakdown by location:

North America and Western Europe: Development costs in these regions are often higher. You can get software development companies from the US or from the UK on board but with hourly prices ranging from $100 to $250 or more.

Eastern Europe, Latin America, and Asia: often have lower development expenses, with hourly prices ranging from $30 to $100.

Key Custom Software Development Cost Factors

It is impossible to estimate the total cost of software development without understanding the factors that can impact the overall cost. Understanding the average price of custom software development can make it easy for you to determine the budget for creating custom software.

Here are some of the best factors that can impact the cost of custom software development.

Target Platforms

Selecting the right platform to build the software is the first and foremost factor to consider, as it is essential to build the software based on the target audience. Selecting the right platform must be based on assessing the customers Therefore, most software development companies tend to focus on the target audience to provide the best software development solutions.

Software Size

The size of the custom software has a direct impact on the cost. at simple words, larger software projects demand greater investment. In addition, the goals and specific needs of the company can also influence the budget for custom software development.

In most cases, software product development for startups requires basic software as they want to test its impact on the limited user base. At the same time, large brands want to hit the market hard and gain profits from the created software. The complexity of the project or the number of features, and software development methodologies directly impact the cost.

Complexity

The cost of software development is heavily influenced by complexity. Let us consider you want to build software that can maintain user profiles and provide customized options, payment upgrades search filters, and other options which can increase the cost. Creating futuristic software can be quite expensive as it will demand dynamic user interfaces along with a wide range of features. The complexity of the database develops as it accommodates compatibility needs and updates, affecting the overall cost.

Technology Stack

The tech stack used for custom software development substantially impacts the project’s cost. Programming languages, frameworks, libraries, and tools all impact development time, necessary knowledge, and resource availability, which ultimately affects the cost of making software.

Popular or proprietary technology may necessitate hiring competent developers, raising expenses. Certain technologies offer pre-built features, minimizing the need for custom development and potentially saving costs. Costs may be impacted by compatibility with existing systems, as integration work may be required. It is critical to carefully analyze the technological stack in order to balance project requirements, financial constraints, and long-term scalability, which will ultimately influence the cost of bespoke software development.

Creative Design

Creative design is a fun part of software development and the difference between custom software vs off-the-shelf. It includes selecting typefaces, color palettes, graphics, and even creating custom designs and animations to improve your software solution’s visual appeal. The recommended budgeting for design-related tasks should be around $10,000 to $20,000. This sum covers the design process, including feedback iterations and prospective redesigns. The project fee will rise correspondingly if you need more design time or elaborate custom artwork.

Integration with other Systems

When external software is integrated into the software development life cycle, it introduces uncertainty into the equation. The simplicity of information interchange and compatibility with different systems might vary greatly.

While some integrations are simple, others can be rather difficult. Integrations with payment providers such as PayPal or Authorize.Net and credit check services such as Equifax or Experian are typically quite simple to incorporate within the software. Integration of such tools could come with some extra cost depending upon their software project pricing structure.

Migration of Existing Data

Manual data entry may not be possible if you have data in an existing system that needs to be transferred to your new application. In such instances, migration is required.

The migration procedure is simple but includes numerous decisions and considerations because the two separate systems can store data differently. After the program, migration operations are typically repeated several times to ensure accurate data translation and proper utilization in the new system.

Establishing translation rules, scripting, testing, and making revisions adds time and money to the project.

Designing to Budget

Like building a house, custom software development, driven by current software development trends, can be tailored to fit a specific budget. One cannot afford to exceed their budget when concerned about building a house or developing software. Atop custom software development company that is up to date on the newest trends can take your ideas and turn them into a design while keeping your budget in mind.

Specific elements can be added or removed after the first design and cost estimate are finished to match your preferred budget. Setting a fair goal budget at the start of a project is highly recommended to ensure optimum resource utilization.

Hiring Model

Hiring model

The hiring model directly impacts the cost of custom software development. It’s important to explore the different models and price points available:

  1. In-house Team Expansion: With this model, you hire software engineers from a custom software development agency to work directly from your space. This approach offers the highest level of collaboration but comes with a higher price tag due to the costs associated with maintaining an in-house team.
  2. Outsourcing: The majority of the brands love to outsource software product development to a custom software development company, often countries to outsource. They handle the work on your behalf, which means you don’t have to take the stress of the development process and have less responsibility for infrastructure andentireThe cost of outsourcing varies depending on the scope of the project and the expertise of the chosen development service provider.
  3. Freelance: Freelancing is the need of the hour for the majority of brands. One can hire some of the world’s finest developers from the best platforms to hire remote developers like Upwork and Fiverr. Brands that don’t want to spend more on a software development agency tend to hire freelancers to cut the budget. There are also drawbacks to hiring freelancers as service quality and reliability are always a concern.

It’s essential to consider your specific requirements, budget carefully, and desired control level when choosing a development recruitment model. By doing so, you can make an informed decision that aligns with your needs and maximizes the value of your investment.

Hidden Custom Software Development Costs

Apart from the direct costs associated with software development, hidden costs cannot be ignored. The two main hidden costs for software development include marketing, and maintenance and support.

Advertising: Marketing expenditures are incurred when custom software is promoted to the target audience. Among these include:

  • The creation of marketing materials.
  • The execution of advertising campaigns.
  • The conduct of market research.
  • Participation in industry events.

The level of marketing efforts and methods used will determine the cost.

Maintenance and Support: Constant support and maintenance are essential for ensuring the smooth operation of the software. Bug patches, adjusting to new requirements or technologies, fixing security vulnerabilities, and providing technical support are all part of the job. These efforts necessitate resources, time, and even the involvement of third-party assistance providers.

The Process of Software Development Cost Estimation

process of software development cost estimation

The following steps are commonly included in the software development cost estimation process:

  1. Consultation Call: This is the first meeting between the client and the development company to discuss project needs and understand the client’s requirements.
  2. Detailed Description: Compiling thorough project information through meetings, software documentation, and stakeholder engagements.
  3. Quote Preparation: Creating a cost estimate by analyzing complexity, technology stack, development time, and resources. This could entail consulting with the dedicated software development team and project managers.
  4. Request for Proposal (RFP): Based on the estimated cost, the development business may write an RFP document stating the project specifics, needs, timing, and cost.
  5. Offer: Present a proposal to the client that includes the expected project cost, timetable, deliverables, and terms. If applicable, information from the RFP may be incorporated into the proposal.

Methods of Cost Estimation

Methods of cost estimation

Various methods of cost estimation take place for custom software development.

Analogy Estimation:

This method compares the current project’s size, complexity, and requirements to similar historical initiatives. Analysts estimate costs based on known expenses of similar projects by using historical data and project experience. Early in the project lifecycle, analogy estimating provides a quick rough cost estimate.

Ballpark Estimation:

This method delivers a broad cost range based on high-level software product needs and assumptions. It is helpful in the early phases when details are scarce. The ballpark assessment provides an approximate estimate without digging into detailed features or needs, which assists stakeholders in determining cost and feasibility.

Detailed Estimation:

This method entails a detailed examination of project requirements, specifications, and deliverables for software development. It divides the work into smaller tasks and estimates the labor and expense for each. Development time, complexity, resources, and dangers are all considered. Detailed estimating yields a more precise cost estimate, but it necessitates a greater understanding and detailed documentation.

Calculating!

Assessing the cost of bespoke software development is important to project planning. Consultation with software development firms, documentation, and preparation of thorough quotations or proposals all contribute to proper cost assessment. Finally, a thorough understanding of the cost of software development-estimating process enables organizations to make informed financial decisions and navigate their custom software development projects effectively.

FAQs for Software Development Cost

Custom software development costing is calculated based on multiple factors such as project complexity, team size, development time, and hourly rates.

In-house software development costs include salaries, infrastructure, and ongoing maintenance, while outsourced costs involve project-specific fees and reduced overhead expenses.

The cost can be reduced by prioritizing requirements, efficient project management, leveraging open-source solutions, and utilizing agile development methodologies.

To choose a model that helps to minimize software development costs, first, you need to understand your project requirement. If the project is small and has minimum changes required while developing then you can choose to go for a fixed-price model. If your software project is big with many changes occurrences then you should go for a dedicated team model.

Hourly software development rates vary based on location, expertise, and project complexity, ranging from $30 to $250 or more.

For effective planning of a long-term software development project that’s dynamic needs to be built in an agile fashion. The planning starts with project analysis, requirement gathering, planning features development in various sprints and then is followed by the development, designing, testing, and iterations. Prototyping when requested by businesses, then it also remains a part of project planning.

The basic software development with a set of core features takes 1-2 months. The software with medium complexity encompassing advanced features integration, personalized UI/UX design, and device adaptation consumes around 2-6 months. The highly-complex software that is optimized for performance and hardware/software compatibility with complex development, design, and support takes more than 6 months to develop.

Custom Software Development is considered expensive because the development team, design team, BA and research team, and marketing team with different experience levels are involved to make the software bring business benefits. However, the one-time investment pays off in the long run, in dividends. The forward-thinkers clearly understand the investment-to-profit ratio in the software development equation and spend optimally on software development to make the business step in with customer expectations, keep up with the market trends, and leapfrog the competition.

Avantika Shergil Avantika Shergil   |  Jun 15, 2023

An enthusiastic Operations Manager at TopDevelopers.co, coordinating and managing the technical and functional areas. She is an adventure lover, passionate traveler, an admirer of nature, who believes that a cup of coffee is the prime source to feel rejuvenated. Researching and writing about technology keeps her boosted and enhances her professional journeying.

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