Software development cost estimation process simplified

Sudeep Srivastava April 5, 2024
cost of software development

One of the most challenging aspects of custom software development is determining how long and how much it will take to deliver a new software product. But the question is, should it be so hard?

Software development cost estimation is inherently tricky, keeping “no projects are the same” in mind. Every product development is unique in what it sets out to achieve; unique in a myriad of parameters that form its existence. And, these parameters are what directly lead to affecting the cost of software development greatly.

To give you a rough idea, the software development project cost may vary from $35,000 to $300,000 depending on factors like the features used, complexity of the UI/UX design, the development company’s location, the hourly rates of developers, etc. Simply put, the higher complexity of the software is, the higher will be its overall cost.

cost estimate to develop a custom software solution

Not just the cost range, we are sure you certainly have a hundred more questions about the custom software development cost estimation process. So let’s get started by quickly going through some prerequisites to estimate the software development cost.

But before this, you might want to look at the ultimate guide to software development for a thorough perspective.

Now, let us start with the prerequisites required for software cost estimation.

Prerequisites to Estimate the Software Development Cost

These prerequisites are discussed with the software development company during the scoping sessions. From explaining your project goals to discussing how you can monetize from software development, a professional organization like Appinventiv will help you every step of the way.

Project Goals

The first step to realizing custom software cost is to explain your project goals during the initial conversation. Highlighting a clear goal can help you design software worth the effort and cost. While at the same time, discussing the end goals can help the development team stay focused and aligned. Thus, the more well-defined the end goal is, the less time it takes to develop the software and offer better cost optimization.

Target Audience

Determining your target audience is one of the most vital steps for successful software development. The target audience usually includes people interested in your services or products. Conducting an in-depth competition analysis, market research, and identifying the latest trends can help you get a clear idea of your target audience. The total efforts and time taken to determine the target audience will ultimately affect the overall cost of the software.

Type of Software

Finalizing the type of software custom to your requirements is one of the most necessary steps to help you determine the time frame and cost of software development. The more features and complexity of software, the more time and cost associated with it. A well-integrated software with ample features to engage and retain users will help you gain a trajectory in the otherwise competitive business landscape.

Some popular software types and their cost estimates

Content Management Systems (CMS): A custom CMS caters to the specific user requirements while enabling businesses to create and update multiple types of content, including blogs, press releases, videos, etc.

Examples of famous content management systems include: WordPress, Joomla, Drupal, Magento, Squarespace, Wix, Ghost

Average Cost Estimates: $35,000 to $80,000

Customer Relationship Management (CRM) Systems: CRM systems are the type of software that allows businesses to track and manage customer relationships, attract new clients, and handle vendor and partner interactions. Custom CRM systems make a worthwhile investment for large organizations that want to manage a distinct target audience and handle their business operations effectively.

Examples of famous CRMs include: Salesforce, HubSpot, Zendesk, ZoHo

Cost Estimates: $35,000 to $300,000

[Also Read: How to build a custom CRM software?]

Enterprise Resource Planning (ERP) Systems: An ERP software empowers businesses to effectively handle and manage their daily business operations, such as procurement, inventory, supply chain, accounting, logistics, and risk management. By automating these tasks and centralizing the operations, custom ERP solutions guarantees enhanced productivity, improved decision-making, reduced errors while ensuring increased efficiency.

Examples of famous ERPs include: SAP ERP, Oracle ERP Cloud

Cost Estimates: $50,000 to $300,000

SaaS (Software-as-a-Service) Products: SaaS is a software distribution model that operates through the cloud. With SaaS, applications are hosted by a third-party cloud service provider and made available to users via the Internet.

Examples of famous SaaS products include: Slack, Asana, DropBox, MailChimp

Cost Estimates: $40,000 to $300,000

Also Read: How to Develop a Pharmacy Management Software – Features, Process, Costs

Let us move forward and understand various factors that affect the software development cost.

Factors That Affect Software Development Costs

If you are wondering how to estimate software development cost; understand that it majorly depends on three significant factors:

Factors that affect software costing

Let’s take a detailed look at these factors.

1. Type of Software Project

From a high level, the typical custom software development arrangements tend to break down into the following details:

  • New software development – New software, including custom software development
  • Software modification – The process of enhancing existing business software
  • Software integration – Adding a custom code to integrate existing software into other processes. This would include plugins and packages such as “Office” and manipulating data flowing between an inventory and an accounting system.
  • Web development – Custom web-based software development

Each software development comes with a different team makeup and requires additional development effort.

Understanding your project’s software development type is the first step towards estimating development cost and categorizing software development cost breakdown. This comes in handy in the final estimation when you combine the type of your project with the size of the project development team.

Also read: IT infrastructure software development – The why’s and how’s

2. Size of the Project

The next critical factor is to determine the size of a project. The project size is typically correlated to the features and functionalities of the product you are building. This means the more complex your project is, the bigger the size of the project will be.

Small-sized development

A small software project usually needs minor changes. Typically, changes such as bug fixing and tweaks to the user interface fall under small-sized software development. Here, client interaction is usually limited.

Approximate Software development cost range – $10,000 – $50,000 based on the level of modifications.

Medium-sized development

Here the engagements are more substantial than just small tweaks and include a well-defined scope of deliverables. Typically, medium-sized software development deals with a single source of data. Projects like mobile application development with simple functionalities, enhancing the web interface to the existing inventory system, or upgrading the UI/UX interface of the current website or app would fall under this category.

One prominent example of medium-scaled software development can be Appinventiv redefining the UI/UX strategy for Domino’s to increase its mobile app conversion by 23%. Here, the external requirements for client interaction are more precise and robust.

The interaction would also include a few design sessions, milestone sign-offs, and weekly check-ins.

Dominos pizza App

Approximate software development cost range – $30,000 – $100,000

Large-sized development

These solutions include complexity and depth. Large-sized software development asks for a broad database, integrating multiple systems, and addressing logging and security features. If your project has to be maintained and scaled in the future, two common steps would be designing an underlying framework and module-based systems.

On the other hand, multi-platform application development (Android, iOS, web) would also fall under the large software development category.

Below are a few prominent examples of large-sized development projects undertaken by our team:

We have helped expand KFC’s mobile presence globally by developing end-to-end apps that enabled real-time order tracking and doorstep delivery across seven countries.

Appinventiv helped expand KFC’s mobile presence

Appinventiv has also helped Adidas, one of the largest sports merchandise brands, reach an extensive user base by expanding its web-centric services to mobile through a dedicated application.

Appinventiv has also helped Adidas reach an extensive user base

The experts at Appinventiv have also developed Vyrb, an eyewear brand’s voice assistant application for social media that helps send and receive audio messages via Bluetooth wearables.

Appinventiv has developed Vyrb, an eyewear brand voice assistant application for social media

The client interaction here is super robust, that is, milestone agreements and extended design sessions, daily calls with the technical team, weekly status meetings, and more.

Approximate software development cost range – $80,000 – $200,000

Enterprise-sized development

Enterprise-sized software development is probably the most extensive and complex project, usually built on underlying frameworks. Since the entire enterprise process is digitally transformed, they have higher security, error handling, and more rigorous logging. Data integrity and security are paramount to such business-critical applications.

There is no exclusive exhibit; however, the support systems designed for enterprise-level development are resilient and can manage 2-3 concurrent faults in the core infrastructure without creating a user impact.

For client interaction, the process is fully integrated. Enterprises usually prefer outsourcing rather than having in-house teams to design and architect their business-aligned software due to deadlines and easily met requirements.

Approximate software development cost range – $100,000 – $300,000

Software Development Cost Estimation as per Technical Complexity:

Type of SoftwareDifferentiating QualitiesTime FrameCost (Approx)
Basic SoftwareBasic feature list, simple UI/UX design, no 3rd party APIs, standard data
processing capabilities
3-5 Months$30,000 – $100,000
Medium Complex SoftwareAverage feature list including payment integration, real-time data analytics, chatbots for communication, personalized UI/UX design, device integration, etc.6-9 Months$80,000 – $200,000
Highly Complex SoftwareComplex UI/UX design, development, complete feature set with 3rd Party APIs, data-synchronization, encryption, optimized performance, multiple software compatibility10+ Months$100,000 – $300,000

3. Development Team Size (As per Project)

Once your project is defined in terms of type and size, the only substantial factor that can directly affect your software development cost is your development team size. Your development team requires at least three roles – a developer, a project manager, and a QA tester to perform certain tasks in software development. The hourly rate of developers will also affect the overall cost and will vary according to the geographical location of the software development team.

However, the requirements should be well aligned with your project. Below are the roles you can choose from according to your size and type of project:

  • Project Manager
  • Business Analyst
  • UI/UX Designer
  • Architect
  • Database Expert
  • Developer
  • QA Tester

Here is a rough estimate of the hourly rates of developers based on multiple geographical areas:

Geographical AreaHourly Costs for Junior Software DeveloperHourly Costs for Senior Software DeveloperHourly Costs for Associate Software Developer
Asia$20-30$25-40$40-60
North America$90-100$120-130$140-150
South America$30-35$40-60$60-100
Europe$40-45$50-60$60-120

Other Factors That Indirectly Impact the Software Development Cost

There are multiple other factors that can indirectly strike your software development budget, let us look at them in detail below:

UI/UX Design of the Software

Creating custom software with a clear UI/UX strategy is essential to gain traction in the market. A seamless software design can improve both user engagement and retention. However, meeting the unique needs of clients requires multiple testing procedures, which can affect the cost to build the software from scratch.

Development Team Type

The type of team you have hired for developing your custom software product also impacts the cost to develop the software. For instance, you can either choose between hiring freelancers, in-house development team or simply outsource your project to a dedicated software development agency. Let us look at the pros and cons of all three below:

Type of Software Development TeamCostingQualityCommunicationContact Time Frame
In-house teamHighly expensiveHigh quality product catered by dedicated in-house developersEasy with the corporate channelsLong-term
Outsourced teamAffordable and OptimizedHigh software product quality considering access to skilled resources and advanced toolsEffective communication with the help of a dedicated project managerLong-term
FreelancerMost economicalCompromised product quality due to lack of expertisePoor considering the freelancer is not a part of a dedicated teamShort-term

Post-Maintenance Cost

Proper maintenance and updates are necessary for the software to facilitate its overall growth in the digitally evolving ecosystem. Ensuring smooth functioning and optimal performance of software across all platforms necessitates taking proactive post-release measures. 

The cost of maintaining the software encompasses expenses incurred for ensuring a bug-free software experience, as well as investments made to provide software upgrades and incorporate new technologies as per the market demands. 

Also Read- How much does it cost to build a church management software like ChurchTrac and PushPay

Features

The features integrated in a custom software also impacts the overall cost to develop a software. A software with an extensive feature list will ultimately cost you more as compared to the one with minimum features. Furthermore, it is necessary to comprehend that a well-defined feature set for your custom software can distinguish it from the competitors while helping you gain traction in the market. 

Tech Stack

Advanced technologies such as AI/ML, data analytics, and metaverse along with a robust tool set is necessary for developing a custom software product that can set your business apart from the competition. However, the cost of implementing complex and multiple technologies may vary as per the hired development team, its location and more.

Partner with an expert like Appinventiv

Custom Software Development Cost Estimation Techniques

An accurate software development cost estimation is one of the key parameters that paves the way for a successful project. The techniques listed below will help you understand the complex process of software cost estimation based on the realistic amount of effort, time, and money.

Empirical Estimation Technique

This estimation technique uses the data from similar projects carried out before to calculate software development costs and gathers information based on assumptions and a little guesswork. After this, the evidence-based cost estimation formulas are applied, and a rough estimate of the cost of developing the software is offered in the planning phase.

Heuristic Estimation Technique

The average cost of software development can also be estimated with the help of the heuristic technique. This approach or software development cost model addresses budget estimation based on multiple angles and is the most viable method to make quick decisions on complex projects. The model offers you a cost estimate by addressing the relationships between multiple elements and parameters of the project.

Analytical Estimation Technique

This software development cost estimation technique is based on dividing the task into multiple operations or elements. After this, each operation’s standard time is applied based on the information gathered from experience.

Now that you understand the multiple software development cost techniques, it is necessary to understand the different types of estimates. These estimates are given to you by the software development company in New York based on your project goals, requirements, and the details discussed during the scoping session.

Comprehending the Types of Cost Estimates

There are three different types of cost estimates that have varying degrees of accuracy for multiple stages of a scoping process:

Ballpark Estimate

This kind of estimate will offer you a thumbnail sketch of the estimated cost of software development. This estimate will help you to clearly understand if the software development company can help you pursue development and if you should hire them.

Budget Estimate

Software development budget estimate will offer you a forecast to plan the project development strategy and the budgets for all stages. If you can offer a budget to the development organization, this estimate will help you understand if they can work under the set amount or not. It is advisable to keep in mind that every project strategy comes with risks associated with time and cost.

SoW (Statement of Work)

This cost estimate defines various project activities, deliverables, and frames. Thus, in writing, you can be upfront with the development company about your needs and strategy and ask them for an accurate cost estimate.

Now that you understand the various software cost estimation techniques, let us discuss estimating the software development time frame, which directly impacts the development cost.

You may like reading: How much does it cost to build a white-label enterprise performance management software

How to Estimate Software Development Time-Frame?

Below is a rough flowchart of the software development time estimation based on the above mentioned factors. To estimate the software development time, we have categorized the size of the projects into small, medium, large, and enterprise.

Estimate Software Development Time

So, with all this in mind, it is concluded that making software cost estimates is hard. To understand how much custom software development costs, your best bet is to seek professional guidance.

Below are some essential tips for making estimates that you must implement in the initial phase of software development.

Expert Key Tips for Understanding the Accurate Time and Average Cost of Custom Software Development

Expert Key Tips for Understanding the Accurate Time and Average Cost of Custom Software Development

Breakdown the Work

When you break down bigger tasks into smaller ones, you get a clear picture of your requirements. This way, you are more likely to figure out additional software development-related questions. How can you break down larger tasks?

Here is an example :

Large task – building the front page. 

General estimated time – 8 hours 

Post breakdown task and time:

  • Creating a CTA section- 4 hours
  • Latest updates section- 2 hours
  • Adding service and solutions section – 6 hours
  • Adding contact us page- 5 hours

As you can see, you get a detailed picture of every small task that could not have been completed within 8 hours.

Ask Questions: Do Not Assume

Task descriptions that you get or assign are vital in estimating the average cost of custom software development. It is always important to ask your development team how they will work on your project. Asking questions makes communication better, and you will gain a broader perspective on how the cost of developing the software is justified with the process.

Communicate in Length With Your Development Team

Making accurate estimates is a common challenge since, most of the time, you and your development team might not be on the same page with time and cost. The crucial part here is to communicate in length with your development team.

Believe that your outsourced development team wants to deliver the best possible solutions for your project. For better understanding, you can always approach your project manager with the questions:

  • Is a task or process entirely new for the team that requires time?
  • Does the team have all the necessary information needed to complete the project?
  • Are the team members well aware of the project expectations?

[Also Read: Outsourcing tips from industry experts for efficient software development]

Don’t Forget the Things You Usually Ignore

The actual development process has to be kept in mind for efficient software development cost estimation, such as:

  • Initial set-up
  • Revisions
  • Testing
  • Bug fixing
  • Deployment

The above processes are inevitable in estimating the accurate cost of software development.

custom software development ecosystem is expected to reach $146.18 billion by 2030

How Can Appinventiv Help You with Custom Software Development Cost Estimation?

Our experts specialize in creating and launching cutting-edge digital products that deliver outstanding returns on investment. Our custom software development services are designed strategically to cater to a wide range of business requirements. 

We can assist you in expanding and streamlining your business in a sustainable manner by utilizing cutting-edge technologies such as data science and analytics, IoT, cloud, DevOps, blockchain, and more. Our agile development process, 24/7 support, and robust data security and protection measures ensure significant cost savings, improved customer service, quicker delivery times, and a competitive edge in the fast-growing industry.

Our 8+ years of expertise has made us expand our reach across different regions, including Europe, the US, UAE, Qatar, MENA, and other areas. We have managed to build a strong portfolio of clients over the years, including the likes of top-tier companies like American Express, Vodafone, KPMG, EmiratesNBD, Asian Bank, Bodyshop, Virgin Group, Adidas, Americana Group, and countless others.

Our information technology consulting services start with an in-depth consultation process and work closely with you to understand your specific requirements and assess the viability of your project.  Once the prerequisites are sorted, we move on to the meticulous development of a bespoke and sophisticated software solution that caters to all your business needs.

We can help you deliver a two-step cost estimation framework that is simple and reliable:

Rough Estimation

The rough estimate is very near to the accurate offshore software development cost estimate given to our clients for information purposes. The objective of rough estimation is to inform the client about the project’s general phases, software development tasks, and the expected result. The precision of this estimate ranges from 50–75%; however, it is just an average cost of software development and not considered as the final cost bound by the terms and conditions.

If the client is unsure, our team works on the given estimate and tries to make it as convenient for the client as possible.

Detailed Estimation

A detailed cost estimate is a more precise and accurate software development cost estimation given to the client, carried out by all the actively engaged development team members. This estimated cost of offshore software development is calculated based on the type of software being developed, tech stack being used, functionalities being incorporated, and complexity of the design including wireframes and other specifications.

Here are the steps carried by our experts to offer a clear-cut cost estimation to our clients:

Initial Consultation

Our first contact with clients commences with a consultation call. During this call, we establish a rapport and gather crucial project information. If the client expresses interest in the proceeding and requests a software development pricing quotation, we organize a video call and an in-person meeting to delve deeper into project requirements.

Detailed Requirement Analysis

To accurately estimate the cost of software development, we conduct a comprehensive meeting to delve into the specifics of your app idea. We understand that determining the precise cost of software development is a complex process, so we actively listen to your needs. This includes reviewing a comprehensive list of features, technical specifications, personal preferences, desired release date, etc. This helps our experts to determine the necessary specifics that will help us provide an accurate estimate of the cost of your software development project.

Quote Preparation

Once we have received all the necessary information, we begin preparing an initial cost estimate for the software development project. Our experts implement multiple techniques to calculate the cost of the project, specifically tailored to meet the unique requirements of each project. 

Proposal Presentation

After completing the evaluation process, we swiftly offer a detailed proposal covering the estimated software development cost. We also suggest valuable insights to optimize your product’s potential within the given resources, ensuring the best possible outcome for you.

Connect with us to digitize and upgrade your current business process.

FAQs

Q. How much does custom software development cost?

A. To understand how much custom software development costs, you first need to determine the type of software you wish to develop. A basic software can cost around $30,000 to $100,000 and have a simple feature list, while a highly complex software can cost around $100,000 to $300,000.

Q. What is the hourly rate of developers in the US?

A. The hourly rate of developers in the US for developing custom software is around $140-150. Hiring developers in the US can result in extensively higher development costs, thus, it is advisable to outsource the software development project in a country like India, considering their hourly rates are just $40-60.

Q. How long does it take to develop a software?

A. The time required to build custom software depends on the project’s complexity and requirements. For instance, software with an extensive feature set will take longer to develop compared to software with a minimal feature list.

The development time for complex software can vary between 9 to 12 months, while simple software can be developed in 4 to 5 months. The custom software development process shouldn’t be rushed as it can lead to a suboptimal final product that lacks sustainability. 

Q. What are the top cost estimation tools used by organizations across the globe?

A. Software development companies’ top cost estimation tools include JIRA, Microsoft Project, Concerto, Primavera Project Planner, etc.

THE AUTHOR
Sudeep Srivastava
Co-Founder and Director
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