Software development cost estimation process simplified

Sudeep Srivastava October 20, 2022
cost of software development

One of the most challenging things in 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; it’s unique in the myriad of parameters that form its existence.

Another substantial factor in custom software development is understanding the cost and duration of strategic business decisions. Whether you are a startup or an established enterprise, know that the timing, return on investment, and benefits you make can make or break your software development.

Your software development project cost may vary from $10,000 to $200,000 depending on certain factors like feature list, UI/UX design, prototyping, the development company’s location, the developers’ hourly rate, etc. Simply put, the overall complexity of the software will be the most viable factor that will define its overall cost.

Not just the cost range, we are sure you certainly have a hundred more questions about custom software development cost estimation. This is probably why we are here to help you explore the software development cost estimation process.

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, 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 world.

User Journeys

Creating a user journey map to visualize the user flow through your software is one of the important prerequisites. A customer-oriented map can help organizations determine the overall flow of the development and offer you a rough custom software development cost.

Now that you understand the prerequisites required to determine the software development cost, let us move forward and explain various factors that affect the software development cost.

 software development cost estimation

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.

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 development usually needs a few minor changes. Typically, changes such as bug fixing and tweaks to the user interface come into small software development. Here, client interaction is usually limited.

Approximate Software development cost range – $10,000 – $50,000 based on modifications

Medium-sized development

Here the engagements are more substantial than just a small tweak and have a well-defined scope of deliverables. Typically medium-sized software development deals with a single source of data. Projects like small mobile application development, 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 development can be Appinventiv redefining UI/UX strategy for Domino’s to increase its mobile app conversion. 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

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, a multi-party application development well-versed with numerous platforms (Android, iOS, web) would also fall in the large software development category.

Below are a few prominent examples of large-sized development:

Appinventiv developed Vyrb, an eyewear brand’s voice assistant application for social media that helps send and receive audio messages via Bluetooth wearables. Such full-fledged application development stands under large-sized software development.

Software development cost estimation process simplified_VYRB

Appinventiv also helped expand KFC’s mobile presence globally by developing an end-to-end app that enables real-time order tracking and doorstep delivery across Egypt and the Middle East.

Software development cost estimation process simplified_KFC

Adidas is one of the largest sports merchandise brands with a broad and diverse product portfolio. Appinventiv helped Adidas reach its extensive user base in Saudi Arabia and Qatar by expanding its web-centric services to mobile through a dedicated application.

Software development cost estimation process simplified_Adidas

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

Approximate software development cost range – $80,000 – $125,000 as per integrations

[Also Read: Cost to develop and maintain a mobile app]

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 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 – $200,000 based on the type of software developed

Since a thorough software cost estimation can be made based on the duration and the human efforts required, it is advisable to first understand the types of software as per their complexity.

Software Development Cost Estimation as per Technical Complexity:

Type of Software Differentiating Qualities Time Frame Cost (Approx)
Basic Software Basic feature list, simple UI/UX design, no 3rd party APIs, standard data processing capabilities. 2-3 Months $10,000 to $45,000
Medium Complex Software Average feature list including payment integration, real-time data analytics, chat bots for communication, personalized UI/UX design, device integration, etc. 3-6 Months $50,000 to $85,000
Highly Complex Software Complex UI/UX design, development, complete feature set with 3rd Party APIS, data-synchronization, encryption, optimized performance, multiple software compatibility. 6-9 Months $90,000 to $200,000

3. Development Team size (As per project)

Once your project is defined in terms of types 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 Area Junior Developer Senior Developer Associate Developer
Asia $20-30 $25-35 $40
North America $90-100 $120-130 $140-150
South America $30-35 $30-35 $40-60
Europe $40-45 $50-55 $50-65

The other factors that might indirectly strike your budget are:

  • Technologies used
  • The number of platforms utilized
  • Target group size
  • Post-maintenance cost
  • The experience of your development team

 custom software solution

Custom Software Development Cost Estimation Techniques

An accurate software cost estimation is one of the key parameters that paves the way for a successful software development. 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 software development cost is offered to you in the planning phase.

This software development cost breakdown technique requires prior experience developing a similar solution. Though the empirical estimation technique is mostly based on guesswork, it has been known to offer clear-cut rough cost estimates over the years. A software development company usually uses Delphi cost estimation and expert judgment while implementing this cost estimation model.

Heuristic Estimation Technique:

The average cost of software development can also be estimated with the help of the heuristic technique. This approach or model addresses cost 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.

An example of a heuristic technique that is used to calculate software development cost is the Constructive Cost Model (COCOMO), which uses a regression formula to determine the cost of the software.

Analytical Estimation Technique:

This 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.

The process is performed by a professional with previous experience in estimating the cost of similar projects and understanding the important workflows.

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 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

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, coming to the factors that affect the overall software development cost, we have discussed them in detail below. The factors such as feature list, software’s overall complexity, location, and hourly rate of developers can affect the cost of your software. Let’s give you a brief understanding of them all:

Now that you understand the various software cost estimation techniques, let us tell you about estimating the software development time frame.

How to Estimate Software Development Time?

Below is a rough flowchart of the software development time estimation based on the above mentioned factors. To estimate software development time, we have categorized the organizations as per the size of project they wish to undertake.

 Estimate Software Development Time

[Also Read: How Long Does it Take to Build a Mobile App?]

So, with all this in mind, it is concluded that making cost estimates is hard. To understand how much custom software development costs, your best bet is to seek professional guidance to guide you with the right software development cost estimate with a technical mindset.

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

Expert key tips for making accurate software development time and cost estimates

key tips for making accurate software

Breakdown the work

When you break down the 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 software development time and cost. It’s 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 software development cost is justified with the process.

Confine 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 confine 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 your 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 cost of software development.

ERP solution

How can Appinventiv help you with custom software development cost estimation?

Appinventiv specializes in building and launching the most competitive digital products with next-gen custom software development solutions. Our services range from software consulting, where our team of experts understand your needs and check the feasibility of your project, to developing a full-fledged software solution; we provide end-to-end software development services.

The most straightforward approach to estimating software project costs is

Project resource cost * Project time = Total project cost

However, at Appinventiv, our software development experts come up with a two-step framework that is simple and reliable.

Rough estimation

The rough estimate is very near to the accurate software development cost estimate given to our clients for informative 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 estimate is based on the software platform, technology, and tools, including wireframes and other specifications.

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 $10,000 to $50,000 and have a simple feature list, while a highly complex software can cost around $80,000 to $200,000.

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 $120-130. Hiring developers in the US can result in extensively higher development costs, thus, it is advisable to outsource the software development project in India, considering their hourly rates are just $35-40.

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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