Set Your Budget Right with Smart Software Development Cost Estimation

PUBLISHED: Apr 26 2024 @ 12:15 | Comments (0) |

Custom web and mobile development is mostly a more advanced solution for medium and large businesses. Although, startups also use their custom software to implement their unique business approaches. The difference is commonly in budget limits – the tech solutions available for larger companies will most likely be too heavy to pay for startups.

However, the main feature of custom software – flexibility – relates to its pricing too.

In this article, we’ll discuss the main factors influencing the final cost of developing software.

Is investing in bespoke software worthwhile?

Absolutely!

Comparing custom software vs ready-made solutions, you’ll see that custom decisions provide more flexible and diverse usability, while generalized software lacks adjustable features.

Feature	Custom Software	Off-The-Shelf Software
Customizability	High: software is made specifically for your business	Depends on the software: if your needs are specific, it’s hard to find a perfect vendor
Cost	Higher initial investment but cost-effective long-term	Lower initial cost but ongoing subscription fees
Ownership	Complete ownership with full control over the software	Limited usage rights based on vendor lock
Integration	Specifically designed to fit into the existing ecosystem	May require additional configuration or not integrate well
Maintenance & Support	A dedicated support team, direct from the developers	Standardized support, which may not address specific issues quickly
Scalability	Scales with your business needs	May not scale well or could require costly upgrades to the point of switching the software
Competitive Advantage	Provides unique features that could offer a competitive edge	Widespread use diminishes exclusive benefits

The cost factors in software development

Costs are driven by plenty of reasons, beginning from the request to the final web or mobile app development.

Workscope and functions

When features and functionalities are required, the ultimate price increases immensely.

Multiple user roles, AI implementation, sophisticated data processing, and real-time functionality are examples of features and functions that naturally call for more code, more design, and more testing. All of these factors dramatically increase effort and, consequently, expense.

For instance, in mobile app development, intricate front-end and back-end work is required for apps that call for intricate movements, user interactions, or unique device orientations.

If you are budget-limited, consider simpler features when building your own software. As your business and budget ceiling rise, so will your software.

Type of software

Globally, we can divide software into four major groups.

Web applications – software programs that are stored on remote servers and delivered over the internet through a browser interface. Web apps include internet landing pages, CRM tools, educational platforms, Enterprise Resource Planning (ERP) systems, etc.

This type of software is typically cheaper than desktop software. Simple landing pages are on the lower end while interactive applications like in-browser editing tools or custom CRM systems represent the higher end of the pricing range.

Desktop applications – software programs that are installed on a specific computer. Desktop apps offer enhanced security and faster response times compared to web applications, as they do not depend on internet speed and browser capabilities.

While they require extensive integration with the underlying operating system, the development costs are higher, especially if the app needs to be cross-platform.

Mobile applications. Mobile app development is crucial for companies looking to connect with clients easily and directly.

Cross-platform, hybrid, or native (iOS, Android) apps cost differently. Because mobile apps require numerous versions to be developed for different operating systems, native apps are the most expensive despite providing the highest performance and user experience.

source: webiotic.com

Technology choice

Using the latest innovations such as blockchain or AR/VR raises prices and calls for developers with specialized expertise.

Furthermore, it can be difficult and costly to integrate new software with older systems or technologies, especially if the infrastructure is poorly documented.

Additional costs

Web and mobile app development is not finished with its launch.

Mandatory extra-spendings include:

Ongoing maintenance is important for the continuous operation of software. This involves bug fixes, updates to meet new operating system standards and security patches.
Periodic updates to add features or improve UI/UX also require budgeting as they involve re-engagement of the development team.
Costs related to the integration of third-party services like payment gateways, social media platforms, and external APIs need to be considered in budgetary estimates.
User and administrator training can also be significant, especially for complex applications.

Methods for estimating costs

Selecting the right IT pricing model is crucial for managing both expectations and budget effectively.

source: tochi-geek.com

1. Fixed cost

With fixed costs for each project, the total price is established before development begins and remains unchanged.

Suitable for: Projects with well-defined scopes and predictable paths.

For instance, for a small business website with a specified number of pages and features agreed upon in advance.

Strengths of these payment method:

Budget certainty. Clients know the exact cost upfront, which aids in financial planning and control.
No surprises. The cost remains the same regardless of the time and resources used, preventing unexpected expenditures.

Weaknesses:

Less flexibility. Changes in scope or additional features can be difficult to accommodate without renegotiating costs.
Quality compromises potential. To stay within budget, developers might rush or simplify aspects of the software.

2. Time & material

Clients pay based on the time developers spend on the project.

Suitable for: Projects where requirements are expected to evolve or aren’t fully defined at the outset.

For instance, hourly payment suits for ongoing software maintenance or upgrades where tasks vary over time.

Strengths:

Flexibility. Allows for adjustments in the project scope.
Pay for work done. Clients pay only for the hours worked, which can potentially result in financial savings if the project requires fewer hours than anticipated.

Weak points:

Unpredictable costs. The rough estimates can escalate if the project takes more time than initially planned.
Potential for higher costs. Delays or scope changes can increase the hours worked, thereby raising expenses.

3. Payment for result

Payment is issued upon completion of predefined milestones or successful delivery of results.

Suitable for: Larger projects that can be broken down into distinct, verifiable stages.

This IT pricing model suits complex mobile app development, with payments made after the completion of stages like prototyping, beta release, and final launch.

Positive sides:

Incentivizes efficiency. Developers are motivated to meet milestones to receive payment.
Aligned interests. Payment terms based on results align developer efforts with client goals, potentially enhancing product quality.

Negative sides:

Potential dispute: Payments may be delayed by disagreements on whether the finished job satisfies the established requirements.
Tricky contract requirements. Contract discussions may become more difficult when defining and approving precise, quantifiable benchmarks.

Each of these pricing methods offers distinct advantages and drawbacks, and the choice depends largely on the project specifics.

Approximate development costs for popular project types

Type of Software	Typical Price Range	Factors Driving Price Higher
Web Applications	$15,000 – $100,000	Custom user interfaces Advanced interactivity Integration with multiple systems High security requirements
Mobile Applications	$10,000 – $150,000	Native mobile app development Complex functionalities like in-app purchasing, GPS, or AR High graphic and UI/UX design requirements
Enterprise Software	$50,000 – $500,000+	Scalability to support thousands of users Complex data integration needs High-level security compliance Continuous maintenance and support
E-commerce Platforms	$20,000 – $200,000	Custom shopping cart solutions Integration with external services (payment gateways, CRM, ERP) Multi-language support Advanced SEO & marketing tools
Content Management Systems (CMS)	$3,000 – $50,000	High levels of customization Integration with databases and other systems Complex workflow or content approval processes
Custom CRM Systems	$25,000 – $150,000	Integration with existing IT infrastructure Complex reporting features Custom modules for marketing, sales, service

Tips for software development cost optimization

1. Analyze your goals thoroughly

Before jumping into web and mobile app development, having a profound insight of your needs is crucial. This doesn’t just help in building software that aligns with your business goals but also in avoiding cost overruns.

Things to do first:

Ask prospective users for their opinions to confirm whether certain features are really necessary.
List the qualities in order of importance and indicate what is essential, desirable, feasible, and non-negotiable.
Review the project scope regularly with all stakeholders. This will help to maintain alignment and make any required adjustments based on feedback and changing requirements.

Start with a Minimum Viable Product (MVP)

Creating an MVP is a tactic to rapidly provide a product with sufficient functionality to appease beta testers, and then refine it in response to their input. By evaluating the market’s reaction to your product and keeping early expenses low, this strategy lowers the likelihood of costly failures.

Strong points of an MVP:

Emphasis on core features. Directs resources towards creating the most important features to meet the user’s main requirements.
Iterative feedback. Enables actual user input to inform future development cycles, improving their effectiveness and targeting.

3. Formulate clear requirements

One of the biggest reasons for project overruns is the frequent changes in requirements. Having a well-documented and clear set of requirements can mitigate this risk.

How to Set Clear Requirements:

Provide functional specifications. Detailed documentation of every function that the software will perform.
Create user stories. Creating comprehensive user stories helps developers understand what end-users actually need from the software.
Ask for prototype models. Developing visual or low-fidelity prototypes can help stakeholders envision the final product and refine requirements.

4. Budget for unexpected spending

Unexpected costs are a reality in web and mobile app development. Setting aside a contingency budget (up to 15% of the total budget) can help manage these surprises without compromising the project flow.

Managing the contingency budget requires:

Regular reviews. Periodic reassessment of the budget versus actual spending can help keep the project financially on track.
Flexible planning. Be prepared to reallocate resources depending on the project phase and immediate needs.

5. Choose your contractor wisely

Here are the key traits of a reliable contractor to ensure you select the right partner for web and mobile app development:

Robust portfolio and proven track record. Check the portfolio of completed projects and client testimonials. Similar projects highlight their experience and capability in delivering quality work.
Transparent cost structure. Reliable contractors provide a clear and detailed breakdown of all charges. This shows what each fee covers, preventing surprises and facilitating better budget management.
Well-defined timelines and milestones ensure the project stays on track and meets delivery expectations.
Effective communication and updates. If a development company is open to regular communication, you can easily update your software and cut expenses (especially if an hourly payment method is chosen).
Insurance and professional bonding. Contactors must ensure adequate insurance and bonding. This protects clients in case of accidents or project failures, as well as offers financial remedies if project terms aren’t met.
Post-development support. Reliable companies offer ongoing assistance after project completion, including bug fixes and updates. It helps to address any operational issues quickly and maintains the software’s functionality and security over time.

These criteria are not just beneficial; they are critical for a successful partnership and project outcome.

Wrapping up

A thorough grasp of the many impacting elements, including project scope, complexity, and technology selection, is necessary to manage the expenses associated with web and mobile app development.

The process is inherently flexible, which emphasizes the importance of making pre-analysis, selecting the right pricing model, and choosing a software development company.

Select your contractors carefully and advance into a new, more sophisticated stage of your business with customized software!

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