Building software to address your business needs is a must in this digital age, not an if. As such, it often comes down to the development cost and efficiency. The faster you create groundbreaking solutions, the quicker you overcome competition and establish yourself as a leading player. Understanding cost estimation principles is the key to success. With prices to develop advanced software varying significantly, many factors to consider to find the best approach possible to spare your budget.
You can quickly run the cost of building your software using our cost calculator or read the article in depth to gain a better understanding of what lies at the core of the estimation.
Approaches To Software Development Cost Estimation
In case you are just getting started with your very first project, you may find it challenging to estimate the cost of software development. Luckily, there are several ways to calculate the final price tag of your custom software development.
One option is to use the bottom-up estimating method. This method revolves around dividing the project into stages and evaluating their costs separately before deriving the final price.
The analogous estimating method relies on values derived from similar projects and can give you relatively accurate predictions if the difference between the two products is insignificant.
Alternatively, you can rely on expert judgment to determine software development pricing. Expert assessment is based on the data from previous projects, market environment, and peculiarities of chosen technologies.
Average Rates On The Market
Apart from exploring cost estimation methods, you can always check the rates for custom software development on the market. Let’s assume you want to build a relatively simple mobile application to support your business.
In this case, you can expect a market average rate ranging from as low as $25 to as high as $149 per hour. The price for custom software and web development will fall in the same range, give or take.
The difference in rates is based on the size and skill set of the team. Moreover, the price may vary depending on the unique features of your project, its complexity, and the outsourcing region. Below we will break down these contributing factors in detail to understand their importance to come up with accurate cost estimates.
Factors Affecting Software Development Costs
Custom software development involves multiple stages ― from a discovery meeting to the project launch, there are lots of factors to consider. Knowing how these factors correspond with project requirements will help significantly with cost estimation.
Number of Features
The functionality of your application or services is one of the critical factors affecting the cost. Applications with fewer features can be developed faster and cheaper compared to those with extended functionality. A rich feature set in mind for your project will require more skills and experience from your development team. Needless to say that UI/UX design is also dependent on the number of features your software will comprise.
Additionally, the more features you plan to implement, the more testing will be required to ensure the stability and security of the product.
Custom software development involves both frontend and backend to build a scalable and sustainable product. Depending on the complexity of your future software, the scope and scale of the stack involved will vary greatly. Consequently, estimating software development costs is directly tied to the technologies you use to build your product.
Backend Technologies. This aspect of software development involves all things related to databases, APIs, and servers.
Since every software project is unique, you will not find a one-size-fits-all solution when choosing the tech stack. Nevertheless, several factors will help you identify the best tech stack while estimating the cost:
- Scalability. If you are planning to build a scalable application, you may end up with a complex stack to be required for the project.
- Time to market. If you want to take your product to the market ASAP, consider choosing well-tested or advanced solutions.
- Development and Maintenance Costs. Since estimating software development costs is front and center, you should consider solutions and frameworks that will not drain your budget.
The cost of software development is also directly tied to the experience of software engineers working on the project. Based on their skills and knowledge, engineers can be junior, middle, and senior.
- Junior developers are usually at the beginning of their careers and rely on the support and guidance of experienced colleagues. Here at LITSLINK, we also have a board of highly skilled software architects who oversee projects, mentor junior specialists and ensure their timely and uncompromised completion. We also run knowledge-sharing workshops on a regular basis to bring our junior developers up to speed faster.
- Middle developers are more autonomous and established specialists who may command several frameworks or programming languages and rarely require guidance.
- Senior developers can contribute the most to your project due to their impressive experience. These specialists can offer innovative and all-encompassing solutions to gear up your project quickly.
Naturally, the cost of your project will go up when working with middle and senior developers. However, experienced developers offer invaluable expertise and industry knowledge to your projects.
One of the most profound nuances that contribute to software development cost is project complexity or project size. If you opt for the T&M approach, the more complex the project is, the more hours it will require to complete, and as a result — the more expenses will be spent. In software development, we can divide complexity into three levels:
- Easy. Those are relatively small projects that usually require changes or upgrades to existing software. Such projects take comparatively little time to complete and a smaller development team to see it through.
- Medium. These projects tend to be more work-intensive and require developers with more advanced skills to see it done. Still, these projects are feasible and deliver tangible results.
- Complex. As the name implies, these projects present a particular challenge for the development team. Complex projects often involve the integration of multiple systems, security, databases, and components. Multi-platform solutions and sophisticated business systems are among such projects.
As pointed above, complexity is an apparent contributing factor to consider when estimating the development cost of your software.
Many tend to disregard the composition of the development team as less relevant when making a software development cost estimation. Though less obvious, this factor is among those that affect the final result and project budget. Notwithstanding the skills, team composition can be explained using three generic types.
In development, generalists specialize in many areas instead of focusing on one area of responsibility. Such teams are usually limited in size and can handle one project at a time. Choosing a generalist team is an optimal choice for projects of small complexity.
This type of a development team can solve complex projects that need a nuanced understanding of industry-specific details. Tech specialists can work wonders with complex projects and optimize the software development cycle.
Large projects require dedicated teams of both generalists and specialists to complete in time. You should pick such teams when quality is of the essence and prompt market rollout is unquestionable.
Outsourcing software development is often the most reasonable and cost-effective way to build a product, especially at the early stage of a project. There are a number of well-established outsourcing regions out there. Each of them has its pros and cons you should carefully consider before choosing a development partner.
This IT region is rapidly gaining momentum as one of the most efficient and productive globally. With overflowing tech talent, Eastern Europe is a promising outsourcing destination.
- Skilled Specialists
- Reliable Workflow
- Good Cost Effectiveness
- Remote Communication
As an IT region, India is by far the largest and most active one. However, there are many complaints regarding the inconsistent quality of development services.
- Extensive Talent Pool
- Established Momentum
- Low Quality
- Communication issues
Historically, West Europe established itself as a reliable IT region with a range of dedicated companies and skilled developers.
- Great Talent Pool
- Stable Productivity
- No Language Barrier
- Higher Rates
In recent years, South America ramped up its IT sector, becoming a powerful nearshore option to some companies considering outsourcing their projects.
- Decent English
- Growing Talent Pool
- Considerable Performance
- Higher Rates
- Cultural Differences
- Lack of High-Skilled Specialists
As you can see, the choice of the region to outsource your projects can be a complicated one since you have to account for all the possible benefits and drawbacks.
With many factors contributing to the final price tag and challenging decisions to make along the road, you need to consider everything beforehand from the choice of an outsourcing region to the team composition and tech stack
You ensure smooth cooperation and transparent communication with your developmental partner when you know how the cost is estimated.