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What is the Cost of Software Development?

Andrew Kurilo
Updated Jul 01, 2022

Do you think the cost for software development is too high? There are many factors that affect the final price.

The costing for software development depends on a variety of different factors. The complexity and size of the project, the technology used, and even the geographic location of developers. All of these aspects are reflected in the final price.

Factors that affect the costing for software development 

1. The complexity of the project

This is defined by the logic of software and the number of various features it has. Note that not all features have the same cost of implementation. Push notifications and video calls, for example, are completely different in terms of price because of the complexity of code and time required. Complicated real-time data analytics with multiple permission levels will require different resources than, let’s say, a fitness app with a calorie calculator. 

How much time and money the various pieces of software development costs

To provide a frame of reference, here are some of the common features of software development, along with their approximate time and cost (based on $25 per hour):

  • Search: $300 to $500 over 12 to 20 hours
  • Push notifications: $625 to $875 over 25 to 35 hours
  • Login: $750 to $1125 over 30 to 45 hours
  • Edit profile: $1125 to $1500 over 45 to 60 hours
  • Payments: $1500 to $1875 over 60 to 75 hours
  • Calls: $6500 to $9250 over 260 to 370 hours

These numbers can vary greatly depending on the company and even on individual projects. These are just the rough guideline of what to expect at this hourly rate. Some teams don’t even use such estimates and evaluate purely on a case-by-case basis.

2. The size

Before describing software size, first, we need to understand the definition of a screen in this context. A screen is a page, open menu or anything that a user sees after they made an interaction. For example, a “login” page and a “change password” one are two different screens with different functions. In this context, it becomes fairly straightforward. The more screens the software has, the more the project will cost.

In general, small apps have somewhere in the range of 10 to 25 of them and run upwards of $75,000. Larger projects with 50-plus screens can cost $250,000 and up.

3. The design

Custom design makes your software stand out and just simply pleasant to use. Long gone are the times of bright lime green text on black backgrounds (although it certainly is an aesthetic used to this day). UI/UX is what makes the application user-friendly. That’s what the “U” stands for. 

This process itself can be quite complex depending on how extravagant you want the elements to be and how many iterations it will go through. The best designs aren’t created perfectly from the start. They are developed after several feedback-redesign cycles. In addition, the number of high-quality custom pictures will further drive the price up.

4. Supported platforms

Take into account how many platforms you want your software to work on. If you want a mobile app, do you want it to work on iOS or Android, etc. Maybe you require a cross-platform solution. A desktop tool has its own nuances, as do purely web-based services. All of this is is reflected in the price. 

5. Technology

The stacks of technologies aren’t equal as well. Some applications can be written in a single API. Others require front-end development done in one programming language, the back end in another, and they need to work together seamlessly. This correlates with the complexity of the project since different features often require different technologies.

6. The development team

The number of people working on your project directly correlates with its cost. It is the same principle if you were paying for a dedicated team. The time of each developer, QA-engineer, and project manager costs money. It’s as simple as that.

The type of team matters a lot when it comes to cost for software development. If your organization has a specialized IT team already on the payroll, then you will have to spend substantially less money for the creation of software. However, the ongoing wages can add up and cost more in the long run. Not to mention, many teams don’t have the necessary knowledge or there simply aren’t enough people available. In that case, you can augment your staff with a dedicated team. There is outsourcing. It’s the most expensive option, but the quality of the project you receive will also be higher.  

7. Their location

The location of the development team also has an influence on the price. The rates differ drastically. In the US you can pay up to 5 times more for the same job done somewhere else. The key is to figure out a balance between cost and quality. We have done an analysis of Russia and Israel markets that you can check out in more detail.

8. Ongoing maintenance

The thing about software is that it’s never truly complete. There is always the possibility to add new features, improve the performance, and fix unnoticed bugs. This is the benefit of time and material payment plan that we’ll discuss later in the article. You don’t have to wait until you get the final product to request changes.

There is a saying in the industry that you should multiply all costs threefold. That’s largely the result of people choosing the fixed-price payment model when they don’t have a clear vision of the project in mind. The product they get is different from what the client envisioned and then they need to spend extra.

The best payment model for software development

Since we mentioned payment models in our previous point it makes sense to explain them in more detail. The two most common ones are fixed price and time and material. Which one is more suitable for you largely depends on the size of the project and how defined your needs and requirements are.  

A fixed price

This option is better suited for projects with clearly defined requirements that aren’t subject to change. In short, you pay the entire development cost upfront. This can work for many clients but has more risks attached. It’s easy to lose control and communication with the team will be limited. Also, it’s not uncommon to face delays when working on a large project. This model is more suitable for small and simple projects.

Time and material

It’s the more flexible method of the two. Payments are made incrementally and not in a lump sum upfront. Depending on the agreement, the client can pay every two weeks, every month or whatever time period is preferred. This approach allows for more control of the team and the development process as a whole. The client can see the project whenever the payment is made. This way, there is an ability to check the reports, ask for extra features, and make other suggestions.

A client’s story of software development

While researching for this article, we remembered the story of one client, so we contacted him to get his perspective. Here is what they have told us about their experience.

“I got burned on the fixed price model. It was my own fault really. I guess, this is why you shouldn’t rush business decisions. I’ve got a bit of experience with software development, we had a dedicated team helping us create an ERP system. After it was completed I was elated. I wanted nearly all of my software to be custom made. I had big ideas and little patience. After the success that was my previous venture, I didn’t see any reason to wait. In fact, I even hired the guys from the company I mentioned before.

So here I was, with what I thought was a clear vision of the project asking to get it developed. Out of all payment options I chose the fixed price one. I had enough money, I had an idea, so I didn’t even think about it. I trusted the guys and I didn’t feel like controlling their process. In the end, I got the software I asked for. 

The tool that they made worked perfectly, but it lacked the main features I wanted because I thought they were a given from my requirements. The specifics are more complex than that. 

Thankfully I wasn’t short on budget and could afford to do it properly. We discussed the matter with the developers and came to an agreement. We were going to use the tool they made as a foundation for the one I wanted. This time I chose the time and material option. 

Every two weeks the guys showed me what they have done. I could play around with, test things and more importantly make suggestions and guide the direction of the project. It wasn’t a hassle that I thought it might be. It didn’t take up much time at all, and I enjoyed the back and forth conversation.

In the end, I got not just the software I wanted but better. Experts from the team offered additional features that they knew I could use. They explained the costs of everything and just were overall very transparent. That’s why if I’m ever going to order more software I know how I’ll spend my money and where it will go.”

The bottom line

Now that you have a better understanding of what does the costing for software development consist of, your resources won’t be wasted. Transparency is the key to a successful partnership. We value our clients and aim to make their experience as hassle-free as possible.

Image Credit: Chaay_Tee / Getty Images
Andrew Kurilo
CEO and co-founder of Digital Skynet, an outsourcing company that focuses on custom software development. A certified professional developer with a passion for business development and expertise in the field of business processes automation. I created a company that helps small and big businesses from all parts of the world.