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Updated Apr 10, 2024

What Is the Cost of Software Development?

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Sean Peek, Senior Analyst & Expert on Business Ownership

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Technology is the cornerstone for nearly every business in the world today, and the software you use often determines whether or not your business will be competitive in your field. It is vital, therefore, to invest in your company’s software development. The cost of 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 are reflected in the final price.

The cost of software development

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, have vastly different costs because of the complexity of code and time required. Complicated real-time data analytics with multiple permission levels will require different resources than, say, a fitness app with a calorie calculator. 

To provide a frame of reference, here are some of the common features of software development, along with the approximate time and cost  of implementing them (based on a rate of $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

Applications are also a cornerstone of business in recent years, and the cost will depend in part on the software included in your business’s mobile app. The average costs of app creation are as follows.

  • A minimum viable product: $5,000 to $20,000
  • A simplified app: $20,000 to $60,000
  • An average-scale app: $60,000 to $150,000
  • A complex, full-scale mobile app: $150,000 and above

These numbers depend on the company and even on individual projects. These are just rough guidelines 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.

There are many different kinds of software aside from those consumers regularly interact with. Depending on your business, you may require software packages such as PEO (payroll and employee recruiting) software and CRM (customer relationship management) software. You can either develop these systems internally or subscribe to them through a third-party system, which can also vary in cost. Weigh the pros and cons of each option before determining which would be best for your company. [Read more about the business cost of keeping software updated.]

Factors that affect the cost of software development

1. The size

Before describing a software’s size, we first 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 make an interaction. For example, a Login page and a Change Password page are two different screens with different functions. In this context, the size factor is 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 screens and run upwards of $75,000. Larger projects with 50-plus screens can cost $250,000 and up.

2. The design

Custom design makes your software stand out and more pleasant to use. Long gone are the times of 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. 

The design process can be 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-and-redesign cycles. In addition, the number of high-quality custom images will drive the price up.

Bottom LineBottom line

If you want many complex elements in your software, such as high-quality custom images, the UX/UI design will go through increased iteration cycles that drive up the cost.

3. Platforms supported

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 and Android? Maybe you require a cross-platform solution. A desktop tool has its own nuances, as do purely web-based services. All of this will be reflected in the price. 

4. 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.

5. The development team

The number of people working on your project directly correlates with its cost. It is the same principle if you are 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 software development team you have affects their cost. If your organization has a specialized IT team already on the payroll, then you will spend substantially less money for software creation. However, their ongoing wages can add up and cost more in the long run. Not to mention, many existing teams don’t have the necessary knowledge or enough people available. In that case, you can augment your staff with a dedicated team or outsource the process. Outsourcing is the most expensive option, but the quality of the project you receive will also be higher. When choosing your software development team, ask them relevant questions about the development process and the software itself.

6. The team’s location

The development team’s location  also has an influence on the price. Rates differ drastically depending on where the team is based. In the U.S. you can pay up to five times more for the same job done somewhere else. The key is to figure out a balance between cost and quality. 

7. Ongoing maintenance

Software is never truly complete. It’s always possible to add new features, improve performance, and fix unnoticed bugs. This is the benefit of time and material payment plan that we’ll discuss later in this 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

The two most common payment models 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. 

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.

TipBottom line

If you have a small, simple project with clearly-defined requirements, pay all of the development costs upfront.

Time and material

This is the more flexible method of the two. Payments are made incrementally instead of in a lump sum upfront. Depending on the agreement, you can pay every two weeks, every month or whatever time period is preferred. This approach allows for more control over the team and the development process as a whole. You can see the project whenever the payment is made. This way, you’ll be able to check the reports, ask for extra features, and make other suggestions. 

Additional reporting by Andrew Kurilo.

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Sean Peek, Senior Analyst & Expert on Business Ownership
Sean Peek has written more than 100 B2B-focused articles on various subjects including business technology, marketing and business finance. In addition to researching trends, reviewing products and writing articles that help small business owners, Sean runs a content marketing agency that creates high-quality editorial content for both B2B and B2C businesses.
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