How to Estimate the Cost of Software Development

The software development cost estimation is a part of the first phase of the development process. Naturally, software development requires certain costs which are quite difficult to calculate, since it is almost impossible to visually determine the amount of work. 

 

Nevertheless, before you resort to custom software development, you need to understand how much it will cost you. The price depends on many factors (software functionality, type, etc.).  

 

This article will inform you about the crucial factors affecting the cost of custom software development. So keep on reading.

 

Average Cost of Software Development

 

The software development costs range from $3000 to $500,000 on the average. Nevertheless, this price can be lower or higher depending on your needs, purpose, software type, number of features, design uniqueness, team members, etc. IT companies can give you the most realistic estimates of software development costs.

 

Factors That Influence The Software Development Cost

 

There are a bunch of factors that need to be taken into account in order to make accurate estimates.

 

1. Software Requirements 

 

To a great extent, the accuracy of software project cost estimation depends on how  detailed your specific requirements are. If you want to resort to the software development company, make sure to provide your vendor with technical documentation or something that contains comprehensive information about your requirements. The more accurate and understandable they are, the cheaper the final cost will be. 

 

 

2. Scope of work

 

The scope of work is directly proportional to the cost of software development. Each added feature, each limitation will add to the final cost. The better you specify the scale of your project, the more accurate your software project cost estimation will be.  

 

 

3. Design

 

The design can be simple or complex. In the first case, it won’t take too much resources while complex design may really drain your budget. So, for software costing estimation, you have to define which kind of design your project requires.

 

4. How complex your project is

 

How big and difficult is your project? How many pages or screens does it contain? The more diverse pages, screens, and features you want, the more work and time it will take to create your product.

 

• Small project

 

Small project doesn’t require a lot of resources and time since it implies the development of one or two simple functions, so it takes roughly 400-700 hours to build. It can even be related to changes in already existing software (bug fixes, interface tweaks, data migration, etc.).

 

• Medium project

 

Software of medium complexity may have several functions that may be quite complex. The development of such a software may take up to 1200 hours.

 

• Large project

 

Large projects include multi-platform applications, complex management or business systems, and more. They require a high level of security and have complex architecture. Therefore they take more than 1200 hours to develop.

 

5. Software development team

 

You can construct your team by involving the specialists of different skills and level of proficiency into the process. However, the development of the vast majority software types requires such professionals:

 

• Front-end developers

 

Front-end developers are responsible for the development of everything that the user sees and interacts with. In short, front-end developers work on the graphical user interface allowing the users to navigate, view, and interact with the software. 

 

• Back-end developers

 

Back-end developers create the software structure - its server side (for example, a registration process when the user credentials are sent to the server to verify if they are correct and then returned with a response to the user). 

 

There are also full-stack developers who work on both back-end and front-end features.

 

• UI/UX designers

 

Designers create the appearance of a software, handle the visual and conceptual parts using the UX and UI technical stack.

 

Also Read | An Overview of Agile Development Cycle

 

6. The developers’ skills

 

Like any other sphere, the IT sphere has specialists of different levels. The average salary of the lowest-paid software developers makes approximately $82,430 and the salary of the best-paid ones makes $136,320. The software development rates range from $25 to $300 per hour.

 

The software engineers are divided into the following categories:

 

• Junior software developers

 

Junior developers are just starting their careers. Consequently, the salary of junior specialists is lower. Nevertheless, they need to be supervised by middle or senior software engineers as they need support so they can’t work on your project alone. 

 

It also should be noted that junior specialists work longer than middle and senior ones, prolonging the overall development time of a software. This leads to extra spendings.

 

• Middle software developers

 

Middle developers are on their way to become senior specialists. They can work effectively and independently on multiple tasks and implement complex software solutions.

 

• Senior software developers 

 

As the name suggests, senior specialists are the most experienced IT professionals in the team. They can solve complex problems, work on multiple projects, and lead software development teams. Hiring senior software developers will certainly cost you a lot of money, but in return you will get high quality software services delivered to you in minimal time. 

 

7. You development team location

 

Many business owners spend a lot of time choosing a country or region to hire software developers. This happens because the cost and pace of software development in different countries varies greatly. The total number of software developers in the world is expected to reach 27.7 million in 2023 which means that it becomes easier and easier to find a tech expert for an accessible price.

 

The cost of outsourcing doesn’t usually depend on the quality of service, but on the other factors related to the country’s peculiarities. According to a Deloitte survey, the most widespread reason for outsourcing (70%) is cost reduction. For real, outsourcing often appears to be a life-saving solution for those who need to cut a budget. In 2020, the global market for IT outsourcing was estimated at $342.9 billion. It’s expected to reach $410.2 billion by 2027

 

The regions with the most affordable software development hourly rates include Eastern Europe, some countries of Central Asia, and countries of South America. Outsourcing in the countries from these regions can reduce the costs for software development by around 40%.

 

Of course, if the wage gap between your country and the other countries is not a problem and you are not planning to outsource your project to a remote team, you can dedicate the task (fully or partly) to a local team or your in-house team.

 

8. Testing

 

A rigorous testing process is one of the keys to your project’s success, so you should think about the budget required for this stage of a development process in advance. It can ensure that bugs or broken links won’t create problems for your software.

 

Also Read | AI in Product Development

 

How to Calculate The Cost of Custom Software Development

 

In order to calculate the software development costs, you need to know the price of resources that will be used during the process (tools, third-party components, staff salaries, outsourcing costs, etc.). The percentage of each part depends on the project’s specifics. The more complex the project is, the more specialists will be required. The fixed wages of your workers will be determined after you define the terms of software development. The wages will depend on the number of specialists and their skill level.

 

1. So, the first thing you need to do is determine your requirements that then will let you know the scope of work. Determine the approximate number of hours needed to complete the project.

 

2. The design peculiarities is another thing that should be included in the overall cost. You may opt for the simplest design if your plan is to develop an MVP. Thanks to that, you can significantly reduce the budget.

 

3. Define the size of your project. For example, if you need nothing more but a simple software that you are not planning to develop in the near time, this will cost you around $1000 - $10,000.  

 

4. Decide on how many team members you need and how skilled they should be to be able to complete your project. Note that you will need to hire at least two middle or senior specialists. Multiple the hours required to complete your project to the salaries of the team member.

 

5. Ensure to add costs for testing and some extra costs that you may require in case of unexpected situations or if you decide to add some new features during the process.

 

 

Conclusion

Custom software products are tailored to the specific needs of your business, so the estimation of costs required for its development is not an easy process. The exact estimation can be given only by professionals from software development companies.