One thing my mom taught me when I was young is to not “blind buy” anything. Otherwise, you would catch yourself flabbergasted about your bill or, worse, unable to pay for it. But when doing business, there are so many things that can’t be exactly estimated, leaving you in a fog of how to allocate your resources and plan your steps. Project estimation in software development is one of the many obstacles our clients face, preventing them from doing effective digital transformation for their team.
So, how much does custom software development cost? Following us through this guide as we teach you how to calculate it, how much you should prepare, and whether there are any hidden costs.
- Overall, How Much Does Custom Software Development Cost?
- Learn What Factors Influence The Cost Of Custom Software
- Potential Hidden Costs That You Might Neglect
- Examples Of Failed And Overbudget Custom Software Projects
- Tips To Prevent Overbudget & Optimize Cost
- Doing It Synodus’ Way: How We Calculate Software Projects Price
- Wrapping Up
Overall, How Much Does Custom Software Development Cost?
The average cost of custom software development is from $50,000 to $500,000. But I have seen cases where it can reach millions of dollars. It’s hard to give you an exact estimate without knowing your project scope and requirements. Remember that every bullet point on your list of features, technology used, and the number of potential users can affect the final price.
However, as we work with many business sizes, we realized there’s a certain price range that companies are willing to invest in bespoke software. Besides technical aspects, the cost of custom software development is also determined by the company size, business model, strategy, and budget allocation for digital transformation.
- For startups, during the early stage of growth, they still focus on validating targeted market and product ideas. Because of this, MVP development is the most suitable approach, which can cost around $5,000 to $50,000.
- For small and medium enterprises, you have more resources but are not willing to splurge, you have concern and caution. At this point, you stand between custom development and off-the-shelf. If you need an instant solution, you most likely choose OTS. Regarding custom development, a few dozen and hundreds are under control, but anything above $500,000 need consideration.
- For enterprise, the sky is unlimited. Large businesses have complicated processes, cross-department workflow, big polls of data processing, high level of data security and compliance. Due to that, the cost for enterprise custom software development can go from $500,000 to millions.
To be more precise, here’s the average sum up cost for developing certain type of software:
|Type of software||Price|
|Content Management System (CMS)||$20,000 – $90,000|
|Software as a Service (SaaS)||$20,000 – $500,000|
|Enterprise Resource Planning (ERP)||$100,000 – $800,000|
|Client Relationship Management (CRM)||$150,000 – $600,000|
|Learning Management System (LMS)||$80,000 – $150,000 (minimum)|
|Minimum Viable Product (MVP)||$50,000 – $250,000 (minimum)|
|Custom eCommerce Store||$20,000 – $70,000|
|Marketplace App||$75,000 (average, basic solution) >$280,000 (more advanced solution)|
|Social Media App||$60,000 – $300,000|
*The price can change based on your requirements. To have an exact estimation, read on to see our breakdown! Or consult with experts like Synodus!
Learn What Factors Influence The Cost Of Custom Software
Understanding these factors can help you self-estimate your project and sort out the requirements by adding or removing specific features to make it fit your financial constraints.
This step is also crucial if you work with an outsourcing partner or freelancers. Why? The clearer your scope and knowing what you need, the better you deal with price and choose a suitable partner.
1. How Complex Is Your Project?
The simplest way to determine the complexity of your project is by counting the number of features or screens. The second question is whether your application needs to integrate with another system or automate any process. Any feature implemented through code will make the software more complex, which in turn increases the price.
For example, a basic login screen with minimal notification sound can cost around $100. But an advanced screen with encryption can reach nearly $10,000.
As you add more features to your project, the database and compatibility requirements also grow. Plus, you must pay attention to maintenance, which can cost a few hundred dollars a month.
2. Does Your UX/UI Require a High Level of Creativity?
As complex software hikes the custom software price, so does intricate design. An app with a good custom UX/UI design usually has higher user satisfaction, dwelling rate, and potential sales. Investing in good UX/UI definitely drives worthy turnover, but not every business has the initial resources to sink into.
To deliver outstanding UX/UI experience, businesses would hire graphic artists and UX designers. These experts not only meticulously design every element on the interface, arrange them to best capture the attention and lead the users’ eye, but also ensure the pleasing and on-brand look of the application.
And if you want to add 3D graphics for a modern and realistic look (which we usually see in games, metaverse, and blockchain applications), these definitely cost a dime, much more than traditional 2D.
Keep in mind that using custom artwork, fonts, and animations will also cost an additional fee. Unless it’s necessary (meaning it helps you convert more users/ customers, it enables you to stand out among competitors, for example, in the game industry) and you have enough resources to back it up, my suggestion is to trim the fat on design and only focus on the main parts.
3. Chosen Platforms & Frameworks
To reach broader customers, when creating desktop and mobile applications, many businesses make it compatible with various operating systems. Of course, you have to pay to refine these apps.
Let’s break it down into web, mobile and desktop software.
For web development
A simple website is the cheapest choice. Then comes web applications and progressive web applications.
For mobile development
If you want to go beyond a website for more engagement, personalization, and unique features, you can choose native, cross-platform, or hybrid (combination of mobile and web) app development.
Native app development requires making separate codebases for iOS and Android. An iOS native app can’t be used on Android and vice versa. The price of Android and iOS platforms varies slightly, as separate developers are required to manage different codebases.
On the other hand, cross-platform app is a more cost-friendly option. Developers only need to write code once, and the app is deployable on both iOS and Android. This approach is both time-saving and cost-efficient. However, it’s not always efficient for some types of products.
For desktop software development
In general, Windows is more cost-effective, thanks to its popularity and ubiquity. Window’s extensive range of tools for development support helps cut costs immensely.
4. Integration Requirements
What businesses integrate into the system is another influential factor. Nowadays, most software doesn’t stand alone but connects with at least a third-party service, an application programming interface (API), or an organization’s pre-existing suite of legacy software.
The process to make these systems align can be a substantial hidden cost for many projects. If the existing API works well, it’s a dream come true. One click, and everything is in sync in a day. But if the current API doesn’t work well, or if you are so unlucky that both your third-party app and legacy software don’t provide API, chances are you must build one.
5. Don’t Forget About the Database Migration
It’s essential for development teams to make a copy of existing data and migrate to the new database. The cost of custom software development increases with the database size, the complexity of security needs, and the number of vulnerabilities in the database.
While migrating data, the software development is expected to take care of and complete certain procedures. Some of them are data validation, data conversion, cleansing, analysis, security profiling, and quality assurance. The sum of those factors above essentially raises the average cost of custom software development.
6. Team Choices
Who you choose to work with will influence the custom software development cost.
If you go for in-house
Estimate these costs before assembling your in-house team:
- Salary and incentive
- Training & Career development budget
- Budget for infrastructure (table, computer, stationery for each employee)
- Recruitment & Onboarding budget
- Cost for software and tools
You should also count the risk of being unable to find the right person, the risk of employee offboarding and the risk of someone leaving after 2 months of probation. Report shows that on average, it takes 40 days to hire and onboard a technical position.
If you go for outsourcing
If having an in-house team is not the ultimate choice, you can opt for outsourcing oversea teams. It’s best to go for full-house agency with designers, developers, and project managers proficient in English or your native language.
Speaking of costs, the price for outsourcing might vary among different regions. According to Mobindustry, the average rate for outsourcing in North America is $165, while it only costs one-eighth of that in India. Destinations like India, Asia, and Eastern Europe are the most ideal outsourcing development regions.
|Country||Average hourly rate|
Choosing which country to outsource can alter your custom software development costs. Read when it is better to use an in-house team and when you should outsource!
But if you require quick assistance with unsophisticated projects, hiring freelancers is the ultimate choice. Multiple good-quality developers can work at a reasonable price, ranging between $10 – $50 for an hour. You can easily hire one from websites like Upwork, Fiverr, etc.
One thing to watch out for when hiring a freelancer is that you should have strong in-house project management and clear communication. The freelancers are not a part of a larger team, yet they should be kept on track of what is going on and what they should do.
Potential Hidden Costs That You Might Neglect
A common mistake shared among businesses is that they think custom software development costs go down to zero once they are done paying and forget about possible hidden costs. Whether it’s a small project or a big project, some costs appear unexpectedly during and after development.
Even after the app is launched, the app development still goes on. It is meant to keep the app alive and meet customer demand as new opportunities present. Companies like Google, Facebook, Twitter paid massive costs for staff to maintain and upgrade the apps post-launch.
- If you are selling or monetizing your app (like Google, Facebook), it’s best to have an in-house team for daily maintenance. During the early stage of growth, you might consider having from 2 to 5 people on deck.
- If this application is used internally, you can save up by attaining a maintenance contract with a third-party. This is way cheaper than having an in-house team.
Most software is either hosted as SaaS or in the cloud, and there is always a monthly fee going with it. These costs will incur post-launch and rise as your company scales. If you host it in-house, on-premises, the cost of monthly maintenance should also be considered.
Another underestimated cost that you might neglect is training costs. If the person maintaining the app leaves the team, you have to find someone else with similar skills to do the job. And when you get that person, you need to spend more on training them and getting them to understand the software, business model, infrastructure, and other components.
To alleviate such expensive training costs, you can establish a training library.
Also known as “technical debt”, this cost appears when you shift your business quickly to adapt to the market need quickly. This type of cost is paid for technology upgrades and extra personnel to bring a new solution to the market as soon as possible. However, this strategy is not going to last long, and businesses are advised to assess the platform to make sure the costs scale with the needs of the company.
Strategic costs are essential to your businesses because they give you leverage. With careful planning, you can catch the opportunities to “hack your way” as soon as possible without worrying much about money.
Examples Of Failed And Overbudget Custom Software Projects
Due to the negligence of hidden costs and lack of proper management, a plethora of projects have failed miserably. Funny enough, Wikipedia has a list of these projects, and I will point out some of the notable ones.
Queensland Health Payroll, a payroll system based in Australia, was among the most illustrious examples. The first phase of development started in 2010, but the Queensland Health Payroll System was quick to go over its budget. This has gone down in history as the biggest over-budget case in Australia, with the cost being over 200 TIMES the original budget, from $AUD 6 million to $AUD 1.2 billion.
Before Queensland, Nike had been in a similar scenario back in 2000. And boy, did they have such lessons in ROI. The story started when Nike wanted to invest about $400 million in updating ERP, supply chain, and a large CRM project for the system upgrade. However, things went out of hand as the project ended up costing $100 million in lost sales, stock prices dropped by 20%, and multiple lawsuits were filed.
Tips To Prevent Overbudget & Optimize Cost
It’s quite common that businesses efficiently manage employees’ wages, number of team members, and infrastructure investment when they opt for in-house. However, things are way trickier when you work with freelancers and outsourcing vendors. There are hidden costs lurking around, and those vendors might have their own ways of calculating the price.
There have been numerous cases that have failed miserably, costing businesses millions and even billions. Scams unfortunately took place and costs exceeded unexpectedly due to businesses’ lack of knowledge and carelessness.
Payment Model That Bespoke Software Company Uses
|Fixed Price Model||Well-defined and consistent. All fixed specifications, budget, and delivery date||Pay for the exact work that is to be done No unexpected additional payments Low involvement in the development process||Difficulty in making changes to the project Concentration on delivering the discussed features, not coming up with new idea for software improvement|
|Dedicated Team||Pay per hour, pay per number of people on 1 team You can partner long-term with their team Your partner manages the compensation & benefits||Massive control over the development process Minimal recruitment and HR management costs Quick team upscaling and downscaling||Budget fluctuates based on required skills and needed time to complete projects|
|Time and Materials||Great for small, underdefined scope Pay per hourly rate and material costs||Settled payment within specified periods Easy requirement and plan alteration without incurring additional costs High satisfaction rate after the development ends||Slight shift in cost and timeframes if there are changes to be made More commitment to be involved in the development process.|
The two most used payment models are Time & Materials and Fixed Price, and you can read the comparison of which is better here!
Tips To Control Your Budget
Besides choosing an appropriate payment model for the project, there are more ways to control your custom software development costs. Here are 4 useful tips that you can effectively reduce the cost of custom software development and stay financially efficient.
Lessen third-party integrations
While it’s true that integrations can bring a lot of value to your app, they can raise the custom software development costs and the risks of imminent complications. Make sure third-party integrations directly contribute to your project’s core values and the final product.
One useful tip applicable to products of different fields is to choose ready-made and trustworthy third-party platforms as your partners. This could save your business from suffering hefty expenses while still delivering reliable software solutions.
Optimize agile project management
One effective way to manage your project is to break it into smaller, more manageable chunks. By doing work in short cycles, you can reduce cost rework and focus on more important stuff.
Start considering open-source software
Open-source tools give robust functionalities, security, and community support while relieving the burden of monthly fees/subscriptions. However, you should beware when using them, and be mindful of licensing requirements and compliance.
Go for simplified design
Keep everything clean, simple, and straightforward. Remove any unnecessary features that take too much time and effort. You can cut down the complexity of the project and custom software development costs.
You should simplify the project at different stages of development, release faster, and keep perfecting the rest of the project.
Doing It Synodus’ Way: How We Calculate Software Projects Price
To support our clients in choosing a feasible approach, we follow a step-by-step process to help them list requirements, choose suitable technology, set a cost-effective payment scheme, and plan out the resources and development process.
This is what sets us apart from our peers. Instead of us saying out loud the initial price and you pay, you get a full view of what you are paying for and how it can effectively work with your business.
By handpicking every technology and framework that best matches your requirements, we will identify a few options for you to make a final decision.
With 250+ mavericks leveraging top-notch technology, from IoT, low code, machine learning, AI to blockchain, we have partnered with dozens of businesses across the globe to build bespoke solutions that drive results.
- High-performing software, mobile, web design & development
- Strategic, long-term tech partner in product development for startups
- Legacy modernization and maintenance post-launch
- Consult in business strategy and digital transformation
Nothing shows better than real numbers and real use cases. View our portfolio and Learn how we become strategic partner of our clients!
While the custom software development cost may seem daunting, it’s essential to view them as an investment rather than a mere cost. By carefully planning and budgeting for your project, considering factors such as complexity, features, and ongoing maintenance, you can make informed decisions that align with your business goals and budget constraints. Remember, the key to success lies in finding a balance between quality and cost-efficiency, ultimately delivering a tailored solution that meets your specific needs and sets your business on a path to success in the digital era.
More related posts from Software Development blog blog you shouldn’t skip:
- SaaS Vs Custom Software Development: Harnessing The Right Power
- How Custom Software Stack Up Against Packaged Software: Key Differences
- Decoding The Contrast Between Custom Software vs Off-the-shelf
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