Custom Software Development – How to Estimate the Cost?

In 2021 tech businesses tend to offer more and more complex products and services to bring higher value for their clients. While standard software sometimes serves the need of companies when managing business or serving customers, custom solutions are most suited for:

1. new business models,
2. testing out innovative ideas,
3. companies working in fields of high intellectual property rights (IP-rights) competition,
4. companies disrupting industries

Custom software will come with all the required features tailored to the specific needs of your business and operations with you having full control over the development process. However, many businesses still avoid the custom approach being uncertain about the time and cost for project planning and development. And while average time for custom software development takes between 1 and 9 months, costs may vary a lot depending on numerous factors. Here is what you need to consider.

How is the custom software development cost determined?

There are several key factors affecting the cost for a tailor-made software solution for your business: 

Software Complexity

What type and number of features will you need included in your software? Which of them do you want at the beginning and how many will you add on a later stage? Answers to these questions would help you get a rough estimation of the budget you need to spend.  

Tip: When planning for software complexity – the so-called Project Discovery Phase - pay attention to the software architecture and ease the scalability and flexibility of your code having in mind future integrations and updates. 

Desired Platform

The cost also depends on the chosen platform for your software’s deployment. Needles to say, you need to pick the right platform among all the web and mobile platforms out there. Or maybe you want your software to run on multiple platforms? Make sure you have all this figured out before initiating the development process.  

Tip: In many cases you might want to deploy your software for several platforms. Make sure you will be able to reuse code and involve automation in the process of further integrations and deployments. Even if this increases initial costs, it would save you significant amount of time and money on a later stage.  

Timeline

No matter whether you have internal dev people, or if you hire a dedicated team for your custom software development, project timeline will have its impact on the pricing. Think carefully whether short or long deadlines will actually cost more for your business. A custom software development project may slow down if you try to add too many complex features or applications at the beginning.

Tip: Take advantage of MVP Development (minimum viable product) to shorten development time and produce a basic version of your software with the most essential features only. The same is also valid if you want to save initial development costs or to test how the market would react to your product.

Development Process

Here you need to figure out a proven development approach that will best fit your needs and will give minimum number of errors with our software being developed as fast as possible. Does it sound like your requirements and expectations? Then you might be looking for an agile software development process which allows for great level of collaboration and implementation of changes at any stage.  

Tip: Agile software development with Scrum or Kanban frameworks is proven to be the most effective, cost-saving, and time-saving approach towards building and deploying custom software solution. No matter if you develop such internally or use an external software partner, make sure that Agile is the leading project management methodology. 

Integrations

Bringing the question back to functionalities, some of them might require integration with third-party APIs. Examples could be external applications, payment or analytics APIs, and any other that you want to exchange data with your app. This could increase the development costs of your software due to the potential compatibility issues that might emerge.  

Tip: In the beginning you might want to add any type of integrations that come to your mind to improve user experience and to enable more functionalities for your software. Instead, try to limit the integrations to a few, essential ones and upgrade on a later stage.  

Design

Time to think about the UI/UX of your application. The development costs would also depend on whether you want to add any animations, specific graphics or non-standard look to attract your users.

Tip: The visual look of your application is only the final touch but is fundamental for keeping users engaged. Make sure your software partner offers professional UI/UX services to guarantee that users are being easily navigated while using the software application. 

How to estimate the custom software development cost for your business? 

After you make sure that a custom software solution would work better for your business and you know what costs depend on, it is about time you learned how you could calculate costs for your own project.

Choose a software development team

You might first think of hiring in-house software developers to build your custom software solution. Such decision, however, might turn out to be inefficient for your business due to many reasons, part of which are: 

• Lack of expertise in attracting, managing and developing software teams
• High costs for employing software developers 
• Time needed from planning your software, through hiring and training staff and development of the project until the actual deployment 
• The need to lay-off staff or relocate human resources after the development project is over 

What if there is a better solution? 

Instead of hiring in-house developers, consider the involvement of a dedicated development team that comes with the right knowledge and expertise and can begin the project delivery right away. This will not only help you execute your project with better quality but also would save you significant amount of resources, time, and, most of all, money.

Determine how the MVP will look like

We already mentioned the minimum viable product as the result you might want to get at the first stage of development of your software. But how will it look like? Which core features do you want it to have? Choosing carefully will help you get an optimal version of your software developed within minimum cost, time and pressure on your teams. 

Predict Scalability and Flexibility

The market is too dynamic to neglect this. When estimating the costs for your software you also need to consider the option for future developments that will make your application flexible and scalable. Otherwise, you may end up in a situation when you are unable to serve your clients, or your software lacks essential features which brings damage to your business. To prevent issues like these, make sure you stay agile and work on sprints to introduce the desired functionalities. 

Negotiate the pricing model

Custom software development is a complex process with numerous stages that suggests various ways for calculating the costs: 

• Hourly pricing models (Time & Material) – here your costs will be determined depending on the work hours needed for the development process. They may vary across geographical locations and also depend on the complexity and scale of your custom software.
• Depending on team size and expertise – you need to estimate the number of experts and various skillsets needed for your project (e.g., will you need only a backend developer or also a front-end developer, a project manager, and a QA analyst?).
• Fixed price – in this case you agree on the full price that you will be charged for your custom software development. It needs to be carefully calculated to include all the aspects such as number of people needed, hours worked, schedule, etc. In any case this model hides significant number of risks even for short-term small-sized projects and it might be a good idea to avoid it. 

The Final Step: Request for Proposal

Being aware of all the aspects that determine the costs of a custom software development project, you are now ready to take the next step and send your RFP to a potential software partner. It can give you actual estimation of the costs for your own project with real average numbers. A request for proposal will help you make your final decision whether to stick to a standard software solution or go for a custom one, and whether to choose hourly based pricing or fixed-price one. At this point you may also have discovered that a dedicated software development team will be much more efficient and effective in doing the job for you. 

At Infoleven we can advise you on your project, navigate you to the best possible solutions and work on your request for proposal to deliver the best custom software for your business. Get in touch with us and learn more.