Custom Software Development Costs: Market Average, Factors, and Our Approach

Businesses are different, and so is the custom software they need to build to achieve their objectives. Small business owners may need a simple app that requires neither complex tools nor a large team of developers, while a big enterprise will be interested in creating a multifunctional solution for a variety of platforms and gadgets. 

By all means, the final costs of these two examples won’t be the same. In this article, we’ll list the key drivers of custom software development costs and explain how they are calculated.

Key Factors Affecting Software Development Costs

According to SaM Solutions’ experience, the costs of software development projects vary from $45,000 to $1,500,000. This is quite a huge ballpark range, but to evaluate more precise costs, business consultants need to define each project’s specifics. 

As a rule, defining specifics implies investigating multiple factors that directly affect the project budget. Let’s look at the most popular ones.

Complexity and size of a project

Quite evidently, the larger and more complex a project is, the more time and resources it will require, and the higher the development cost will be. But how exactly does one define complexity and size?

In terms of costs, software engineers usually list the following three types of software projects: 

• Small projects

Small projects are characterized by a relatively small scope and basic requirements. These projects may be completed by a small team of developers within a relatively short time.

Examples:  Simple web applications, mobile apps with basic functionality, or small automation scripts/minor pieces of software.

Average price range: from $5,000 to $15,000.

• Medium-sized projects

Medium-sized projects may have more complex requirements and involve more stakeholders, which can increase the project’s size and complexity. These projects may require a larger development team, more advanced technologies, and longer project timelines.

Examples: customized ecommerce solutions (including those based on Magento, SAP Commerce Cloud, or Salesforce Commerce), custom web-based software development (can be powered by Umbraco, Sitecore, WordPress, or other SaaS platforms), complex mobile apps.

Average price range: from $15,000 to $100,000.

• Enterprise-level custom software

Enterprise-level custom software is typically the most complex and requires a high degree of functionality, scalability, and customization. These projects may require compliance with specific regulations, specialized features or functionality, and integration with specific systems.

Examples: ERP systems, data-intensive web or mobile applications, or other large-scale software solutions. 

Average price range: from $100,000. 

Skill level of developers

The skill level of engineers can have a significant impact on the cost of custom software development as well. Here’s what exactly the skills tend to affect:

• Development speed

Seasoned developers are typically able to work more quickly and efficiently than less experienced specialists, which allows them to complete projects faster. This can lead to lower development costs since – as we’ve already mentioned – the time required to complete a project is directly related to its cost.

• Code quality

Experienced engineers are more likely to write clean, well-organized, and easily maintainable code than junior developers. This can help reduce the time and cost required for future updates and modifications to the software.

• Technology expertise

Experienced developers have expertise in a wider range of programming languages, frameworks, and technologies, which makes them able to freely and impartially choose the most appropriate tools for a particular project. This can help optimize development time and costs by using the most efficient technologies. 

• Communication skills

More mature engineers are often better at communicating with stakeholders and team members. While poor communication can lead to delays and increased costs, good team work ensures that the project stays on track and within budget.

Size of a development team

A full-fledged software development team for a large-scale project typically includes:

• Business analysts – analyze business needs and formulate high-level requirements.
• Solution architect – designs software architecture.
• Product or Project managers – overlook the entire project and shape the requirements.
• Project Scrum Master / Team Lead – plans and assigns the tasks to the team members.
• UI/UX designers – create UX wireframes and design UI mockups.
• Backend software developers– deliver the code for the server-side of the solution.
• Frontend software engineers – write the code for the client-side of the solution.
• QA specialists – run manual and automated tests and log test results.
• DevOps engineers – build CI/CD processes.

If a company has a limited budget, the team will be smaller and some members will have more responsibilities, compensating for the absence of dedicated experts. Mind, however, that the smaller the team, the longer it takes to deliver a project – and, consequently, the higher the software cost. It’s often more cost-effective to hire more experts and wrap up faster than pay a very small team for 2 years or more. 

Development team location

The location of a team can affect the costs of a software development project in several ways. There are three primary types of development team locations: on-shore, near-shore, and offshore. Each location type has its own advantages and disadvantages, which can impact the cost.

• On-shore teams: On-shore development teams offer the advantage of easy communication and collaboration. But if the cost of living and labor rates in your company’s country are high, this model will lead to higher development costs.

• Near-shore teams: Near-shore development teams offer lower labor rates than on-shore teams and a similar time zone, but there may still be challenges related to language and cultural differences. Additional costs related to travel and logistics can increase the costs further.

• Offshore teams: Offshore outsourcing may be a great alternative to other typical software development engagements. Offshore development teams offer the lowest labor rates and can be an effective way to reduce project costs, but there may be challenges related to asynchronous work, onboarding, and quality control.

Technology stack

The technology stack refers to the combination of programming languages, frameworks, libraries, and other tools that are used to develop the software. Here are some ways in which the technology stack can affect custom software development costs:

• Availability of experts

If a technology stack is popular and widely used, there may be a larger pool of skilled developers available, which can help keep development costs lower. Meanwhile, if a technology stack is legacy or niche, it may be more difficult to find skilled engineers, which would drive the cost of development up.

• Licensing costs

If a software development project requires the use of proprietary software or libraries instead of open-source ones, there may be licensing fees associated with their use.

• Scalability

Certain – usually pricier – technologies are better suited for large-scale projects and can handle high traffic volumes more efficiently, while others – most affordable ones – may struggle to scale effectively. If a project requires a high degree of scalability, it may require the use of a more expensive technology stack.

• Integration with other systems

The technology stack used in custom software development can affect how easily it is integrated with other systems. Some technology stacks may require additional development time and resources to integrate with other systems, which can increase the overall cost of development.

Testing and quality assurance

Testing and quality assurance are crucial components of software development, and can add to the overall cost of the project. However, investing in thorough testing and quality assurance can save money in the long run by preventing costly bugs and issues in production.

Design

The importance of great visuals can not be overestimated. Attractive designs and quality UX can lead to increased customer engagement, which is especially vital for ecommerce apps and mobile- or web-based digital products. 

However, not all types of software require an intricate and unique design. SCM, ERP, and CMS solutions can do great with just customized templates. This can help minimize the costs of UI/UX design services and allocate the budget to feature development instead. 

How We Estimate Software Development Costs at SaM Solutions

To find out the costs of the project, SaM Solutions follows several stages of estimation:

1. Requirement analysis. Our business analysts explore needs and requirements, including the necessary features, target audience, and the desired delivery date.

2. Project scope finalization. We schedule meetings or video calls with your product owners or project managers and discuss their vision of the final software. Our team makes sure to fully understand your expectations in order to correctly estimate project costs.

3. Proposal preparation. Together with our software architects and lead developers, we create a proposal document that contains all key information on the project.

4. Quote calculation. Based on the information in the proposal, we also prepare a quote with the estimated project costs. We also offer optimization strategies (e.g. another development methodology, different technology stack, alternative team composition, etc.) to help you minimize the expenses. 

Drop Us a Line to Get a Quote

The cost of software development services varies depending on many factors, including the project scope and complexity, technology stack, development team’s composition, experience, and location, as well as testing and design efforts. To know the exact price of your project, feel free to schedule a consultation with the SaM Solutions team. With our decades of experience in custom software development, we will be glad to help you understand project costs better and launch development.