Factors Affecting the Cost of Software Development in 2024

Companies are increasing their efficiency through customized software development to increase their competitive advantage.

In 2021, the world market for custom software development was valued at more than $44 billion at the time of its 20021. It is projected to grow by a staggering 22.3% CAGR between 2023 and 2030.

However, determining the right custom cost for software development is challenging for many companies and start-ups.

Many factors affect the cost of a software development, including team size and complexity of the project, tech stack, etc.

Estimating the cost of software development is challenging, especially when you keep “no projects are the same” in mind. Each product is distinct in the goals it aims to achieve and in various variables that define the basis of its existence. These variables are the ones that directly contribute to the price of software development.

For a rough concept, software development project costs can range between $35,000 and $300,000 based on the type of features utilized, the complexity of the UX/UI design, the location of the company that develops it, and the hourly rate of developers, etc. But, the greater the level of complexity of the software, the more expensive its total cost.

Prerequisites for Estimating the Software Development Cost

Before developing a software, these essentials are discussed to ensure estimation of software development cost. AddWeb Solution, a professional software development firm, will help you with each step.

Project Goals

Informing your clients about the goals of your project in the first meeting is the most effective way to estimate the costs of custom software. An objective and clear plan will allow you to create applications worth your price and effort. Discussing the ultimate goals with the team will ensure that they stay on track and the same page. The more specific the goal, the more quickly the software will be developed and the more efficient the cost-optimization.

Target Audience

The first step to developing successful software is to identify the target market. The people most interested in your product or services typically constitute your target market. Costs will be influenced by the time and effort spent identifying the audience you want to reach.

Types of Software

The first step in determining the cost and duration for software creation is determining the software that will meet your requirements. A greater number of features and complex software will add time and expense. The integrated software you use that includes numerous features that draw users in and keep them entertained can give you an advantage in an extremely competitive business environment.

Custom Software Development Cost Estimation Techniques

An accurate estimation of the software’s cost is among the many elements contributing to effective software development. These methods can aid in understanding the intricate method of estimating the cost to develop software based on realistic quantities of time, effort, and funds. These methods will aid in estimating the typical costs of custom software development:

Empirical Estimation Technique

This method uses the data from previous projects to estimate software development costs. The method also collects information through assumptions and a little intuition. Then, methods of cost estimation based on evidence are employed, and a preliminary estimate is presented to the company in the planning stage.

Previous experience using an equivalent software solution for this method is required. The empirical estimation technique relies on guesswork but has been proven to be a solid method for estimating rough costs.

Heuristic Estimation Technique

You can employ the heuristic estimation method to determine the cost of software development. This strategy or model manages cost estimation in a variety of different ways. It is the most efficient method to make decisions swiftly regarding complicated projects. This model determines the expense of a project by analyzing the relationships between its various factors and elements.

A heuristic approach to calculating software development costs includes using the Constructive Cost Model, which utilizes regression to calculate the program development cost.

Analytical Estimation Technique

Cost estimation using this method breaks the task into several components or processes. Then, each task’s typical duration is calculated by analyzing previous experiences. The procedure is carried out by an expert who has expertise in estimating the cost of similar projects and is aware of the crucial process.

To comprehend software development costs, you must understand the various estimates. These estimates are offered by the company that develops software according to the goals of the project requirements, specifications, and the details discussed in an initial scoping session.

Factors Affecting the Cost of Custom Software Development in 2024

Suppose you’re trying to figure out what you can do to estimate the cost of developing software. In that case, it is largely based on these important factors. Let’s take a closer look at these aspects.

Type of Software Project

From a high-level perspective, the standard custom software development plans tend to be broken down into these specifics:

Development of new software, including customized software development

Software modification – The method of improving existing software for business

Software integration – Adding an individual code allows you to integrate existing software with other processes. This includes programs and plugins like “Office” and manipulating data between inventory and accounting systems.

Web development – Custom web-based software development

Each software development has a distinct team composition and may require additional development efforts.

Understanding the type of software your project is developing is the first stage in estimating development costs and classifying the software development cost breakdown. This can be useful when you consider the nature of your project and the size of your project development team.

Team Type

The software development pricing model depends on the development team and the development team. We’re comparing four kinds of teams to provide you with an idea.

Local Development Team from the US

“Local Development” refers to find a software development agency in your local region or the country.

This is essentially outsourcing your needs to a software development outsourcing firm from the same place. This is the best choice for startups because they are in the same region.

In-House Development Team

A team of in-house employees works within your premises. The company employs these employees and trains them as full-time employees.

Freelance Software Developers

The developers are independent and rely on their agreements for their projects.

Considering that these projects are not integral to your business is important. Thus, there is a greater chance of abandoning your development in the middle.

Offshore Software Development Company

An offshore software development company like AddWeb Solution is located in another country with the latest infrastructure and industry-specific expertise. We can help you create mobile and web applications tailored to your needs.

A development partner can draw from an impressive pool of skilled employees, including project managers and scrum masters, designers, software engineers, QA engineers, and many more. Therefore, outsourcing software development to a third-party provider like the offshore software development company AddWeb Solution is cheaper than other options.

A company for software development offshore has numerous advantages over other models and has a few cons.

Size of the Project

The next step is to determine the size of the project. It is typically related to the functionality and features of the product you’re creating. The more complicated the project, the greater the project’s size will be.

Small-Sized Development

Smaller software projects typically need minor adjustments. Smaller-sized software development involves bug fixes and adjustments in the user’s interface. User interaction is usually restricted.

Medium-Sized development

The tasks here are more extensive than minor tweaks and come with clearly defined delivered items. Small-sized software development usually deals with just one source of information. This encompasses projects like mobile application development with basic functions, adding web interfaces for a system of inventory, and updating the UI/UX of a present website/app.

Large-Sized development

Their complexity and depth distinguish them. Developing large-scale software requires an extensive database, several integrated systems, and security and logging. Two of the most common actions you can take if your software project requires it to be scalable and maintained in the future are creating an underlying system and an application-based framework.

Development of software for multi-platform platforms (Android, iOS, web) is also included in this category.

Enterprise-Sized Development

They offer more security, efficient error handling, and logs as the business processes have been digitally redesigned. These applications that are critical to business depend on data integrity and security.

The systems that support enterprise-level development are robust and can handle two or three faults simultaneously in the infrastructure core without affecting users.

This process integrates to facilitate interactions with clients. Due to deadlines and demands, companies prefer outsourcing the design of their applications and development rather than having internal teams.

Type of Software

Software implementation projects come in a variety of varieties. For mobile or web creation, every one of these projects has a different team composition and requires an entirely different amount of development work. We’ve compiled the most popular projects below.

Mobile Development

Suppose you’re seeking to reach your customers via mobile. In that case, mobile application solutions can help you create an intimate relationship with customers. The cost of mobile app development services depends on the platforms you aim for. If your team of developers is developing two distinct apps designed for iOS and Android, be ready to pay more than using a one-platform application.

Hybrid and native mobile apps are also available with various price tags. Platform-specific applications cost more, whereas hybrid apps can run on multiple operating systems using the same code base. This results in less work in development and less expense.

Backend infrastructure and APIs are also a part of the overall cost of mobile apps. Therefore, API integration could be large-scale based on API complexity and accessibility.

Knowing the kind of project is the initial and most important stage in formulating the estimate. This data is used together with the scope of management for the project and team structure to give an estimate on your project.

Team Location

The right location choices can dramatically cut the cost of creating custom software. While some locations have low-cost attractions for talent, others charge higher prices due to skills shortages and higher living standards. This is why Switzerland ranks high on the list of the most lucrative places.

Other countries like Poland have less than this standard and are more efficient for international businesses. The average annual income of the average Polish developer is approximately $65K. We suggest choosing the company with the best price-to-value ratio and a cost-effective location.

Development by Size

To calculate the cost of custom software development, your tech development partner must know your business size. The greater the number of users your software serves, the greater capacity and development effort it will require.

For instance, custom CRM and BPM software development for a small business application with minimal features can cost about $100K. However, if you require an enterprise-wide and extensive CRM system, the cost will begin at $600K.

Typically, the size classification falls into three groups: SMEs and large enterprises. How complex your solution reflects the size of your business? Let’s examine this test.

Startups

Startups are businesses making their first steps within the business world. Most startups focus on a single product or service that has yet to be released. Because young companies are created because of the desire to solve an issue, they aim to address the needs of users by offering a customized solution.

To determine the validity of their digital products, startups approach companies that develop software to build an MVP, also known as an MVP. The cost of MVPs is less than that of a complete solution because MVPs contain a base range of features.

Initially, making a Minimum Viable Prototype of your software in just a few months or between 600 and 800 hours of development is possible. The cost amount needed to complete MVP software development differs based on the geographical location and size of the team that you develop.

The cost of developing an application like this differs depending on your location and the prevalent rates in the local business. It is typical to anticipate the cost of developing software to be between $30k to $45,000.

Small to Midsize Companies

According to estimates from Forbes, 46.4% of all US employees work in the small-business sector. Small- and medium-sized enterprises are typically looking to improve the efficiency of their business operations or to eliminate the technological silos. Additionally, scalability is frequently on the agenda for SMEs as they have to deal with their growing business at a similar speed and level of effectiveness.

All in all, Small to midsize businesses generally require solutions of moderate complexity that can meet an array of distinct requirements. Regarding features, SME software may include automation of business processes and integrations with data management, built-in communication, and many other features.

On average, the price for developing software and the estimation of time for applying moderate complexity ranges between 3 and 6 months. This demands the full attention of the entire team of developers.

For a typical hourly rate of $50, estimated software development costs generally will be $70,000-$100,000. It is important to remember that these numbers can differ depending on the project’s particulars. Therefore, speaking with experts specializing in software implementation is recommended to get more precise estimations.

Core Features

Software functionality is among the primary factors that impact the average software development cost. The more comprehensive your feature set is, the more resources are required to be put into place. Various features also require a more integrated process of development, more extensive testing, and well-thought-out UX.

Based on feature saturation, all applications can be classified into three categories: simple, medium, and more complex. The main distinctions are outlined in the table below.

If you want to achieve a balance, we recommend creating the MVP first to avoid unnecessary expenditure. An MVP is a first version that is merely the most basic functions. Minimum features should be sufficient to validate and test your MVP idea using actual users.

UI/UX Design Complexity

To prepare your app to be successful, you must also develop an attractive interface that enables users to transition between screens effortlessly. So, modifying the visual design is an additional aspect of the cost breakdown. Customized designs incur greater costs than ordinary ones based on templates already in place.

Animations, user-specific experiences, or data visualizations are many customized design options. The number of screens available is crucial when determining the design output.

Backend Requirements

The backend infrastructure is an array of internal components that aren’t apparent to the user’s eyes. The backend infrastructure can contain anything from databases to servers. These components allow users to interact and share information using your digital solution.

The more complicated your application is, the more backend functions it will have. For instance, a top-end application such as Airbnb is powered by thousands of backend processing that allow users to search for listings, browse the featured rentals or even become hosts.

Integrations can reduce a significant portion of your backend costs. In certain instances, your developers may need to develop a custom API that can increase your overall cost.

Testing

QA specialists will run extensive tests when your system design and architecture are in place. Testing the development process is essential because it can reveal defects in your software code and confirm your application’s conformity to the requirements set out. QA engineers also verify that the final product is safe, competitive, and user-friendly.

The cost of QA implementation is different for each application. The more complicated your solution will be, the more testing scenarios and test cases it will have.

Post-Maintenance Cost

Ensuring smooth functioning and the best software performance across all platforms requires proactive measures after release.

The maintenance cost for the software includes expenses to ensure a flawless software experience and the investments made to offer software upgrades and incorporate new technology according to market needs.

Tech Stack

Innovative technologies like AI/ML, data analytics, metaverse analytics, and a comprehensive toolset are essential for creating custom software to help set your business ahead of the others. The cost of implementing complex and multi-layered technologies can differ based on the development team hired as well as the location of the team.

Tips for Understanding the Time and Average Cost of Software Development

The following procedures are necessary when estimating the precise price of software development.

Breakdown the Work

When you break down more complex tasks into smaller tasks, you’ll have an accurate picture of what you need. In this way, you’re more likely to identify other software development-related issues. How do you reduce the larger task?

Here’s an example:

The task is huge – creating your front page.

The general estimated time is 8 hours

Post breakdown tasks and times:

Making a CTA section – 4 hours

Latest updates section – 2 hours

Add a section for service and solutions in up to 6 hours

You will get the complete picture of every tiny task that cannot be accomplished in less than 8 hours.

Ask Questions: Do Not Assume

The task descriptions you receive or assign to your team are crucial to estimating the price of developing custom software. Inquiring with your custom software development company that how they will collaborate on the project is essential. Inquiring questions improves communication and will give you more insight into how the expense of creating the software will be accounted for in the method.

Communicate with Your Development Team

Accurate estimates are the most common problem because, generally speaking, you and your development team may need to be on the same page regarding time and expense. The most important thing is to communicate at the right amount and with the development group. Trust that your outsourced development team is committed to providing the most efficient solutions to your project. To better understand the process, don’t hesitate to contact your project manager by asking the following questions:

Is the process or task completely new to the team and requires the most time?

Do your team members possess all the necessary information required to finish the project?

Are team members informed about the expectations of the project?

Don’t Forget the Things You Usually Ignore

The development process itself has to be considered to make a more accurate cost estimation, for example:

Initial set-up

Revisions

Testing

Fixing bugs

Deployment

The Key Takeaway

Calculating the total cost of software development is based on various variables. The magnitude of the project, as well as the degree of complexity of its features, will significantly impact the total cost. In addition, the developers’ knowledge and location to hire software developers can play an important role along with the methodology of software development employed.

In the end, by considering all of these factors when making an appropriate plan for the software development budget, companies can be sure their efforts are executed effectively in line with their budget capability.

A reputable software company has real-world experience implementing business concepts using seamless solutions. They will quickly recognize the project’s feasibility and determine the most efficient technology stack to create an unbeatable code. Consider the experience of the selected company and then carefully examine their USPs to identify the top.