Software Development Costs - How Much Should You Pay?

Anna Buczak
02 March 2020 · 8 min read

Price is an important factor to consider when developing software. Several different aspects impact the final cost of software development. In this article, we will provide an overview of how software development services are priced and explain the pertinent factors which influence the total cost.

Before we get into the specifics of the price of software development there’s one thing you should know: one of the most beneficial things you can do when looking to purchase custom software development services is to find a stellar partner. One who creates solutions that are custom-fit to your software requirements and processes, one that will treat you, the customer, as part of their team. Working with a top tier software development company can save you time, money and a lot of unnecessary stress in the long run.

What impacts the cost of software?

Software Size

Software size is a crucial factor in estimating the cost of custom software development. There is a direct correlation between software size and price, and the best way to measure it is in terms of man-hours. Small pieces of software will generally have one or two developers working on the project for a few months. Medium-sized software can take half a year and might require more professionals. Finally, large software projects will take longer than a year and require a team of 5-10. Most cost estimation models for software development use software size as their primary input parameter. Eliminating unnecessary features, can help save you on the development costs.

Complexity

Complicated logic takes more time to code and test. Software applications that perform substantial analysis, tallying or number crunching, or have a bunch of permutations and nuances are just a few ways a project can be deemed complex. The cost of custom development software increases in tandem with complexity. Adding features adds complexity - the more you need your software to do, the more complex it becomes.

Integrations with other systems

Integrating with external software is a total mixed bag. It all depends on the external application. Sometimes the application doesn’t provide appropriate interface and documentation to access the resources you need. However, sometimes integrations are totally painless and easy like when integrating with APIs of major customer support and engagement services. In general, older and lesser-known systems pose the greatest challenge to integration. The more difficult the integration the greater the cost of the project.

Seniority of developers

The seniority level of software developers is a factor that determines its software developer cost. Generally, developers are divided into three major groups:

  • juniors,
  • regulars,
  • seniors.

Software engineers are frequently separated into these categories by their knowledge skill and work experience. The hourly rate of developers will vary based on their qualifications. Junior developers are the least expensive and senior developers the most. The more complex a project is the more skilled the software engineers working on it have to be and thus the more costly it will be.

Location

The location of a custom software developer will be a factor when determining the final cost. North American software development companies and those in developed nations have higher overhead costs, and charge higher rates, than developers from less developed countries. Companies in small urban centers will generally have lower overhead than those located in major cities.

If you are wondering how location of your vendor impact the software prices, read our quick guide to the outsourcing costs of software development in seven major countries: the United States, the United Kingdom, France, Spain, Poland, Ukraine and India.

Maintenance

You may ask yourself a question whether you need software maintenence after the release. Remember that software is always evolving and the product is never finished as long as it is being used. Software maintenance has four major parts.

  1. First, there is corrective maintenance which is fixing bugs and errors found by QAs and users. In fact, some bugs can occur in very rare circumstances and these could be found even years after the release!
  2. Second, there is adaptive maintenance. Adaptive maintenance involves modifying the software to changes in the underlying infrastructure or libraries. An example would be updating the database version because it will soon stop being maintained by the cloud provider.
  3. Thirdly, there is perfective maintenance. This isn’t maintenance in the traditional sense, because it is just adding new or modifying existing features with suggestions from those users after the launch. That makes it more of a delayed development cost.
  4. Finally, there is preventative maintenance. This type of maintenance consists of the cost of adjusting the system to prevent future problems. Security is one example of preventative maintenance, but many more could come up over the lifespan of a project.

What are the factors that increase the price of software development?

Underestimation

Sometimes inexperienced software developers will underestimate the time a task will take to complete. When this happens, they need to revise their quote so that the project is still profitable, but it gets passed onto you as the client. This is why you should beware of any project quotes that seem too good to be true. It’s possible that you may end up paying a higher price down the line or need to start again from scratch with a new developer if you can’t agree on a new price with your first one.

In-house development

Getting your software developed in-house may seem like a great idea. There’s a better cultural fit, you have the perk of face-to-face communication, and you can make quick changes to your project on the fly. However, having software developed in-house has its drawbacks. For one, there is a higher cost associated with in-house development. Developing in-house means paying for hidden costs like:

  • payroll taxes,
  • health insurance,
  • vacations,
  • paid time off,
  • pension contributions,
  • sick leave, and more.

On top of this, you will have to pay for necessary equipment purchases and further operating costs, such as software licenses, in order to set up your employees. But before you even have the privilege of paying these costs you need to spend money on finding and recruiting good candidates for your development team. There will also be retention expenses that tend to be high when dealing with top tier developers. Overall, having software developed in-house is very expensive. What seems a reasonable solution for startups and SMEs is to take into account nearshoring or offshoring.

What are factors that decrease the price of software development?

Simplicity

Software development costs increase exponentially in tandem with the complexity of the software's codebase. More senior coders are required for complex situations and they tend to be very expensive. Having simple minimalistic functionalities for your software can save you tons of money in software development costs. So as a client, one thing you can do to lower the cost of a project is further reducing the scope of business requirements for your minimum viable product and thus reducing its size and complexity. This approach will help you spend more efficiently and take on lesser risks. Plus, you can always expand the project later on.

Outsourcing

Outsourcing can have a major impact on the price of software development. Software development outsourcing in some cases reduces the cost of a project by up to 30%. This is due to the wide gap in earnings between developed and developing countries. Sending your software to be developed overseas by cheaper developers helps you save money on your project. India, Ukraine, China, and Poland are ranked as the top sources for outsourced custom software development, with Poland being ranked as having the 3rd best developers in the world by HackerRank.

Software development cost at Ulam Labs

Here at Ulam Labs, we work with all different types of projects. To understand general price differences, we can divide our projects into three general categories: simple, moderate, and complex projects. Here they are outlined in detail:

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How much does software development cost?

  • Simple project

Includes proof of concept, a prototype, and a simple web application. This kind of project will usually last two months with two developers working on it. The price for something of this size starts at around 25,000 EUR. Generally, there will be some small QA and DevOps involvement. Cloud hosting is included in the package during development and after that is 2,000 EUR per year.

  • Moderate project

Includes a commercial-grade web application. This size of the project will generally take 4-6 months for 3 developers and QA (full time). Infrastructure is prepared on GCP or AWS with the client’s billing account. The price of software development of this size starts at 80,000 EUR.

  • Complex project

Software is advanced, multi-phase, with 3rd party integrations, and utilizes modern technology like blockchain. A project of this size will take 8-16 months to complete with 4-6 developers, UX, QA, and PM (full time). The price of a software development project of this size starts at 200,000 EUR.

Each price estimation we make at Ulam Labs is individually tailored. We start with the discovery workshop to discuss your idea, vision and business targets you want to achieve. It will help us set the scope and requirements. This step should take just 1 or 2 weeks. In order to prepare a detailed estimation, our specialists need all project requirements. After this phase, we have a project kick-off in which we align and deploy the team, tools and set Scrum artifacts and meetings. This way we ensure we always run with maximum efficiency! If everything is settled down, we are ready to write the first line of your code. We take the time to make sure that we get your software done right. - Konrad Rotkiewicz, CEO at Ulam Labs

Conclusion

When developing software price is an important factor. In this article, we outlined some of the most important elements that affect the final cost of custom software development. Details like software size, complexity, integrations with other systems, seniority of developers working on the project, their location, and maintenance considerations - all have an impact on the final price of software development. Factors that can increase price include underestimating the time required for the development of your project and opting for in-house development as well as factors that decrease the price of a project include simplicity and outsourcing.

Ulam Labs will cater to your software development needs whether your project is simple, moderate, or complex. Would you like to know the cost of your software?

Related blogposts:

Software Outsourcing Rates: Price Comparison by Country

Why IT Outsourcing Is A Good Option In A Crisis?

Nearshoring Or Offshoring: Choose The Right Option For Your Business

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