How To Estimate The Cost Of Custom Software Development?

How To Estimate The Cost Of Custom Software Development

The term “Software” is not specific and has a wide range of applications. Custom software has gained more attention in the past few years because of the scalability, flexibility and personalized experience they offer. But there is a confusion among CTOs and CEOs about the cost of custom software development. Although all custom software projects are different, execution remains the main concern for many businesses. Technologies like Artificial intelligence, Internet of things, AR/VR, and machine learning have become common as integrations. Such innovative integrations need robust execution of software development projects.

Accurate cost estimation is a key to successful software development project. It may sound different, but this is a truth as it includes money and software. Here we will discuss some of the approaches that eases the software cost estimation process for the businesses and how to estimate the custom software development cost for project. But before proceeding to it, let us see what is custom software.

What Is Custom Software?

Custom software is a user-specific software that caters to a generalized user base. It has features that are in line with your business requirements. For example, a tailor-made banking desktop application or ERP software comes under custom software. A custom software development process includes requirement analysis, coding testing and deployment. It offers a personalized experience for users, lowers the development cost and increases ROI. Also, scalability in custom software is better than other softwares. Let’s get on the factors that affect custom software development costs.

Factors Affecting The Cost Of Custom Software Development-

1. Size Of The Software-

One of the most important factor that determines almost half of the development cost is the size of your custom software. For instance, a simple mobile application or online store that offers products will be less costlier than a multitasking ERP solution used by banks or hospitals. Also, CRM solutions, warehouse management and security apps are premium software that is expensive and time consuming to build before the final product is released. Ensure that you know the exact features that a software should have when you explain it to team. 

2. Complexity-

Complexity of a software plays a vital role in final development estimate. It refers to the overall purpose and additional requirements you have for your software development team. As the complexity increases, cost also increases. Design, features, user interface and technological requirements are the main factors that make the software simple or complicated. You can develop a simple software or application with traditional platforms and technologies in just a few weeks. The degree of complexity can increase development time and tools required to add highly responsive functionality. 

3. MVP Requirements-

We all know the importance of MVP. It test your product before they launch in the market. MVP is a great way to receive valuable feedback. For instance, you want to build a music streaming app that plays music. Though this seems like a fantastic thought, you may still need to find out how users react to this addition. Hence, you can create a beta version and release it. MVP may take  up to 20-40% of total development cost, but it is worth the investment because user reviews can give you a complete understanding of product’s usability. Also, it gives some extra time to work on complex features of the application. Inshort, MVP of software not just improves the time-to-market but offers valuable feedback on its functionality.

4. Design Requirements-

Providing creative designs and animations to your software is always a better idea as it keeps users engaged. Because the design has the potential to scale up your development efforts, that may increase the cost of custom software development. It will be better to choose an elegant and simple design. 

5. Development Approach-

Starting from selecting a framework to following a development approach, the project plan includes modules that help you complete the execution strategy and budget. After this, you need a development approach that is reliable, fast and has few errors. Agile development is an approach with iterative process. As per the report, 95% of organizations used Agile development, where tasks are distributed across sprints to take address feedback from stakeholders and developers also.

Agile development allows cost-effective development lifecycle in a following manner-

  • Starting stage lets you to create a roadmap to clarify tasks, allocation and interaction metrics, reduce team efforts and technical debts.
  • Prototyping gives stakeholders a look into the product, that provides space for improvements before the product comes into the market.
  • Iterative sprints ensure each version integrates with user feedback to reduce development time and bugs.

6. Integrations Of Systems-

Third party API integrations help you to include more functionality to apps. APIs are a set of instructions that help different systems to interact. When you integrate third-party APIs, there can be compatibility issues, integration costs can increase. For instance, instant messaging integration. If you want to integrate whatsapp into your application, then there are two ways- Set up docker container and use AWS solution. In case of the docker container set up, you will need to create containers using developer’s guide provided by Whatsapp. It may increase the development cost and effort too. Understanding the compatibility of third-party APIs with custom software and the cost of integrations becomes quintessential.

7. Database Migrations-

Database migration can be costly if not planned properly. You can avoid this by creating a backup of existing data, among other database migration practices. It reduces the risk of data loss during migration. Here software development company can help you. It helps you seamlessly move your data between systems, formats, locations and includes data conversion, validation, profiling, cleansing and quality assurance. 

Steps To Determine The Cost Of Custom Software Development-

1. Select The Right Software-

In the market there are different types of software models but selecting the right one is an important task. It can be challenging to find a product that matches your requirements. Hence, to avoid the time waste in thinking of custom features, you may go for a boxed-product that has features like your requirements. But if you want to extend capabilities, integrations, maintenance, upgradations, training etc, select the right software at the start.

2. Hire A Suitable Development Team-

You can choose in-house developers and off-shore technical experts. In case of the cost aspect, off-shore experts are better. If you prefer in-house employee, you should provide insurance, productivity metrics and allowances etc. It can be costlier to hire new employee when migrating to a new technology. 

Know the reasons of- Why should you outsource the software development?

3. MVP Features To Choose-

Product features are the core reason for your product success hence, if you want to increase your return on investment, then divide your features into two priorities while you define your project requirements. Select as per your software’s primary features a top priority and remaining a second priority.

Know the- Top 7 considerations for developing an effective MVP (minimum viable product)

4. Considering Risks For Future Developments-

While building a large-scale product like SLack, you have to assess the risks involved. The repercussions of neglecting the magnitude of your scalability can cause more damage than you can imagine and in some cases, can cost you users’ credibility.

5. Impact Of The Funding Type-

Small scale software has simple architecture with low-cost development, enterprise software has list of features. This difference affects the cost of development for software. Enterprise-grade software requires substantial funding resources. With investors like non-profit organizations, government authorities etc, grant-funded software becomes highly scalable. The right amount of funds allows you to procure premium resources and hire in-house or offshore experts.

Factors To Determine The Average Cost of Custom Software Development

1. Software Type-

There are three types of software: enterprise, mid-market and small scale. Every type affects the development price differently according to the level of software. Enterprise-level custom software development needs quality developers and may range between $200,000 and $100,00,00,000. Mid-market software may cost about $45,000 to $60,00,000, whereas, the price of small-scale software may range in between $10,000 and $5,50,000.

2. Based On Work Hours-

Hourly pricing models differs depending on the location of technology partner. Large scale software owners mostly see a increase in their overall development costs, for these projects take more resources and time to develop.

3. Size Of The Team-

According to the designation, number of employees, their salaries etc., the cost of software can change.

4. Fixed-Price Cost Package-

Fixed-price cost package is an agreement between stakeholders and the vendor. This contract covers the cost of custom software development per hour, project work statement and details of payment schedule. Mostly payment is offered in milestones after software developers get the validation from product owners. Contract should have transparency to evaluate the exact cost of software development.

Request For Proposal-

It is a great practice to estimate custom software development costs. Organizations draft RFPs for their technical partner or vendor. The RFP should include all the requirements you need for custom software. Companies can post the excerpts from the RFP draft on open-source channels. Feedbacks from peers and vendors on the platform can help you draw some crucial points in the final draft. Some vendors will come up with requirements and suggestions that you might have missed. This will help you gauge the cost of custom software development at very early stage. There are two types of vendors. One offers low hourly rates than its average cost. They seem to fit right into your budget, but the real picture shows during the development stage, where there are some hidden costs.

The other may seem costly on the paper, but are reliable and do not cut corners to fit right into your pocket. RFP will help you to choose the right vendor and estimate the cost of custom software development.

Final Words-

Estimating the custom software development cost is difficult when compared with the development of ordinary software development. But with proper planning and strategy, cost estimation will be easier. The above points will help you to estimate the project cost more accurately. If you’re still confused about estimating the software development cost, consult with Solace experts. We are here to help you through consultation and development with our expert developers. You can hire php developers, ios developers and android developers of Solace team for web solution development. Connect with Solace for software development as per your business requirement. We will be happy to help you.

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