How much does custom software development cost?

Custom software is unique, so the custom software development cost also varies. The price consists mainly of work effort. Development planning can be used to estimate the final cost of the project. The price is affected by the number of features to be developed, the complexity, the project schedule, and the number of integrations, publishing platforms, and views required.

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ohjelmistokehityksen hinta

Custom software development means developing an application specifically for the company. The aim of the software is to achieve a competitive advantage for the company by developing an application to support the company’s own processes. The biggest advantage of custom software is its suitability for the company’s processes. When using a ready-made application, the company’s processes must be adapted to the operating model of the application. Software with the necessary features is not always available on the market, so developing your own solution might sometimes be the only option.

Custom software is therefore characterized by uniqueness. There is no other completely similar software. For this reason, development work is also always very personalized, which in turn makes project pricing challenging and increases the risk of exceeding pre-estimated costs. Budget overruns in software projects are not uncommon, with up to 66 percent of software development projects exceeding budgeted costs (McKinsey).

ohjelmistokehitys budjettiylitys

The main goal of a software project is, of course, to add value to the company. However, this will not work if the budget does not hold. For this reason, you should try to estimate the total cost of the project right at the beginning of the project.

Estimating the development cost of custom software

So how do you estimate development cost ? In software development, most of the costs consist of the work effort. The price of the work is mainly determined by the number of hours worked, but the team’s experience and competence also affect the price. Therefore, when budgeting a project, pay special attention to these factors that affect the workload
  • Number and complexity of features to be developed
  • The number of views required
  • Number and type of integrations required
  • Complexity of required software logic
  • Number of publishing platforms
  • Project team size and expertise
  • Project schedule
  • The need for data migration
  • The need for maintenance

Features

The more features your app needs, the more the project will cost. The same goes for devices. For example, if you need a lot of computing power, you can prepare for higher costs. On the other hand, if you choose cheaper hardware, the amount of work required for development may increase. You can achieve the best cost-effectiveness by carefully planning and prioritizing functionalities and choosing the right equipment.

Number of views

Another factor that significantly affects costs is the number of views. The more views you need and the more pixel-perfect you want UI to be, the more hours it takes to complete. Changes in the UI during the project are one of the most common reasons for budget overruns and schedule delays. The best way to avoid these pitfalls is to plan your views before you start developing UI. This will minimize changes during development and makes budget overruns less probable.

Scope of the project

The scope of the project is one of the factors influencing costs. A small project can contain only minor changes to an existing application and no integrations at all. In this case, you do not need a large budget to implement the project. But you can prepare for a higher amount of work if you need to make significant changes to your application or want many integrations, and thus also higher costs.

Integrations

In particular, the assessment of the workload required to implement integrations involves a number of uncertainties, which may also bring surprises in terms of cost. Existing interfaces, or the lack of them, affect how much work is required to implement integrations. For example, integrating payment systems into an application today is fairly straightforward, but if you want integration with a customized ERP system for your business, integration is more challenging to implement for sure.

Complexity

The complexity of the software also has an effect on the amount of development work. The more complex logic the software utilizes, the more expensive it usually becomes. For example, if you want to use your own machine learning models in the application, you need to set aside a lot of time to teach the models. In the machine vision projects we do, teaching models has usually taken up more than half of the hours spent on the whole project. In addition to the actual development work, a more complex application also requires more time for testing.

Publishing platform

The number of publishing platforms is one of the cost drivers. If you want the app to work in your browser, iOS, and Android, you need to make three different versions of the app. However, before the development work, familiarize yourself with the needs of the users, and consider whether the application is really necessary to make for all platforms or whether a responsive web application alone would be sufficient? If you want to save on costs, you may want to stick to the web app and leave the mobile app development altogether or to be done later.

Schedule

The project schedule is surprisingly important to the total cost of the project. If your implementation is in a hurry, you need to increase the size of the development team, which in turn reduces the efficiency of your work. The bigger the team, the more time goes in waiting and organizing the work. In teamwork, one plus one is less than two. Thus, doubling the size of the team does not halve the time it takes to complete the project, but the amount of management work is guaranteed to increase as well as the probability of errors.

Data migrations

If you are developing a new application, also remember to consider whether you need to import data from the old application into the new version. The data model in old systems is often not the same as the one used in the new application, so data migration also requires some work.

Maintenance

In addition to the development work, the operating costs are also budgeted in the beginning of the project. In order to reduce the cost of development work, it may be tempting to speed up implementation by using ready-made services. For example, Azure offers a wide range of services to help you save hours spent on development. However, most of these services are not free, so using them increases the cost of maintaining the application. So don’t just focus on estimating development costs when budgeting, but also remember to find out how much the maintenance costs will be in advance.

Reducing the price of the development

If the initial calculation of the investment cost  seems too high, do not give up immediately. There are several ways you can control the cost of software development and still achieve added value for your business. Right choices may decrease the cost of your project great deal. You can stay in budget, even if the things change during the project.

One of the best ways to reduce the risk of budget overruns is to start with a pilot or MVP (minimum viable product). In MVP, only the most important functionalities are selected for implementation. You can always add and improve secondary functionality later. Sometimes MVP is perfectly sufficient to solve an acute development need and you can cope for a long time without a final product. In addition, you can gather valuable feedback from MVP users, the feedback you can use in further development.

Technology choices also contribute to the cost of development work. Always choose the features you want to implement first and only then think about which technology will get you the best results. You limit the implementation possibilities unnecessarily in advance by first choosing the technology and you end up paying a higher price for the project.

A well planned is half done might not literally be true in software development, but still don’t underestimate the importance of planning. Any changes during the project will increase costs. While it’s not a good idea to try to avoid all changes, it’s worth to avoid unnecessary changes. An example of this is the already mentioned UI design. You will have to pay more for the development work if you start to develop the user interface before the final layout are completed. Here, too, the importance of an adequate schedule becomes clear. Too tight schedule forces different parts to be done at the same time, which always results in either an increase in costs or a poor outcome.

Paljonko ohjelmiston kehitys sitten maksaa?

Giving an exact price is impossible without proper information about your needs and goals. For this reason, preliminary software development price estimates are never completely accurate, but are better suited for use in budgeting. You will receive an exact price tag for the project when you know your  schedule, the features to be implemented and other factors that affect the workload of the project.

Projects are either priced at a fixed price or pricing is based on hourly invoicing. Both have their uses. We usually do pilots and MVPs as fixed-price projects because their focus is limited and the work required for the project is fairly well known at the beginning. If, on the other hand, your needs are not clear and still require planning or you need additional resources for the project you are managing yourself, it makes more sense to use hourly pricing.

Development work does not always have to be expensive and time consuming. With 10,000 euros you can already get started. A well-planned application provides added value to your company with even a small investment, and further development can be implemented with the income received from MVP. At the same time, you can gather valuable information about the wishes and needs of end users, which reduces the risks of further development and helps to develop an application with an excellent user experience that better serves its purpose.

Use the examples below to make a rough estimate of the budget required for development work:

  1. A simple month-long pilot project without major equipment purchases. Starting from 10,000 euros
  2. A web application with slightly more complex software logic with a mediocre number of features. Starting from 30,000 euros.
  3. A more demanding pilot project with a lot of features, duration 3-5 months. Starting from 40,000 euros.
  4. Application for several platforms, project duration 6–12 months. Starting from 60,000 euros.

 

You can use these price examples to help you budget your project. However, more precise pricing always requires a more detailed work plan. If you need help with your project planning or pricing, we will be happy to help you.

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Book an appointment for a free project planning meeting and we will help you make a more detailed price estimate for your development project.