How Much Does It Cost to Develop Software? Key Details Explained

When a business decides to invest in custom software development, one of the most frequent questions they ask is, “How much does it cost to develop software?” The answer, however, isn’t straightforward. 

The cost of developing software varies widely, influenced by a number of factors such as project complexity, team location, development time, and specific business needs.

In this blog, we’ll cover all such factors and how software development is priced in detail. So if you are a startup or an established company, or someone who wants to understand the software development costs, this guide will help you make better decisions about your next project.

Factors Affecting Software Development Costs

Before we delve into the exact price, let’s consider what factors play an important part in defining the price of custom software development. A whole bunch of things contribute in different ways to the total cost. Here are the key components that affect the cost of development:

Project Complexity

When you develop a software, the complexity of the software is, without a doubt, one of the biggest factors influencing how much the project will cost. A software project can be something simple, like a mobile app, or complicated,  like an enterprise-level system. Since many functionalities, integrations, and features are in a complex software, it will result in a higher price of development.

The Size

The size of the project (the amount of content, features, and functionality it encompasses) is a major factor in the cost as a whole. Big projects with several features need many more devs and a much longer time to produce. The more features, or user journeys, the software has to support, the more complex and more expensive the process becomes.

The Design

The software design, especially in regards to user experience (UX) and user interface (UI), can greatly influence overall costs. Achieving a clean, easy-to-use interface takes a lot of understanding of who the user actually is and several iterations. Custom, unique designs can also extend development time. With a basic design, you often need fewer resources and less time. Custom design with unique visual elements, animations, and advanced functionality tends to drive up costs due to the need for specialized designers and developers.

Technology

The technologies that are used in the process of development can increase costs to a great extent. Some programming languages and frameworks take longer to develop and cost more. The development price may increase if you choose to implement some advanced technologies like AI, big data analytics, or Internet of Things (IoT) functionality.

The Development Team

Software development costs vary depending on the team’s size, experience, and expertise. A highly skilled developer brings specialized abilities—but what are the skills a software developer has? Proficiency in programming languages, problem-solving, system design, and collaboration all play a role in both project quality and pricing. You must also think about how many developers are required to finish the project on time. Depending on the complexity, this might mean a team of generalists or a team of experts.

The Team’s Location

The development team’s location is a major factor affecting cost. There are huge differences in development rates and appropriate measures across regions. For example, US-based and Western European teams tend to charge more than Eastern European, Latin American, or Asian teams. This is largely due to disparities in labor costs, living expenses, and market rates.

Ongoing Maintenance

After the software is developed, it needs ongoing maintenance. That may include bug fixes, security updates, performance improvements, as well as adding newer features. Maintenance costs typically account for approximately 15-20% of development cost per year.

Breakdown of Software Development Costs

Let us provide a more detailed overview of where the biggest budget goes in the software development process:

UX Design, Requirements Engineering, Project Planning

There are several phases for any software project, starting with requirement gathering and analysis, UX design, and project planning. This step is very important because it defines the base for all project. Good planning and design are a must for the end users, and also avoid unnecessary iterations in development. The estimated cost is about 10% of the project cost.

Architecture and UI Design

Software architecture is the overall structure of the software, ensuring that it is scalable, reliable, and easy to maintain. On the other hand, user interface (UI) design deals with the appearance of the software and how users operate it. A product that is robust and appealing needs both architecture and UI design to go hand in hand. This costs about 5% to 10% of the project cost.

Software Coding

Coding is the most crucial phase of software development. This encompasses frontend and backend development. Backend involves server-side logic (Databases, integrations) and front-end involves the client-side interface a user can see and interact with. Backend Development is estimated to be 40% of the total project cost, while front-end is 25% of the project cost.

Quality Assurance (QA)

Quality assurance (QA) is a process in place to ensure the software functions as expected and fulfills the quality standards defined by the client. QA includes extensive testing that helps to catch any bugs, errors, or performance abnormalities before the product is launched. It is the stage of software where the stability of the software is checked, and the satisfaction of the software users is confirmed. It takes up about 15% to 20% of the total project costs.

Software Deployment

After the software has been developed and validated, it is deployed to a server or cloud environment. This step includes hosting setup, deployment management, and availability for users. The cost of this stage varies based on the services provided for this stage

Maintenance and Support of the Software

Once the software is launched, it needs to be supported and maintained over time to make sure it continues to work, is safe, and is updated. This means you will need to fix bugs, release updates, and possibly add additional features as required. It requires about 15 to 20 percent of the original development costs per year

Cost of Software Development Defined by Team Type

Selecting a suitable development team is one of the most important decisions taken in the software development process. The team that you hire will highly impact the quality and the cost of your project. The cost estimate given below is for developing software of medium complexity. 

In-House Development Team

A developer team that is employed full-time by your organization is referred to as an in-house team. When you hire developers for your in-house team, it provides the most control over the development process and greater communication, as the team is always available in the office. This can cost up to $220,000 or more, especially in the US.

Local Development Team (US)

Outsourcing a local team tends to be more expensive, especially in places such as the USA, due to high salaries and living costs. The advantages include time zone compatibility, faster communication, and a stronger understanding of local needs. In the US, outsourcing to a local team can cost somewhere around $200,000.

Freelance Software Developers

For smaller projects or companies with limited budgets, freelancers can be a cheaper alternative. Freelancers do not have the same resources and infrastructure that an agency or in-house team can provide. They can cost up to $150,000.

Offshore Software Development Agency

Offshore development teams are situated in countries with lower labor costs, like India, Ukraine, or the Philippines. These teams provide quality work at a much lower price compared to local teams. This is just one of the benefits of offshore development, there are some more pros that make this a preferred approach among firms of different sizes. Typically, offshore development in India costs about $100,000. One prominent example of an offshore development agency would be Soft Suave. The cost of developers starts at an affordable $14/hour at Soft Suave.

What is Maximize ROI in Software Development?

Maximizing your return on investment (ROI) is a key consideration in software development investment. Although the upfront cost is a factor, the real value of the software is how it meets business needs and provides long-term benefits.

How to Maximize ROI:

• Ensure that the software aligns with business goals: It is crucial to make sure that the software solves the right problems and meets business goals.
• Plan for Scalability: Scalable software will scale with your business, and you won’t have to worry about expensive upgrades down the road.
• User Experience is the Key: Your software must be intuitive and easier to use for better performance in the market.
• Monitor Performance Metrics: Employ analytics to track the software’s performance to guarantee it’s providing value.

A successful software project is the key to reaping rich business benefits like increased efficiency, higher customer satisfaction, and ultimately revenue.

Ways to Reduce Software Development Costs

Although developing software can be expensive, if you’re learning how to develop software, there are some things that can be done to save money without sacrificing quality:

Use Open-Source Software

Making use of open-source tools and libraries will help you minimize development costs, including licensing charges. Because of the existence of well-established communities that support numerous open-source platforms, open-source solutions are more solid and with functionalities that don’t require development from scratch.

Reduce Third-Party Integrations

Also, third-party integrations (payment gateways, analytics tools, CRM systems, etc.) may require additional costs for a license and increasing the complexity of the development process. The more third-party tools that your software is integrated with, the higher the costs and the more complex the development process.

Adopt Agile Project Management

Using an agile approach can keep you aligned on budget and time. Agile methodology is about dividing the project into smaller, more manageable pieces to enable ongoing feedback, faster changes, and avoiding scope creep. Agile practices will ensure that resources are effectively deployed and, thus, changes can be made quickly and economically.

Simplify the Design

A sleek and sophisticated design enhances the user experience, but is expensive to build. Avoiding complexity will reduce the time dedicated to the design (UI/UX), which can help in lowering the cost of the project. Simplicity doesn’t mean lower quality; it just means focusing on the essential elements that improve functionality without unnecessary complexity

Hire an Offshore Software Development Agency

This is a highly cost-effective strategy as you will be hiring a full-time offshore development agency. Offshore agencies, especially in areas of relatively low income, such as Eastern Europe, India, or Latin America, can deliver expert developers for a fraction of the price of local teams. These kinds of agencies often offer a full range of services from design to deployment, so you wouldn’t have to hire and manage lots of vendors.

Invest in the Discovery Phase

The discovery phase is a crucial step where you define the project scope, understand the business requirements, and create a clear roadmap for development. Investing time early on in detailed planning will prevent you from making expensive mistakes and changes later. By identifying potential issues and aligning expectations early on, you can minimize unnecessary revisions and prevent the project from going off track.

MVP (Minimum Viable Product)

Creating a Minimum Viable Product (MVP) is a great way to test your software concept, with minimal development costs. An MVP focuses on achieving only those features that early users need, while also being useful for getting feedback. Additionally, you will be able to validate your product idea, iterate based on user feedback, and avoid spending resources on features that may not be needed.

Hire Dedicated Developers

In contrast to multiple freelancers or an in-house full-time team, hire dedicated developers who work only on your project. The dedicated developers will bring their skill set to your software and assist you in cutting down the project costs by concentrating on the tailored requirements of your software. In general, they are more time-efficient and integrated in the project than general contractors.

Conclusion

The cost of developing software varies significantly depending on several factors, like the complexity of your project, the kind of team you choose, as well as the required features. Knowing these factors can aid you in planning your project more efficiently and help you make wiser decisions to stay within your mentioned budget.

Focus on ongoing development and aligned business objectives to increase your ROI. Whether you’re going for an in-house team, offshore, or freelance, make sure that your development is in line with your needs, goals, and budget.

With proper planning, knowledge about the factors driving software development costs, you can create software that serves your business purpose and is sustainable.