#softwarecost

Custom software development is a significant investment, and understanding its return on investment (ROI) is crucial for businesses aiming to utilize technology effectively. Tailored software solutions can deliver immense value, but gauging these benefits requires proper ROI measurement. This article explores how companies can effectively measure the ROI of custom software development using software cost estimation tools and outlines key factors that influence it.

Custom software development can be expensive because the development team is building the application from scratch. There’s nothing you can do about that. But there are a few things you can do to lower the costs of developing a custom software solution.

How much does software development cost?

Let’s get started with a simple question: How much does it actually cost to build custom solutions?

There’s only one answer to this question, and it’s:

It depends.

The cost of your app depends on many variables, such as project requirements, application features, your project’s size and complexity, and many others. We’re going to talk about these factors in detail later on.

Software estimation is often tricky, but to give you a general sense of the amounts we’re talking about, let’s focus on project complexity for a moment. Such projects can be divided into three categories in terms of their complexity:

Basic applications – they offer simple functionalities and can be built quite fast. Such an application will take the development team 500-700 hours and cost anything between $20,000 and $80,000. An example is a simple mobile application that has a well-defined and limited set of features.

Medium-complexity applications – such applications take approximately 700-1200 hours to build because they have more complicated features. Examples of such applications include a customer-facing server application or an enterprise app that offers web and mobile functionalities. In this case, software cost estimates will range from $80,000 to $150,000.

Complex applications – such applications take more than 1200+ hours to complete and often require developing a complex architecture and multiple integrations, or have a high security demand. Examples include data-driven apps, an enterprise software that features complex business logic, social media apps, or sophisticated reporting apps.

Why is software development expensive?

Note that the costs of building software originate not only from the team, but also the work of other professionals such as UX/UI designers, data analysts, QA analysts, and many others.

Expert tip: Quality Assurance (QA) services are key to every development process. By testing every component of your software solution, you’ll identify and fix any bugs or errors. The cost of testing will again depend on the complexity of your project. The earlier you find the bug in the process, the cheaper it will be to correct it – that’s why a good QA process matters!

Building software solutions is expensive because it takes many talented people to develop high-quality software. Custom software relies on careful planning, involves research, and is based on a constant back-and-forth between the team, the client, and the end-users for gathering valuable feedback.

This type of software is tailor-made to match the unique requirements, processes, workflows, and objectives of your company. That’s why the costs of developing software are so high.

What factors impact the cost of software development?

These factors have a huge impact on the price of building software, so keep them in mind when working on your idea for an app.

1. Who you hire for the job

Companies that want to develop custom software can choose from several options. In essence, your choice boils down to these three:

Building an in-house team,

Hiring freelance software developers,

Teaming up with a software development company (also known as outsourcing).

Here’s a short overview of each option in terms of its impact on the costs of creating custom solutions.

Freelance software developers

This option is the cheapest, but it comes with many drawbacks. Hiring freelance developers doesn’t guarantee the delivery of your solution on time or the final product quality. When choosing this option, you’re the one responsible for overseeing the development process – and that might be problematic if you need to focus on your business or have no experience in Project Management. Finally, freelance developers come with no assurance, so you might end up with a buggy software on your hands and invest even more money into fixing it.

In-house development team

Building an internal team of software developers is a good option if you’re planning to develop a long-term project and have the resources to do that. The good thing about having an in-house team is the control over its work and the quality delivered at all the development stages. But hiring full-time developers is time-consuming and expensive. You’ll have to invest in their salaries (and let’s face it, skilled software engineers expect high salaries), but also in overhead costs such as software licenses, hardware, taxes, holiday and sick leaves, etc. Hiring an in-house team is the most expensive option.

Outsourcing software development

Companies that choose to team up with specialized software development agencies enjoy many benefits. They get access to skilled and experienced engineers who know how to collaborate efficiently and have processes in place that guarantee successful and productive development.

They have domain knowledge and know-how to help you build the best possible solution. At the same time, they know the ins and outs of software development to provide you with helpful advice about technology choices, product development, and beyond. This option offers similar quality guarantees to the in-house team without forcing you to experience the costs of hiring staff full-time.

2. The level of seniority your project requires

The cost of hiring software developers can vary according to their level of knowledge and expertise. You can divide developers by their level of seniority into junior, mid-level, and senior.

Junior developers have just started their journey and still require support from their more experienced colleagues. By working in a team of skilled developers, they get to learn a lot – but can only contribute simple tasks.

Mid-level developers have a few years of work on their back and can work on a project independently. They know how to deal with complex technical problems.

Senior developers can provide your project with the best skills and expertise. They know how to write bug-free code, develop the best architecture for your solution, and balance between the technical and business goals of your project. Moreover, they can explain in a high-level manner the advantages and drawbacks of different technologies, frameworks, and solutions to help you understand their reasoning behind building your application.

If our project requires more complicated functionalities, you’ll need to hire more qualified developers – and the software development hourly rates will rise together with the engineer’s level.

3. Where you hire

The rates of software development professionals vary a lot between different regions of the world. That’s why the location where you’re hiring software developers will have an impact on the final price of your project.

For example, the development services in the US, UK, and Australia are usually very expensive. That’s why companies that want to balance cost and quality look to Central and East European countries that can provide qualified services at local rates.

What causes software development projects to overrun?

Before we move on to our tips and tricks for reducing the costs of software development, let’s take a quick look at the most common reasons why such projects end up exceeding their budgets:

Lack of proper planning – this step is key in estimating software costs. To be accurate, you need to know the requirements and all the tasks needed to complete the project within the specified costs. Planning is a critical step in resource allocation and management.

Frequent changes (pivots) and scope creep – discuss the project’s scope in detail, or risk that the project fails. Development teams may have certain assumptions about what you’re looking to build, so it’s your job to clarify the scope of your project as early as possible.

Lacking communication – this issue can develop in two directions: over-communicating and micro-management or under-communicating. Clear communication is a must for a successful software project.

Underestimating the role of testing – some companies forget that testing is a key phase that happens prior to the actual work, while the code is in production. If you don’t test your product then, you risk releasing a buggy piece of software (and then overrun your budget when trying to fix your mistake!).

How to reduce software development costs

1. Outsource software development

Outsourcing software development to professional agencies comes at a high initial cost, but you’ll get plenty of cost savings throughout the projects. Since you’re not hiring developers, you get to avoid paying in-house salaries, taxes, perks and benefits, workspace, software and hardware, and many other overhead costs.

Software outsourcing allows tapping into the talent of teams located all over the world. Working with a company located in another country or continent might seem challenging, but experienced providers have processes in place that streamline communication and allow fruitful remote collaboration.

2. Identify and document project requirements

The best way to keep your project within its budget is by avoiding ambiguity in the description of your project already at level of the software estimate. Establish your project requirements and create a document that you will use every time you approach software developers to ask them for a quote.

You don’t need to have it all figured out right from the start. But write down the most important things and, while doing that, aim for clarity.

If your descriptions is ambiguous, the requirements might get misinterpreted and you’ll face problems such as improper functionality, poor design, and low business value. A thorough and well-defined project specification will set the team on the right track, reduce the overall cost of software development, and save your precious time to focus on growing your business.

3. Prioritize features

Be realistic right from the start and prioritize your application features, even if it means compromising your vision. Be aware that a complete software solution might not be possible to realize right away. Don’t give up on your dream, just be smart about prioritizing the functionalities your app needs to drive business value as soon as possible – and create an accurate software project estimation.

Remove nice-to-have elements from the scope of your project and add them to your backlog. You can return to them once the must-haves are completed, implemented, and – ideally – are already turning a profit. Starting with a Minimum Viable Product (MVP) is how companies build successful products today.

4. Plan with the future in mind

Many companies forget that the costs of building software extend beyond the development and release phase. A completed application still generates expenses – be it in maintenance or future growth.

The application you’re developing today will look different in the future. A customer might ask you for modifications or new functionalities. Your target market might evolve in a completely new direction, forcing you to revamp your product.

A custom software development project should take future changes into account. The development team needs to have a rough idea of the kind of modifications that may be expected in the future. That way, developers build the app to simplify the implementation of alterations and reduces the cost of building software in the future.

5. Involve a QA team early on

It pays off to start testing early in the software development life cycle. That’s because errors or bugs can accumulate already during the requirement or design phase. If you fail to catch them at this stage, they will disseminate throughout the entire project.

Have a QA team be part of your project right from the start to identify problems prior to the development phase. You’ll avoid building software of low quality, but also save up on the costs of a redesign in the middle of your project. Also, bugs require rework in later phases, which can become very costly.

6. Follow the agile methodologies

The agile approach to building software keeps the process lean and facilitates the close cooperation of the stakeholders at all the stages of software development. Every iteration ends with gathering feedback from clients or end-users. The development team then uses it to improve the product. That way, all the changes are made during the process, and the risk for rework is practically reduced to zero.

7. Hire a proactive team (inhouse or outsourced)

Covid 19 has badly effected all the industry. Software, hardware, food, oil industries have been completely collapsed and it will take time to recover