Average Cost of Custom Software Development Project

Software Development

In a constantly evolving market, many companies opt for custom software solutions to stay flexible and competitive. With the help of custom software, businesses can optimize production flows, improve efficiency, and increase productivity.

Determining the cost of the project is essential to know if the investment is feasible. That’s why many business owners ask, “how much does custom software cost to develop?” As a bulk estimate, custom software development companies offer different pricing: usually starting from $10,000 to as high as $100,000 in upfront costs.

To be more precise, many factors go into account when determining the cost of custom software. We’ve created the following guide to pricing to help you with your estimate.

Determining the Cost of Software

On average, custom software development starts from $10,000 to as high as $100,000. This is just a broad estimate. However, there are a lot of aspects that dictate the cost of the software you want to be developed for your company. This is because software can mean anything from just a simple app on your phone to a full-featured enterprise system that supports multiple users around the globe. Since there are plenty of factors to be considered, no two custom-built applications are the same. We’ll discuss these aspects below.

Scope and Complexity of Project

One major factor affecting project cost is its complexity. Simple types of software require less work than many enterprise solutions that are expensive and might be difficult to deliver. 

A complex solution requires complex logic, which requires complex analysis – not to mention the amount of planning, coding, and testing that goes into its implementation. It translates to more time for production. 

For instance, a simple inventory system for an e-commerce shop with cataloging and login features tend to be relatively cheap since they are fairly straightforward. Meanwhile, banking or logistics systems that require complex CRMs, warehouse management features, data management, and financial security are relatively more expensive.

We highly recommend defining a list of your desired features at the very beginning of the project for a more accurate estimate. If you require a software that can perform several heavy analyses, number crunching or scoring, or if your application requires a lot of features and variations, it will require more attention and effort to build and this means more money.

Size of Software

Aside from its complexity, another determinant for software cost is its size. Larger software is typically more expensive than smaller applications since multiple screens require more work. Naturally, the more screens you have, the more work goes into building your solution and the more it will cost.

In simple terms, once a person opens an application and clicks a link, button or menu, they are prompted with a screen/page. It’s also important to note that a screen viewing customer info and a screen for editing it are two completely different things as the codes to execute those functions differ from each other.

Typically, small applications (10 to 25 screens; or less) can cost up to $50,000, medium apps (about 25 to 40 screens) up to $75,000, and larger apps (more than 40 screens) around $100,000 or more. 

Data Migration and Integration

Customizing software doesn’t always mean that you start from scratch. No wonder, you will want to keep your existing data and take it to the new application. If the migration requires more work than you can feasibly type in by hand, then you will need to automate data migration. This further complicates the process.

Seamless data migration requires a proper data mapping set up. Your goal is to avoid data loss and make sure that data from the existing system is processed flawlessly by the new one. Keep in mind that these are two completely different systems and their process of storing data may vary greatly.

The complexity of integration with third-party service and tools varies greatly. It can be effortless and sometimes can be extremely difficult. Say, for example, you want to integrate with a payment system such as PayPal. It is extremely popular and easy to integrate with. Some older and less-known systems may prove to be difficult and take a significant part of your development budget.

Project Time Frame

Timing is crucial for custom software development. This ties together with how complex an application is and how large it’s going to be. This is one of the most crucial aspects that determine the cost of custom software development. The more time spent working on software, the more expensive it will get. 

Thus, these two questions pop up when developing custom software:

  • How much time will your custom software solution take to be developed?
  • What’s the turnaround time you want for your project?

Think of it like this, if your developers request for six months to build your solution, but then you want the job done in five months or less. This means that you must pay more for your project to be completed within the time frame you want. Please note that the additional costs may not be linear as you shorten the development time. 

Manpower (Size of Company)

Another factor to consider in estimating the cost of custom software development is the size of the software development company you’re outsourcing to. This is because the prices vary depending on who you choose to develop your project. A bigger company generally costs more as you must factor in their business costs than say, a freelancer who operates by himself. 

Enterprise (Large-Scale). Enterprise-Class software development companies top the list because this category boasts of a thousand employees or more. The custom software development hourly rates of these companies vary from $350 – $850 on the average. 

Mid-Market. Mid-Market Class companies typically have 25 – 100 employees. They charge average hourly rates of $100 – $200. 

Small Agency. Small Agency companies have 5 -10 employees. They charge an average hourly rate of $75 – $125 per hour. 

Freelancer. Freelance Developers have an average hourly rate that ranges from $25 – $300 per hour. 

Summing Up

Costs for custom software development are often problematic and are always subject to change based on a number of factors. This was the very reason why we came up with the guide above. As a summary, here are rough averages of software costs for applications of various sizes:

  • Simple software – small-sized apps with a fair amount of coding can take about 1 to 2 months and will cost around $20,000 to $25,000 to develop.
  • Medium software – mid-sized software can take anywhere between 2 to 5 months of development and could cost around $40,000 to $80,000.
  • Large and complex software – apps with multiple pages requiring complex analyses could take more than 6 months and cost upwards of $100,000.

Take these into consideration when figuring out your budget for bespoke software.

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