Software Development Costs: A Guide to Making Effective Cost Estimates

How costly is it to develop software?

The straightforward answer is it depends.

Custom software development costs can vary significantly based on various factors, from the size of the project to the technology stack used. The ballpark range can go from a few thousand dollars to more than six figures.

And while it’s possible for any software development company to provide a specific amount, chances are, that figure will not be reflective of the actual amount you’ll be spending.

According to a study by Harvard Business Review, on average, one in six software projects exceeded its budget. This can strain the financial resources of a business, leading to resource cuts in other areas or a subpar software product.

The good news is many of these potential issues can be addressed proactively. With ample insights and proper planning, you can come up with better cost estimates — and I’m here to help you with that.

In this article, I’ll discuss the factors influencing software development pricing. Knowing these can enable you to better estimate the cost of your software project and come up with effective strategies for budget planning and cost management.

Without further ado, let’s delve into the intricate nature of custom software development.

What is software development?

Software development is the process of designing, programming, testing, and maintaining software applications or systems. It involves a combination of technical skills, problem-solving, and collaboration to build software solutions that meet specific requirements and address user needs.

During software development, developers use programming languages, frameworks, and tools to write code that instructs computers to perform specific tasks. They analyze requirements, create system designs, write and debug code, and test software for functionality, performance, and security.

How to Estimate Your Custom Software Development Cost: 4 Crucial Factors to Consider

If you want to know how much your custom software development may cost, take into account the following factors that impact software development pricing:

#1 Project complexity

A software project with larger scopes or complex requirements typically requires more resources, development time, and testing efforts, which can increase costs. Depending on factors such as your desired functionalities, the technical challenges involved, and your intended user experience, your software project can fall under the following categories:

• Basic
• Simple
• Complex

Let’s take a closer look at each.

Basic software

Basic software typically refers to a minimalistic application with fundamental features and limited functionality. It focuses on essential core functionalities and may have a straightforward user interface. Basic software often has a narrow scope and is often built for a single platform, operating system, or device.

Simple software

Simple software is slightly more comprehensive than its basic counterpart, offering a broader range of features while maintaining a streamlined and user-friendly experience. It may include additional functionalities, basic interactions, and a more intuitive interface. Simple apps tend to cater to specific user needs, but they still have a relatively straightforward software development process.

Complex software

This type of software is characterized by a sophisticated and extensive set of features, often involving intricate functionality and advanced interactions. These apps usually require a higher level of technical expertise and development effort.

It often involves:

• Integrations with external systems
• Complex data processing
• Advanced user interfaces and intricate user experiences
• Novel features
• Multiple platform compatibility

These requirements generally demand more time and effort for research, prototyping, testing, and iterative refinement.

🚨 It’s important to note that the classification of an app as basic, simple, or complex can vary based on the context, target audience, and industry standards.

But no matter the type of software, one rule of thumb applies: the more complex the project, the longer it takes to complete, and therefore, the higher the software development price tag.

To give you a better idea, take a look at the sample feature effort estimate below:

Sample Feature Effort Estimate

Features	Effort Estimates
User profiles	1 week
Common social signup and login	2 weeks
Basic calendar integration	3 weeks
ID verification (passport/driver’s license)	3 weeks
Messaging/chat	4-5 weeks
Buy / Sell Marketplace	5 weeks
Video calling	8 weeks

#2 Developer skills and expertise

Highly skilled and experienced developers often command higher rates, but their efficiency and expertise can lead to more effective and faster development, potentially reducing overall costs.

While the upfront investment in hiring experienced developers may be higher, their efficiency, expertise, and ability to deliver high-quality results in a shorter time frame can result in long-term cost savings.

This is why at Appetiser, we make every effort to invest in the right people. We are privileged to have former engineers from renowned companies like Google, Samsung, and Apple as part of our team. Their experience and insights bring valuable perspectives to our projects.

On average, our developers have six years of experience. In Australia, hiring talent of this caliber typically costs between $150,000 and $280,000. By having such experienced professionals on our team, we ensure a high level of expertise and competence in our development work.

I encourage you to explore our portfolio page to find out how our expertise has led to numerous client success stories.

#3 Development methodology

There are various software development methodologies, but the most common ones often fall under either fixed-fee or agile development pricing models.

In a fixed-fee development model, the software development company and the client agree on a predetermined price for the project. Under this arrangement, the cost of software development is established and agreed upon before the development work begins.

While the fixed-fee agreement provides cost predictability, it often results in low-quality development — which can result in even higher costs in the long term.

In contrast, agile methodologies, such as Kanban and Scrum, promote iterative development and frequent feedback, allowing for better cost control and adjustment of project priorities.

These involve breaking the project into smaller, manageable tasks so your development team can work on the highest-priority items and deliver value in shorter cycles. It allows stakeholders to provide feedback early on and make adjustments as needed.

An agile environment also affords startups the ability to build software with scalability and future needs in mind. Anticipating future growth and designing the architecture and infrastructure accordingly helps avoid costly rework and system overhauls down the line.

At Appetiser, we follow the Kanban development method. This agile framework gives our clients the power to control their projects’ scope and budget throughout the engagement.

When you work with us, you have the flexibility to scale up, scale down, or even pause at any given time. You are at the forefront, and we are here to guide and support you without locking you into any commitments.

#4 Timeframe and urgency

When faced with tight deadlines or accelerated development schedules, software projects may require additional measures to meet time constraints. This often involves adjusting the team size, allocating extra resources, or resorting to overtime work, which can impact the project’s overall costs.

Here’s a closer look at how these factors can influence the project budget:

• Larger teams. Tight deadlines may necessitate expanding the development team to increase productivity and meet the project’s time requirements. Adding more team members means additional costs associated with their salaries, benefits, onboarding, and management. Larger teams also require more coordination and communication efforts, which can impact efficiency and potentially increase costs.
• Additional resources. Meeting accelerated development schedules may require additional resources such as software licenses, hardware, development tools, or cloud infrastructure. These extra resources incur additional expenses that contribute to the overall project cost.
• Overtime work. In order to expedite development and meet tight deadlines, the development team may need to work overtime. Overtime work often incurs additional costs in the form of overtime pay or compensatory time off. These additional expenses need to be accounted for when calculating the overall project budget.

But isn’t time-to-market crucial in the software development industry?

Indeed! The ability to deliver a high-quality product within a shorter time frame allows you to seize market opportunities, meet customer demands, and gain a first-mover advantage.

This is something that we understand at Appetiser. As such, we have made significant investments in ensuring our projects’ quality, efficiency, and timeliness through our internal R&D project known as the Appetiser Baseplate.

Our Baseplate is extensively utilized across design, iOS, Android, and web development. It is a standardized framework that we have meticulously crafted based on our vast experience designing and developing numerous apps.

“Having a baseplate helps a designer not overthink flows established by the industry. There is no point in reinventing the wheel. Also, having a baseplate that solves secondary flows and screens helps the designer to focus on main sections or unique features that the client needs.” — Lukas Hernandez, Product Designer, Appetiser Apps

The edge of our baseplate technology lies in its ability to expedite development by 50% while maintaining a superior level of app quality, all while reducing costs for our clients.

By encapsulating our past mistakes and successes, we have integrated valuable insights into a proprietary tool that has allowed us to help numerous clients achieve market readiness for their complex projects in 4 months or less!

Take, for example, award-winning sports strategy leader Dimers.

During the pandemic’s peak, we built and launched the sports app with a global impact in mind. By utilizing a data-led design and development approach, we provided a clear direction and streamlined the development process — enabling Dimers to launch in just 3 months and generate 140,000 users in just 30 days!

Find out how we did it when you read Dimers’ case study.

Go lean with features and functionality

As mentioned, larger projects with complex features often require a bigger project team and a longer development timeframe. It is vital to optimize software development costs to prioritize essential features and functionality.

This approach enables you to launch a minimum viable product (MVP) faster, gather user feedback, and make informed decisions about subsequent feature development. In addition, you can significantly reduce development costs and time-to-market by avoiding the temptation to build every conceivable feature from the outset.

Do you want the same results for your software project? Reach out to Appetiser for a free consultation. Together, let’s unlock the full potential of your software development project.