How to Estimate Custom Software Development Costs for your Projects?
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By: Sagar Sharma

How to Estimate Custom Software Development Costs for your Projects?

Custom software development can also be termed as the development of a peculiar digital technology solution for addressing the needs of a specific company. When compared with the development of off-the-shelf software development, the cost of custom software development is typically more expensive.

Usually, there should be a proper budget planning for developing software for every project to tackle the unexpected financial crisis. However, when it comes to custom software development predicting the average cost of custom software development is a bit harder, and we have discussed briefly why it is harder in this blog.

Before that, we discussed a few basic things about custom software development. Take a look.

Table of Content

  • What is custom software?
  • How to Develop A Custom Software?
  • Benefits of Custom Software Development
  • Factors Affecting Software Development Cost
  • How to Estimate Custom Software Development Cost?
  • Tips to Determine The Cost of Custom Software Development
  • Factors That Play a Crucial Role in Determining the Average Cost of Custom Software Development?

What is custom software?

Custom software is a user-specific product that is built as per the needs of any business user requirements and is different from the regular off-the-shelf software such as Microsoft Office which serves a common purpose to all businesses. Developing custom software involves several steps such as requirement analysis, code development, software testing, and finally, deployment.

Some of the important benefits of custom software are it provides personalized experiences to users, thereby increasing the return on investment and lowering the development cost. Since we just went through the basics of custom software, let us look at how to develop custom software and the factors that affect the custom software development costs.

How to Develop A Custom Software?

#1: Determine your software needs well prior

Defining crystal clear project goals enables proper development and execution of your custom software. Before you decide upon, it is ideal to brainstorm with managers and subordinates their views about what kind of changes in the system can make them adaptive, in the organization.

The custom software you develop should be ideated perfectly such that it influences all the departments of the organization positively. Therefore, before you implement your idea, know your current organizational measures and list out their pros and cons, which will make further processes involved easy.

#2: Get the right team to work on your custom software

You have multiple options to do this process. If you have an in-house development team, see if they are well-versed to work on the technology you wish to develop your custom software. If not, hire a new professional who can work efficiently and can do multi-tasking. Another option would be hiring freelance developers and pay them on an hourly basis and get the development done.

Otherwise, you can hire a technical expert on a contract basis and allow the person to train your existing team as well and work on the custom software development. Whichever you choose, make sure that it is cost-effective.

#3: Plan and set target milestones

If you have a proper roadmap for your project, it leads the entire project development cycle in the right way. Depending on whom you employ in custom software development, assign them the correct roles while creating the roadmap, and make sure that all the assigned tasks are completed within the available time and allocated budget.

This will help you with identifying any major changes and improvements needed if any.

#4: Carry out deepened testing

Testing plays a crucial role in custom software development and before deploying the new software across your organization. Two levels of testing are required for any developed software. Developers and IT professionals perform the initial level of testing, which provides you with the results of the functionality of fundamental features.

User testing is the second level which will be performed by real users to check whether the performance of the custom software is up to the mark. In developer words, we call it Beta testing. User feedback is more important in the testing phase because it helps you make real-time improvements to your custom software.

#5: Keep clean documentation of the entire process

Documenting each stage of the software development process is highly important so that it helps you as future references in case you make any changes or add any new features in between. You may have to document right from the project plan, implementation plan, test plan, scope statement, and training plan, to ensure everything is on track.

It also helps you define the usage of custom software, what resources are expected in this project development cycle, and several other details. If you develop some other custom software on the same technology, these documentations can help in aiding newcomers.

Benefits of Custom Software Development

#1: Tailored To Satisfy The Needs of Your Brand

Ready-to-use software/applications may have only some of the common features for the benefit of users, whereas custom software can be tailored according to your business needs and user expectations. Therefore, it increases the image of your brand among users extensively, thereby improves the scalability of the software in the future.

User’s demand for features keeps growing day by day, which means they need to include more customized features becoming necessary in the long-run. This is not possible in ready-made software and the Cost of Custom Software Development may be high if you change the features and developing the platform according to your needs.

#2: Optimized business process

Every organization has its own business model and different in-house processes. Preferring instant-to-use software can result in a mismatch of business needs and complications in being adaptive. However, if it is a large-scale enterprise, then definitely it requires the software to be designed and developed in a manner such that it integrates well with the business model and processes of the organization.

Therefore rather than replacing the software, custom software helps with optimizing your business processes.

#3: Custom software can lead to lowered costs over time

Ready-to-use software solutions may seem to be costing cheaper initially, but you should understand that it requires renewals/subscriptions on a monthly, quarterly, or yearly basis. Moreover, the extension of features becomes very difficult with such type of software. Custom software though may have higher upfront development and execution costs, keeps you stress-free from investing in more in the future.

Since you decide on which features to be in the software, it becomes easy to handle in the upcoming part. They do not incur any long-term recurring fees, thereby making it less expensive over time and show improvement in return on investment as well.

#4: You own your software; it adds credibility to your brand

The best thing about developing custom software is you hold the copyrights of the software and it adds value to your company among users as well. Whereas some software developed based on ready-to-use, for developing such software mostly utilized by the software companies and they own its copyrights. Added to that, for any kind of changes or implementation, it takes your life to get it done in ready-made software; whereas, it is quickly and easily performed in custom software.

With custom-made software, you will have complete control of activities that happen in your software, and you do not spend any money on licensing. Otherwise, if you require software for one-time use, then instant-to-use can benefit you more.

#5: Uniqueness

Every organization runs a unique business. If you look for a one-size-fits-all solution for all businesses, it may end up in failure and a waste of time, effort, and money. Therefore having custom-made software to suit your unique business requirements can accommodate the working model.

Some may worry about the Custom software development costs but still custom software can make your identity unique in the market standard and among your users as well. Moreover, the average cost of custom software development depends upon a few factors which are elaborated in upcoming sections. Custom software results in the immense growth of your business and returns on investment as well.

Factors Affecting Software Development Cost

Before you understand how to estimate the custom software development cost and the factors that influence the cost of developing custom software for your company, you must learn how general software development cost is influenced by various factors.

List of Top 10 Influencing Factors Of Basic Software Development Cost

1. The size of the software

The most important factor that determines almost half the development cost is the size of your custom software. For example, a simple mobile application or an online store offering your products will be cheaper than a multitasking ERP solution used by banks or hospitals. Similarly, CRM solutions, warehouse management, and security applications are premium software that is expensive and time-consuming to build before the final product is released. Make sure you know the exact features that your software should have when you explain it to your team.

2. Complexity

The complexity of your custom software can play a very important role in the final development estimate. The complexity refers to the overall purpose and additional requirements you have for your software development team. The more complicated it is, the higher the costs will be.

The features, design, user interface, and technological requirements are the main factors that make the software complicated or relatively simple. With traditional platforms and technologies, you can develop a simple software or application in just a few weeks. However, the degree of complexity can increase development time and the tools needed to add highly responsive functionality.

3. Design Structure

The Design structure covered by two main areas which are listed below:

Creative design: This is the creative aspect and visual elements of the software, including graphics, color schemes, and unique designs to attract customers on various platforms. Companies like Amazon have invested billions to make their designs as creative as possible. Therefore, they must want their projects to be perfect and attractive regardless of the investment cost.

UI/UX design: The user interface and user experience are the main aspects of software design that interact with users. It is important to find the best UI/UX designers who understand the process of designing B2B or B2C software for your company, and this can cost around $800-2000 separately.

4. Software development

For those who know the basic components of the development process, estimating development costs would not be an impossible task. But for a beginner, there is a whole step-by-step procedure included to create scalable and customized business software.

Implementing a design, platforms, front-end development, back-end development, and verifying that the software is bug-free can take some time. However, the process and timing also depend on the size and complexity of the project, as there are some challenges associated with development.

5. Integrations

Third-party integration or integration with other software involves significant research and effort, as you are not aware of potential security and performance issues. If it is a regular software or business application, buying third-party integrations and connecting to your application would not take much time for multi-integration such as WMS to track goods, payment gateways, shipping, and more. However, it can be expensive to include all of the pre-selected features.

6. Migration of existing data

Whether you have existing software or data to add to your new software, data migration is an accurate process. Data migration requires custom scripts, which take the data from your old system and remodel it to the new software. The steps are quite simple, but there are several channels to make data migration possible on the first attempt.

Most data migrations are completed after software development with translation functions according to your needs. The calculation of scripts, translation rules, migration space, and workload will take time and investment.

7. Time and budget

When it comes to estimating the average cost of custom software development, time has a significant impact on the cost of development. If you have a deadline in mind, your software development agency will need to increase the number of developers to meet your expectations and deadline. This can affect the total cost of the service and any additional costs.

On the other hand, if you have a budget within which you work, your development consultant will ask you to filter your needs or use software that fits your budget. You can choose to stick to your budget or focus on features depending on the size of your business.

8. Platform and features

Platforms on which you prefer to develop your custom software play a vital role in determining the custom software development costs. If you choose only one platform for your software, such as iOS, Android, or Web, the cost will be lower than choosing all three. Besides, the software and tools suggested by your team will add to the estimated cost.

The functions or pages you want in your software are a priority component of your idea. Therefore, you should make a list of features that you can’t commit to at any cost along with secondary features that can help reduce your development cost. Be sure to research the key features for high-performance software and consider an MVP to get the best result.

9. Testing

Once development is complete, your development team will make sure that the software is working properly. If there are bugs or errors, they will remove them and test the software on various devices. Testing is an inevitable part of any development project, and the cost depends on the total cost of development.

10. Maintenance and support

When your software is developed after weeks of technical work and implementation of changes, you have to prepare for extra costs such as updates and support costs. Maintenance and technical support are important to keep your software up and running for a long time. Usually, the software solution provider provides support and maintenance at a reasonable price, so you can anticipate the cost during the development budget.

Before completing the project, you should focus on the quality and features that will be beneficial to your business and worth the investment.

Find the right expertise in software development at a competitive cost

When choosing custom software services for your company, you should identify and research technical requirements and initial costs. At first, it may seem a bit complicated, but once you understand the basics (mentioned above), you will be able to create a budget for software development without any difficulty.

How to Estimate Custom Software Development Cost?

Businesses focus more on getting custom-made software for their customers rather than opting for an existing or a pre-defined model. The customized software is highly on demand since it is scalable, flexible, and can offer more in a personalized manner. Moreover, modern-day software solutions may not be the right fit for every business because of the type of businesses we see.

Upon the rising expectations of customers, businesses are looking for more customer-centric customizable software solutions. With the integration of technologies like artificial intelligence, the internet of things, augmented/virtual reality and machine learning, both businesses, and customers look for high-quality applications/software in usage.

Custom software development involves software tailored to your company’s specific needs. With the aid of developing custom software, companies can able to avail themselves of the digital solution for their specific needs. Moreover, custom software helps a lot in managing operations and to avail well-optimized data security.

In recent years, the demand for custom software development has increased, like optimization and accuracy for companies have become key factors in sustaining growth.

How much does custom software development cost?

For every product development, many factors are considered before the cost of the finished product comes out.

Similarly, developing custom software also has its own parameters while fixing up its cost. Like one other application, building custom software for your organization does not show much variance.

But there are certain critical considerations to take your investment on the right track, and how they show an impact on your project lifecycle. As per the recent study, the cost of developing custom software may vary from $2000 to $250,000 that depends on its size and requirements.

Regardless of the location and size of your company and the developers you choose, several key factors determine the total Cost of Custom Software Development. And few of those vital factors are discussed in brief here.

Custom Software Development Cost Influencing Factors

#1: Number of platforms

You can deploy your custom software on popular platforms such as Windows, Mac, Linux, Unix, Android, iOS, and Web. Depending on which platform you wish to deploy, the cost also varies accordingly. We all know that Android is one of the leading players in the current market and when you choose such a platform, the scalability enhances automatically.

Therefore, a robust software structure is required for efficient performance, which may need more effort in development.

#2: Development approach

Your project plan contains certain modules that may help you with executing a picture-perfect strategy and budget right from selecting a framework till you make a decision approach. Once you are set with the development approach, you may find it fast and reliable, with few errors as well.

This type of approach requires agile development where there is an iterative process involved in software development. The agile development process has certain steps that start with conception (the idea of your software product), initiation, and deployment. When the custom software development is under the initiation stage, it undergoes designing, code development, and testing.

#3: Launching the software

Launching deals with the timeline of the development of the custom software, and it is a crucial facet of the development process, which may affect the time of the product launch. Again, there are a few factors that may increase the time of your software development:

  • More number of features
  • Complexity added along to more number of features
  • Contains fewer features but with high complexity involved

These are the main concerns that start-ups and enterprises may encounter with developing custom software, which may greatly affect the timeline.

#4: MVP requirements

Any product before hitting the market can get the feedback introduced as a minimum viable product. This is one way you test whether your product will be successful after it is launched completely. Remember that an MVP may take up to 20–40% of your total development cost, but at the same time, it is worth it to get the feedback of your product users and revamp it according to their preferences and launch it finally.

In case you have complex features included, then releasing the MVP can get you some time to work on those challenges of the product.

#5: Complexity of software

Custom software provides the required scalability, flexibility, and maintainability of complexities involved in developing features, whereas standard software can cost you a high price than the custom one. Sometimes, complexity can also depend on the number of layers of users included testing the ability of the software.

If you want the price of the software development to be reduced, you should go for a less complicated architecture and a high-functional one.

#6: Design requirements

If your idea is to engage a large number of users towards your software, then creating some compelling and attractive designs with animations is always a great idea. High-end designs can result in huge development efforts and even increase the cost of custom software development.

Therefore, choosing a design that is appealing and simple can save you from costing more.

#7: Integration of systems

Custom software development should allow the integration of third-party APIs to include additional functionality to apps. With a clear understanding of the compatibility of third-party APIs with your customized software and the cost involved with integrations, you can achieve the finest output.

#8: Database migrations

If database migrations are not planned well, it can cost you double the development cost. Creating a backup of the existing database can save you from losing the data when database migration happens.

Tips to Determine The Cost of Custom Software Development

#1: Pick the right software

There are different types of software models available in the market, but choosing the right one at the first step is more crucial. It could be challenging to find a product that matches your unique needs. Therefore, to avoid the time you invest in thinking of the custom features, you may go for a boxed-product that has features close to your thoughts.

But what if you wish to extend the capabilities, integrations, maintenance, upgradations, training, and so on? So choose the right software at the beginning itself.

#2: Hire a suitable development team

You can choose between in-house developers and off-shore technical experts. Since we are looking at the cost aspect, off-shore experts win the race. If you prefer an in-house employee, you should provide insurance, perks, and productivity metrics and allowances sort of things. Though it is not a big deal, it is painful when you hire a new employee when migrating to a new technology which will cost you even more.

#3: MVP features to choose

Your product features will be the core reason for your product success; therefore, if you aim to increase your return on investment, then bifurcate your features into two priorities while you define your project requirements. Make your software’s primary features a top priority and the rest a second priority.

#4: Considering risks for future development

If you are developing a product, you should look at the futuristic approaches of its scalability and then make desired plans for its development. Failing to pay attention to considering risks may lead to loss of money and in some cases, users’ credibility as well.

#5: Impact of the funding type

The cost of developing custom software depends on what type of software you wish to develop. Small companies may go for a simpler architecture with low-cost development, whereas enterprise software comes with a bulk list of features that may end up in complexity and huge development costs also.

If enterprise-grade software needs substantial funding resources, then with investors such as NGOs, government authorities, and other firms, grant-funded software is highly feasible and scalable.

Factors That Play a Crucial Role in Determining the Average Cost of Custom Software Development?

1. Based on software type:

Enterprise-level custom software can cost you between $200,000 and $100, 00,00,000; mid-market software can cost you between $45,000 and $60,00,000; small-scale software can be between $10,000 and $5,50,000.

2. Based on working hours:

This may vary according to software type, technology, location, etc.

3. Size of the team:

Depending on designations, the number of employees, their salaries, etc. the cost of the software can vary.

4. Fixed-price package:

This is an agreement form of a standard package that depends on stakeholders and vendors.

Wrapping up, the blog concludes that custom software development is always better than the predefined model, keeping futuristic developments in mind. Also, take a look over the factors which we elaborated that have a strong impact on determining the average cost of custom software development and go for the development accordingly.

Final Words

As we mentioned, estimating the custom software development costs is difficult when compared with the development of ordinary off-the-shelf software development. However, if the project planning and strategy to estimate the cost of custom software development carried with perfection predicting the custom software development cost can be done at ease also it leads to reduce the development cost significantly.

Frequently Asked Questions On Custom Software Development

1. Which custom software is highly movable in the market?

It depends on your target users and which type of service can benefit and enable them to use your software all the time.

2. How is the cost of custom software calculated?

There is no predefined formula for calculating the cost of custom software as such. You can assume which features and factors to be considered for development, thereby it works out well.

3. How should I pay the software development cost?

Since there are different stages of the custom software development process, depending on how your developers work, you can release the payment.

4. How much, on the whole, does a custom software development cost?

As we said, depending on your project scope, requirements, and technical complexity, the cost of custom software development may vary accordingly.

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