The modern customer-centric tech world forces companies to build custom solutions to meet the specific needs of their users. More and more businesses prefer developing custom solutions as opposed to off-the-shelf ones to gain a competitive edge and win over customers. Even despite the elevated software development costs of custom platforms, businesses acknowledge the benefits of having a tool tailored to their needs. What goes into the effective estimating of software development costs and smart project planning? In this article, we will investigate the average costs of software development and try to pinpoint the aspects that increase the price tag.

Average Cost of Software Development
(by types)

Before diving into the concrete factors that influence the software development costs, let’s take a look at the typical features, types of projects, etc. What are the most common types of custom software solutions and how much does it cost to develop software in 2021?

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Content Management Systems (CMS)

software development costs cms

Some companies choose to build a custom CMS to meet the specific needs of their users. CMS serves as a tool to create and update content, for example, blogs, press releases, and even videos. Although you can simply use an off-the-shelf solution like WordPress or Magento, going with a custom tool could be beneficial. Regardless of the customizability of modern CMS platforms, a custom-made software solution is much more expandable and even potentially profitable. Especially businesses with new and unique products or services would gain a lot from custom software development, as they can later offer it outside of the company and generate additional income.

CMS software development costs: from $20,000 to $50,000 for a basic platform with design, a few custom features, configuration, and so on.

 

 

Customer Relationship Management Systems (CRM Systems)

CRM systems incorporate various tools that help businesses keep track of their customers, win over potential clients, and manage vendor and partner relationships. There are hundreds of CRM systems on the market, from complex to basic and simple. However, companies with unique management approaches or target audiences might benefit from a custom CRM platform. Besides, CRM systems usually come with a scalable pricing structure that makes them quite an investment for a large company. Creating a bespoke tool, in this case, might not only deliver you a software solution that perfectly suits your needs and requirements but also save you money.

CRM software development costs: on average, $100,000 for a platform with a basic set of features, plus a few tailored functions. However, large and complex CRM solutions like Hubspot, Salesforce, Freshsales, etc. might be up to $600,000+.

 

Enterprise Resource Planning Systems (ERP Systems)

software development costs erp

ERP systems are built to help businesses manage their daily operations such as accounting, compliance, supply chain tasks, project management, procurement, etc. A small company can afford to use an off-the-shelf solution, but as businesses grow, the number of daily tasks increases. At the same time, the earlier you invest in a custom ERP solution and start using a system tailored particularly for your business needs, the quicker you will gain the benefits. Having a custom ERP tool at hand is beneficial for any growing business, especially in less saturated industries. A scalable solution tailored to your needs and requirements will definitely cover your back and allow you to focus on the product itself.

ERP software development costs: from $100,000 and more, depending on the number of features and size of the company. The sheer amount of data in large enterprises requires more advanced features for ERP solutions. This way the cost of such solution development can increase to $150,000 – $500,000.

 

eCommerce Solutions

software development costs ecommerce

eCommerce software allows businesses to create websites to promote and sell their digital and physical products. Such platforms provide a way to integrate the online store into the business’s website and give users direct access to products and services. Many businesses will find existing eCommerce platforms, like Magento, OpenCart, Shopify, and WooCommerce satisfactory, but some companies require custom software programming solutions. Especially companies with unique architecture or complex requirements will benefit from the customizability and creative freedom of a custom eCommerce solution.

eCommerce websites built on one of the popular eCommerce CMS, such as Magento, OpenCart, Shopify, and WooCommerce, have development costs: from $20,000 to $70,000 and more. It all depends on the level of customization, needed integrations, etc.

Software development costs for a custom eCommerce system built from scratch: starting from $50,000 for a simple product, and up to hundreds of thousands of dollars for complex solutions, depending on the requirements.

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Supply Chain Management Solutions

Supply chain management (SCM) is a complex business process that involves many actors, such as suppliers, vendors, retailers, distributors, producers, and customers. The process starts with raw materials and follows them all the way until the end consumer purchases the final product. SCM software is created to optimize and automate supply chain management processes to enhance performance and eventually increase revenue.

SCM software development costs: can start from $100,000 to $300,000 on average, and more for more complex solutions.

 

SaaS products

SaaS (Solution as a Service) applications are gaining noticeably more attention in the past few years. SaaS-based apps can be used in exchange for a monthly or yearly fee and can be accessed from any device. Usually, these types of apps are hosted in the cloud and provide a great level of security, and convenience for end-users. SaaS works for various industries and businesses, which is why it is quite difficult to estimate the average development costs.

SaaS software development costs: from $25,000 to $100,000, and even more for complex SaaS products.

 

Costs to develop an analog to a famous app

Let’s take a look at concrete numbers based on cases of creating alternatives to the most successful mobile apps. Average software development costs of creating a popular app like Uber or Tinder.

Uber

$80,000 – $100,000

Tinder

$60,000 – $80,000

Tiktok

$80,000 – $100,000

Slack

$100,000 – $120,000

Zoom

$80,000 – $110,000

Booking

$150,000 – $300,000

Average Cost of Software Development
(by size)

The average software development costs also vary from small and medium businesses to large corporations. In short, we will split all the businesses into three categories: startups, SMEs, and large enterprises. Depending on the company’s size, you will require a corresponding number of features, certain scalability metrics, feature complexity, and other characteristics. Let’s perform a software development cost breakdown and see what you will pay for a small, medium, or large application.

 

Startups

Startups are companies that are just opening their business and launching products, and creating a custom solution right away could be very beneficial. Building a tailored solution that caters to the specific needs of your business and audience will help you avoid reputational losses. Off-the-shelf tools can fail to provide some essential services that your industry requires and repel clients right at the beginning. At the same time, even a small successful application will generate some user base and give the much-needed promotional boost to take your idea to the next level.

Basic app versions are usually called MVPs, Minimum Viable Products. As a startup, you can create a small app with only essential features in just 2 months or 800 hours (total for the whole team of PM, QA, Designer, Back-end, and Mobile developers). The price for such an app will vary depending on the location and the average rates in your region. Still, the software development costs would lie between $30,000 and $45,000.

 

SMEs

To take the business to the new level, SMEs could build a bespoke solution to automate daily tasks and streamline internal processes. On top of that, a growing business always requires scalable software development for small businesses to meet their needs without compromising security, speed, performance, and other important factors.

An average software development time estimation for a medium-sized app would be around 4-6 months or 2000 hours (total for the whole team, which usually consists of PM, QA, Designer, Back-end, and Mobile developers). If we apply the same average rates ($50 per hour) as in the example above, the average software development costs would be from $70,000 to $100,000.

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Large Enterprises

Big corporations usually perform millions of operations and employ thousands of people. For an internal application, such enterprises definitely require large custom tools to manage their daily tasks. Large corporations face higher security threats as they become a very enticing target for hackers. Custom-made solutions will be specifically tailored to protect your assets and data to ensure that no serious breaches occur. Such software solutions are required to be compliant with data protection laws like GDPR to guarantee smooth operations.

With the same rate of $50 per hour, large-scale apps take more than 6 months to develop and cost over $100,000 or even over $500,000.

Factors that Influence Software Development Costs

In this section, we will concentrate on the five most significant factors that influence the final software development pricing. We have already touched on the topic but focused on the custom software types and the company size. Although both these aspects impact the price tag, there are a few factors that shape the budget even more.

 

Software Complexity

You will not be surprised to hear that the costs of software development lie in direct correlation with app complexity. This aspect involves several matters, such as the number of features, the complexity of features, and the level of customization. Clearly, the more features you would like to add to your product, the higher the price tag gets. But what about complexity? How to calculate the cost to develop software based on complexity?

Let’s take a look at a simple example: for a signup, you can implement a basic email signup feature (20 hours) or add a social media integration that allows users to immediately sign up using their accounts (extra 20 hours). The latter will be more complex and thus more expensive, but it will also be better for the user experience. The number of features and complexity of the future app should be established after the market research during the discovery phase. Without knowing the market and target audience, establishing which features are important will be very difficult and unproductive.

software development costs discovery phase

 

Platforms

Basically, for a mobile solution, you have two options when it comes to platform choice: native and cross-platform. Without going too much into technical details, native app development delivers you one app for one platform (iOS or Android), whereas the cross-platform approach allows businesses to create an app for two platforms simultaneously, using one source code base.

The catch is that native app development is more expensive, as you will have to write two codebases. However, native apps demonstrate higher speed, better performance, and excellent UX.

The cross-platform development approach is noticeably cheaper. At the same time, the metrics like UX, performance, and page load usually suffer. There are a few tricks of developing cross-platform apps and also preserving high rates in performance and speed. Read about how to decrease the cost of software development with just a few tips.

If you would like to also create a web application, the choice of platform is less important as most web development languages like JavaScript or Python are platform-independent. In other words, you can create a web app that will work no matter what the system is – Windows, Linux, or macOS.

 

UI/UX Design

Although it may not sound like the most expensive item on the list, UI/UX design can be quite pricey. Especially nowadays, people have realized the potential of great UX and the wonders it can do for your app. Poor UX design is the reason for frequent app abandonment and low engagement.

UI/UX design incorporates everything from buttons, colors, icons, etc., as well as the navigation itself and how easy and pleasant it is to use the application. Nowadays, businesses also strive to be inclusive and make their products accessible for visually and hearing-impaired individuals. The intensity and complexity of UI elements and your designer’s rate drastically affect the software development costs.

 

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Back-End Infrastructure And Connected APIs

Besides the frontend, which entails UI/UX design, you have to take care of the backend for the application. The bigger the app, the more complex processes will be required to operate the functions. For example, behind Uber’s easy-to-use interface and clear navigation, you will discover myriads of hidden processes that connect users to drivers and admins, load and update maps, track the delivery, and send notifications.

Moreover, data protection has become a crucial part of every business. You have to think about data privacy compliance throughout the entire development process, and ensure that both your and the user data will be safe after the app launch.

Finally, you may need to integrate with other systems to provide your services. This will require purchasing APIs or building custom ones in some cases. In other words, if you build an app that needs a large number of processes and third-party integrations, your backend development costs will rise.

 

Hiring model and team location/composition

The final and vital aspect of software development cost estimation refers to HR processes. Firstly, your bill will change depending on the team composition, hiring model, and the location of the development company. In this part of the article, we will explore how and why these aspects influence the software development budget and try to find ways to decrease the costs.

 

Team composition

A standard software development team for web solutions usually includes frontend and backend developers, for mobile – backend and mobile app developers who write code, and a Quality Assurance (QA) engineer who runs tests. Besides that, development teams employ a UI/UX designer to create user interface elements and make the app aesthetically appealing and easy to use. On top of that, there is a DevOps engineer who takes care of the CI/CD pipeline, a Product Manager who makes sure the product requirements are in place, and a Project Manager who manages both the team and the processes.

If you are building a small application on a tight budget, you will not require a large team of coders and managers. The complexity and scale of the project identify the budget.

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Hiring model

software development costs models of cooperation

We will describe the three most common hiring models that are prevalent in the tech market. You can employ in-house workers, hire freelancers, or outsource your project to a third-party vendor. Before you can estimate software development costs, familiarize yourself with different models and choose the one that suits your business.

Freelance software developer rates are usually lower than in-house employee’s salary, but the quality of the project might suffer. On the other hand, freelancing and outsourcing are great for short-term projects, and the in-house model only works for long-term collaborations. What are the benefits and drawbacks of each model?

In-house Freelance Outsourcing
Costs Expensive: includes taxes, benefits, hiring costs, office equipment, etc. Affordable: you can find a freelancer on freelancing platforms like Toptal or Upwork. Affordable: depending on the pricing model, you will avoid extra charges.
Contract duration Long-term: in-house workers are usually hired for the long term. Short-term: freelancers are hired per project. Both: you can outsource a small task for the short term or hire a dedicated team for a long-term project.
Quality Good: HR will make sure to vet the candidates and find you the best worker. Poor: some freelancers may not be very reliable. Good: an outsourcing company will be contractually obligated to deliver.
Communication Great: you will communicate via corporate channels. Poor: as the worker is not a part of your team, a few misunderstandings might arise. Good: you will be assigned an account manager to handle communication about your project.
Dedication Great: your in-house employee will be dedicated to performing well. Poor: short-term freelancers might lack the motivation to perform their best. Good: reliable outsourcing companies are fully dedicated to your project.

 

Location

The software development costs are also contingent on the location of the development company. If you decide to outsource, you may manage to lower your software development prices by a large percentage. Take a look at the hourly custom software development rates across different countries:

01

Eastern Europe

$35-60
02

Asia

$25-40
03

US

$80-100
04

Western Europe

$60-80

Software development cost estimation at DOIT Software

DOIT Software is a custom software development company with years of experience and a rich portfolio of successful cases. We believe our extensive knowledge of the development process can help you get an accurate estimate of the software development cost for your project. However, before calculating the possible costs of development, you need to do some homework.

Firstly, describe your idea in detail and the problem your app is going to solve. Based on that, prepare a list of essential and non-functional features you would like to implement. Add a few examples of existing solutions and specify your unique value. Finally, provide technical specifications, design ideas, and some wireframes. To get an accurate estimate for your idea, contact the DOIT Software team.

 

The process of estimation

software development costs with doit software

Our team always strives to optimize the workflow and make the communication with clients smooth and friction-free. This is why we have developed 4 steps to a quick and accurate estimation of custom software development costs.

01

Consultation Call

The first communication we have with our clients is a consultation call where we introduce each other and learn the basic information about the project. If the client decides to move further and asks for a software development quotation, we plan another call, a videocall, and a meeting to gather more details.
02

Details Description

The second step is the meeting where we ask for more details which are necessary for estimating the software development cost. As mentioned above, there is no simple answer to the question of how much does software development cost. We will need to hear your app idea, including a full list of features, technical specifications, personal preferences, planned release date, etc.
03

Quote Preparation

Based on the information we receive from our client, we make the first software costing estimation. There are a few types of software development cost calculator techniques that we can use. We will talk about the different types of estimations later in this section.
04

Offer

Finally, we get back to you with an estimation of software development costs, and also some improvement tips to help you make the best product using the given resources.

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Software requirements specification

Another essential part of the software development and product design cost estimate is creating a software requirements specification. Software requirements specification (SRS) is a document that contains all the technical information relevant to the project, including product scope, target audience, user needs, functional, non-functional, and system requirements. SRS is a long and detailed document that outlines the framework of the entire software development project.

 

Methods of Estimations

There are a few methods of custom software development cost estimation that we use at DOIT Software.

01

Analogy estimation

As we have ​​an extensive portfolio of cases, we can apply the same cost projections when we see a similar project. Some changes will have to be made, but if the projects are similar enough, this type of estimation is the most accurate and the quickest one.
02

Ballpark estimation

Ballpark is a rough estimation of digital product development costs and answers the question of whether a company can financially build this project. It is usually conducted after the first meeting or call to give a client a rough number before going through with a detailed estimate. You should not start a project with a ballpark estimate and it’s best to receive a detailed one before jumping into the development process.
03

Detailed estimation

The key to producing a good detailed estimation is collecting enough information about the project. Having all the important data at our disposal helps us to get the idea about the app and increases the chances for developing an accurately detailed estimate. After listing all the features, creating mockups, and prioritizing features, we can deliver a precise product development cost estimation with two scenarios: realistic and optimistic outcomes. The optimistic variant implies that everything goes smoothly and no huge obstacles occur during the app development process, whereas the realistic approach takes common risks into account.

Estimation Template

There are some software development cost estimation examples that you can find online. However, with the following steps, you can create a template by yourself:

  • Split your entire project into several big phases: design, development, testing, etc.
  • Divide the stages into smaller and more manageable phases.
  • Estimate the duration of each subphase.
  • Identify the scope of HR resources you will require for each phase (developers, testers, project managers, etc.)
  • Establish the software development hourly rates (developer cost, tester rates, etc.)
  • Include the fixed costs, such as business or project management software costs, office equipment, training, etc.
  • Add up the tasks and calculate the cost of software development.

Conclusion

The cost of software engineering is hard to grasp as projects can be quite big and overwhelming. However, without a good estimate, you are bound to overspend and run out of resources. Luckily, there are tech companies that can help you get through this challenging phase and calculate the software development costs for you. Contact DOIT Software and use our extensive knowledge and experience to create an accurate estimation of the development costs for your project.

Frequently Asked Questions

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How much does software development cost?

Depending on the project requirements, features, the location of the software development company, and other aspects, software development costs for a small app are from $30,000 to $45,000, for a medium-sized project from $70,000 to $100,000, and for a large-scale complex application, $100,000 and more.

How is the cost of software development calculated?

There are a few ways of calculating software development costing, but we can roughly divide them into two categories: ballpark and detailed. Ballpark is a rough estimation you receive to get an idea of how much the app development will cost, whereas a detailed estimate is what follows afterward and calculates the costs more scrupulously.

What are the hourly software development rates?

Software development cost per hour depends on the location of the vendor. Software engineering contract rates tend to be a little lower in Eastern Europe countries such as Ukraine ($35-60), and higher in Western Europe ($60-80) and the US ($80-100).

What are the software development cost factors?

The most significant factors of software development costs are the app complexity, the number of features, and the location of the software development company.

VITALY MAKHOV,
CEO @ DOIT SOFTWARE
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