Major Factors That Determine the Expense of Software Development Projects
Software development is a pain in the neck, especially when it comes to budget and cost estimation. It can be challenging to accurately estimate the budget required, which can intimidate business owners during the research phase.
To help you navigate these challenges, let’s explore the factors influencing the cost of developing software.
The software size
As a rule, with larger software programs, the software complexity escalates, as well as the number of specialists involved in the project.
Small applications, generally comprising 1 to 10 screens, typically address straightforward user needs. Therefore, they often have simplified designs, simpler testing scenarios, and lower development costs.
Mid-size applications feature 11 to 50 screens and offer more comprehensive functionality, more elaborated design decisions, and extensive functional testing. They cater to broader user needs, like e-commerce websites, CRM systems, and content management systems.
Large applications (those exceeding 50 screens) are complex and multi-faceted, typically found in enterprise-level solutions like ERP systems, social media platforms, and large-scale online marketplaces. These applications involve high levels of complexity in design, requiring detailed user interfaces and custom branding. For large software products, comprehensive testing protocols are essential.
source: mavink.com
Type of development
The type of development — native or framework — significantly impacts software project costs across mobile, web, and desktop software solutions. While native programming delivers improved speed and a customized user experience, it comes at a greater cost. For instance, developing a native app for iOS and Android may require from 900 to 5000 hours of effort and cost from $100,000 to $300,000.
Nevertheless, using frameworks like React Native, Flutter, Angular, or Electron makes it feasible to reuse code segments across many platforms (for example, in iOS and Android apps). The cost and time required to construct a cross-platform application using these frameworks can vary from $30,000 to $100,000, with an average of 600–2,000 hours of effort. Utilizing cross-platform frameworks might result in savings of about 30–50% of the total budget.
Functions required
The final cost of developing software significantly varies based on the functions required in the application.
Basic features. Simple features like user authentication and simple data entry forms are less costly due to their straightforward development. These features require less time and fewer resources to implement.
Complex functionalities. More complex functionalities, such as real-time data processing, demand specialized development and extensive testing and increase expenses. These features are more intricate and require additional development effort and testing.
Advanced features. Advanced features like AI integration or machine learning capabilities further raise costs due to their complexity and data requirements. These functionalities necessitate specialized skills and considerable development time.
source: litslink.com
The development team
Of course, the final cost will depend on the contractor as well. This is a complex factor, which encompasses:
- The team location. Offshore teams from lower-cost countries (e.g., India, Eastern Europe) reduce expenses. Nearshore teams offer better communication and cultural alignment at moderate prices. Onshore teams in high-cost regions (e.g., the US and Western Europe) are the most expensive but provide ease of communication and market alignment.
- The type of hiring a team. Outsourcing, in-house, or outstaffing will fetch you differently. In-house is the most expensive and control-demanding option.
- The number of people working on the project. It primarily depends on the project size — larger projects require an extended development team.
- The level of expertise. Though not measurable, this factor implies that experienced IT agencies command higher rates than new-to-market companies. Check the portfolio and market prices to evaluate whether the company fits the pricing trends.
Testing expenses
Testing expenses typically account for 20-30% of total software development costs.
For instance, automated testing, despite an initial setup cost of $10,000-$20,000, reduces long-term manual testing expenses, which typically range from $40-$80 per hour. Functional, performance, security, and user acceptance testing add quality but increase spending, usually totaling $5,000-$15,000 per testing phase.
Maintenance expenses
Regular maintenance, which includes bug fixes, updates, and improvements, typically costs 15-20% of the initial development budget annually. For example, annual maintenance may be between $15,000 and $20,000 if the initial development price was $100,000.
Employing a specialized support staff, which often costs between $70-$150 per hour, may help avoid significant problems and minimize downtime, which can be quite expensive — critical failures can sometimes cost $10,000 and above.
Real-life examples of project expenses
Small projects
| Project | Development team type | Key functions | What is the approximate development budget? | Testing | Maintenance (yearly) |
| Small business website | Freelance developers | Basic info pages, contact form | $5,000 - $10,000 | $2,000 | $1,000 |
| Retail mobile app | Local agency | Product catalog, loyalty program, checkout | $30,000 - $60,000 | $8,000 | $10,000 |
Mid-size projects
| Project | Development team Type | Key functions | How much does software development cost? | Testing | Maintenance (yearly) |
| E-commerce website | Outsourced | Product listings, shopping cart, and payment | $50,000 - $100,000 | $10,000 | $20,000 |
| IoT home automation app | Hybrid (in-house + freelancers) | Device control, scheduling, and notifications | $75,000 - $150,000 | $20,000 | $15,000 |
Large projects
| Project | Development team type | Key functions | How much does it cost to create a software? | Testing | Maintenance (yearly) |
| Mobile banking app | In-house + external experts | Account management, transfers, and security | $500,000 - $1,000,000 | $150,000 | $100,000 |
| Healthcare management system | In-house + specialized vendors | Patient records, appointments, and billing | $750,000 - $1,500,000 | $200,000 | $150,000 |
Wrapping up
We hope this article clarified some key points for you. For a thorough project evaluation, consider reaching out to a software development firm. They will assess your specific needs, desired features, and platform choices to give you an accurate estimate of software development costs.
Sources
Payroll Apps for Small Business: A Key to Small Business Payroll Efficiency – synder.com