Do you want it fast, high-quality, and affordable? So do we. But as practice shows, there's still no magic in our world. This means we usually have to choose from three options:
- Fast + high-quality = but it costs a fortune.
- High-quality + affordable = but you need patience and a willingness to wait.
- Affordable + fast = so bad that it’s better not to do it at all.
Well, it’s obvious that the third option is off the table. But the first two are definitely workable. And surely, you’d like to save money, right?
Let’s break down the components of costing software development and explore how to get a top-tier product on a minimal budget. We'll go over common mistakes and try to answer all your questions.
This article could save you tens of thousands of dollars. So believe us, it’s worth the time you’ll spend reading it. It’s also worth a 5-star rating and, even more so, worth sharing with your business community.
Ready to uncover all the dev cost secrets from a business analyst, project manager, and developers?
Software pricing models
So, you’ve come to an agency with your project idea.
Let’s use an agency as an example because freelancers usually work with hourly rates (making calculations relatively straightforward), and in-house employees (if you’ve decided to create your own IT department) will most likely have fixed salaries.
What happens after you present your idea to the manager? Does the manager have a ready-made table to give you a rough estimate of how much it will cost to develop your software?
Usually, no. But there is something else that can be used.
The Analogy Method
The manager (or business analyst, or another responsible person) uses data from previously completed projects with similar characteristics. In this case, costs and timelines are estimated based on historical experience.
Pros: fast and inexpensive, suitable for typical projects.
Cons: doesn’t account for the unique aspects of a new project.
However, not all projects can be standardized. This is especially true if the company - like us at Wezom - practices a personalized approach to clients and their needs. Software pricing plans may be simple, but they’re not the most effective solution.
The Expert Estimation Method
In this approach, the Project/Product Manager consults developers, analysts, and technical specialists, asking them to manually estimate the project based on their personal experience. The basic estimation formula is:
Cost = (Man-hours × Hourly rate) × Complexity factor
Typically, this method involves:
- Assessing the technical complexity of the project.
- Conducting a software cost analysis based on the technologies involved.
- Determining architectural solutions.
- Calculating resource requirements.
Each department involved provides its verdict, outlining conditions, challenges, and timelines.
Pros: flexible and accounts for the specifics of the project.
Cons: prone to subjectivity, requires highly qualified experts.
Typical Complexity Factors
- Simple Project: 1.0
- Moderate Complexity: 1.5
- High Complexity: 2.0–3.0
This approach, in principle, closely aligns with another method, which we will describe below.
Bottom-Up Estimation
This is a common scenario for Agile projects. Software cost is estimated as the sum of the costs of individual tasks (based on effort). For example, calculating the number of hours required to develop each module: authentication - 80 hours, shopping cart - 50 hours, and so on.
Pros: high accuracy, accounts for all project details.
Cons: time-consuming, requires a well-prepared specification (technical requirements).
This method involves breaking the project down into smaller components. The final estimate is influenced by:
- The complexity of the functionality.
- The number of screens/modules.
- Integrations with external systems.
- The uniqueness of technical solutions.
But how can you determine the exact number of hours while accounting for potential risks and delays? For this, a special formula is used:
Cost = (Optimistic + 4 × Realistic + Pessimistic) ÷ 6
Example:
- Optimistic estimate: 100 hours
- Realistic estimate: 150 hours
- Pessimistic estimate: 200 hours
Calculation:
(100 + 4 × 150 + 200) ÷ 6 = 150 hours
Function Point Analysis, FPA
In this case, the workload is estimated based on the system's functionality (inputs, outputs, interfaces, databases). Essentially, a standard software cost breakdown is performed. Standard coefficients are applied. For example, if one functional point costs $200 and the system consists of 100 such points, the project cost will be $20,000.
To be honest, this method is rarely used for the final evaluation of programming costs. It is primarily a supplementary tool, necessary for:
- At early stages of development: When detailed technical documentation is not yet available, but there’s a general understanding of the system’s functionality.
- For comparing different projects: To choose between multiple implementation options or evaluate the effectiveness of different teams.
- For resource planning: To determine the required number of developers, time, and budget.
- For assessing project complexity: To understand how complex the system is and identify potential risks during development.
Pros: Objective and allows for project comparability.
Cons: Requires an understanding of functional points and their associated costs.
COnstructive COst MOdel
COCOMO (Constructive Cost Model) is a mathematical model based on the volume of code (in thousands of lines) and the type of project (organizational, semi-independent, embedded). For example, for a project with 50,000 lines of code, the COCOMO formula might estimate the cost at $100,000.
Pros: suitable for large projects, takes project complexity into account.
Cons: difficult to apply to small or non-standard projects, results in a very approximate estimate.
The accuracy of the estimate depends on the quality of the input data and the expert’s experience. For example, we consider factors that influence the cost and adjust the nominal effort: we increase it by 20% due to high reliability and decrease it by 10% because of the experienced team. This results in an actual effort of: 100 × 1.2 × 0.9 = 108 person-months.
Method of Comparing Costs with the Market
This method involves analyzing the average development costing in a similar field. It is suitable for initial-stage evaluations. For example, the average cost of Mobile App development in the U.S. might range from $20,000 to $100,000.
Pros: Quick and market-oriented.
Cons: Superficial estimate that doesn't account for the unique aspects of the project.
Of course, the cost of programming isn’t calculated manually; specialized tools like Jira, Confluence, or Microsoft Project are commonly used, while Excel is reserved for extreme cases. These tools offer automation and speed, but third-party software often fails to account for critical internal nuances. For accurate results, cost estimation software should either be custom-built or professionally adapted to the team's specific needs.
When calculating timelines, I always include a 20-30% buffer for risks and unforeseen circumstances. I then conduct an intermediate reassessment, as cost development can fluctuate significantly during the process. But don’t worry - this works both ways, not just for increases. In my opinion, the ideal estimate combines experience, mathematics, and professional intuition.
(c) Recommendations from a Wezom Project Manager
That’s all well and good, but it still doesn’t answer the question: how much does it cost to create software? Let’s add more numbers and specifics.
Factors Influencing Software Development Costs
Imagine you’re planning to bake a cake for your mom’s birthday. What determines the price? The ingredients - whether they’re standard or organic. And who’s making it - a home baker, a small bakery, or a chain store? The analogy is clear: prices of software depend on nearly identical parameters.
Note: These are approximate software price range to give you a general idea. However, for an accurate estimate, it’s essential to analyze the specific requirements of the project.
Now, let’s take a closer look at a key factor: the choice of the development team and its impact on the costs of software development.
Factors to Consider When Choosing a Development Team for Costing of Software
The most expensive specialists come from California and Silicon Valley. Let’s take a look at the average market rates (current as of the time of writing):
Junior: $5,000 - $8,000/month
Middle: $8,000 - $15,000/month
Senior: $15,000 - $25,000/month
Pros: high code quality, strict adherence to deadlines.
Cons: challenging hiring process, requires an exceptional offer to attract specialists.
If your project priorities include:
- balance of price and quality,
- flexibility in approach and pricing,
- strict adherence to deadlines and contract terms,
- innovative solutions,
then a European team is your best option.
In the worst-case scenario, you could outsource to a team from India.
Pricing range:
Junior: $500 - $1,500/month
Middle: $1,500 - $3,000/month
Senior: $3,000 - $5,000/month
How do you like this software pricing comparison between the USA and India? But be prepared for a lot of revisions (allocate extra time for this), communication challenges, high turnover rates, and sometimes outright poor-quality code.
Team performance is definitely not the factor where we’d recommend saving money in order to reduce the cost for software development. You risk losing quality significantly or even wasting your budget without achieving the desired outcome.
But saving money is tempting, right? Let’s explore how to do it wisely.
How can we minimize the cost of developing without compromising on quality?
Start by clearly defining the functionality and priorities of your project. A detailed technical specification (TS) will help avoid revisions and rework that can drive up costs.
1. Start with an MVP (Minimum Viable Product)
An MVP is a version of your product with the core functionality needed to solve the main problems. It allows you to test your idea without unnecessary expenses. For example, focus on basic functionality at first, and add additional features later.
2. Don't Reject Ready-made Solutions
A good team will always suggest optimal ways to save sensibly. Sometimes, App build cost "from scratch" is not effective. For example, it is easier and cheaper to use an existing CMS (like WordPress or Shopify) than to create your own. The software subscription cost is a fraction of the price. Use APIs and cloud solutions for standard functions (payments, social media logins) instead of developing them from scratch.
3. Adaptive Design Instead of a Separate Mobile App
You won’t be able to completely avoid a mobile version, as by 2025, there will be 7.49 mobile users (in billions) worldwide. However, you don't have to create a full mobile app right away. For the start (or for smaller local projects), adapting your site for smaller pocket-sized screens will be more than enough.
4. Choose an Agile Methodology
Agile involves incremental development, with regular testing and feedback. This allows issues to be identified and resolved early, reducing the price for software and minimizing cost for application development and fixes.
5. Monitor the Budget from Day One
Ask the contractor to provide a detailed costs to develop an App breakdown and hourly report to avoid overspending. Transparent logging is essential for project control. Document the budget calculation method as this is crucial for understanding where the money is going.
And don't skimp on testing! Thorough testing before launch will help minimize the App cost of fixes later on. For example, beta testing with real users can identify flaws before the product reaches the market, saving you a significant amount in the long term.
Also, remember that in addition to the main costs, you'll have tax and operational expenses, which can account for up to 20% of the project budget. Plus, ongoing maintenance and updates.
What happens if you skip maintenance and updates?
Many people believe it's just a way to increase the cost of software. After all, maintenance can be an expensive "luxury," costing up to 15-20% of the project budget annually. However, saving on updates can have serious negative consequences:
- The software will no longer meet modern standards and requirements.
- Bugs and vulnerabilities will accumulate, potentially causing system failures and data loss. These vulnerabilities could be exploited by attackers, causing damage to the system.
- The software will become slower and less efficient.
- Competitors who regularly update their products will gain an edge in the market.
- The product will fail to work with new technologies and devices.
- Users will face problems and, ultimately, abandon the product.
Summary
Let's summarize. So, how much does it cost to create software in the end? Below is an approximate software pricing guide to give you a general idea.
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The data on the duration and cost of software development stages are approximate and can vary significantly depending on the specific project, its scale, complexity, the technologies used, and other factors. The figures provided are based on average market data from the USA.
The secret to successful software development cost management lies in careful planning and accurate estimation. Using proven methods and a modern approach not only helps reduce expenses but also creates a product that serves as the foundation for long-term success.
We do NOT offer fast, cheap, and quality solutions. However, we can guarantee the best software pricing deals and very attractive software price discounts.
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