Software Development Costs: What you need to know

Developing software – whether it’s for a SaaS platform, website, GIS system or app – costs money. There are, however, many ways to cost up a software development project. This article discusses the full process for custom software development - from sourcing funds to what impacts the cost, and how to plan a software development budget.

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Software development costs: Your options

There are two typical routes businesses choose when seeking software development services:

 

1. Buy or license an off-the-shelf product

This is when you buy pre-built software designed to serve a broad range of users or businesses with similar needs. Off-the-shelf models are developed with standard functionalities that can be used right away with minimal setup, providing a quick route to market which often requires balancing with developing custom software solutions.

Short term, this can appear to be the most cost-efficient route. But it often requires paying for customised elements by developers to paying for use of feature add-ons and integrations.

Buying or licensing an existing product can the lack flexibility and customisation options you will get from custom built software, and often won’t deliver the operational efficiencies required for each business’s set of processes.

 

2. Invest in custom software solutions

This is where you invest in creating your own tailored software solution. It requires initial investment to scope, design, build, test, and host your solution. While it may seem costly upfront, it offers long-term benefits like:

1. Creative control: You are in control of what you need the custom solution to do, with the right development partner they can help shape the technical architecture, features and functionality to deliver on your specific requirements.
2. Flexibility: Bespoke software solutions provide you with complete flexibility. The product is developed to meet your exact requirements. This leads to operational improvements and the potential for you to have a competitive advantage.
3. Intellectual Property: your custom-built product becomes an asset to your business; you own the IP of the product and this can add to the overall value of your business.

 

What impacts the cost of custom software development

A variety of factors impact the cost of custom software development:

 

1. Product complexity

Product complexity includes how much time is required for developing and streamlining the UI/UX, which requires the consideration of:

• Capability
• Functionality
• System or hardware integrations
• Data processing
• Security needs
• Industry compliance
• System connectivity
• User needs
• Other factors such as performance, scale, availability

 

2. Time to market

The timeframe you want the solution to be ready for your end users directly impacts cost. If you need it quickly, development companies may charge extra to prioritise your project. Expedited projects might require additional team members or tools to meet the tighter deadline, extra resources may be required to run concurrent workstreams and a more robust process around project governance leading to higher development costs.

 

3. Technology stack

Cost can be impacted by the choice of technologies and frameworks that are used:

• Open-Source Tools: Free options are available for some technologies, but they may have limitations or lack advanced features or require customisation to meet requirements. For example, mapping tools like Open Street Map may be sufficient for basic use, if custom styling, features and capabilities are required this will impact costs.
• Licensing and usage Costs: Some tools may require a one-time purchase or ongoing licensing fees, or costs associated to usage depending on your project’s needs.
• Integration Costs: Connecting your product to external systems, like payment gateways or APIs, often involves development costs and fees associated with using the external system (e.g., transaction charges for payment processing).
• Hosting and Infrastructure: Your app needs to be hosted on reliable infrastructure, requiring budgeting for databases, storage, bandwidth, and scalability to ensure smooth performance. This will become an ongoing cost once your product is delivered and in use.

 

4. Specialist expertise

Complex products may need experts in specific areas, for instance:

• GIS (Geographic Information System) development
• System integration
• Technical architecture

Specialised niche skills and highly experienced professionals typically cost more but offer benefits like greater alignment with industry standards. They are also valuable consultants who can enhance the quality and functionality of your product.

Investing in specialists can appear costly but allows you to access domain expertise and previous knowledge that can be used for your product to meet specific technical and compliance standards, adding long-term value.

 

Budgeting for your software development: your options

 

1. Fixed cost method

Fixed cost approach lets you plan costs effectively by setting a fixed budget, with a documented scope outlining what will be delivered and the timeframe for delivery. This approach allows you to focus on high-value features in the initial phases and release a Minimum Viable Product (MVP) whilst adding capabilities subsequently as funds allow.

Fixed cost structures are good for planning and predictability but might feel too rigid as any changes to the scope must be accommodated by renegotiated terms. However, an agile development practice can make this approach adaptive, allowing early demos, feedback, and reprioritisation of features – all while staying within the fixed budget.

 

2. Time & materials method

This is when development costs are based on the time and resources it took to complete the project, and charges are applied using an hourly rate.

With this approach, you will only know the final cost upon completion of the work, but it works well for projects involving incremental improvements like updates to an already built app. You can also adjust priorities any time, allowing you to be flexible with the process.

 

3. Inhouse & outsource combinations

This approach can involve combining in-house development and/or design expertise with outsourced expertise to cover skills gaps. An in-house team could offer front-end development and/or design while the outsourced team could provide backend or system integration, and/or design implementation for instance.

This process allows you to leverage external specialists’ knowledge and experience, complementing your internal skillsets.

 

Who builds your software development solution?

There are a few options available to build your software development solution:

1. Hiring freelancers

Ideal for simple projects, freelancers can be good for small apps with limited functionality. When undergoing this method, you must carefully consider whether the freelancer in question can handle ongoing support, maintenance or hosting elements before taking them on or risk creating a product that can’t be supported in the future, incurring additional costs.

 

2. Outsourcing to another country

Costs of outsourcing vary significantly depending on several factors including where they’re based – costs change based on geographic location. For this, communication is key for effective collaboration, clearly conveying your solution’s requirements, providing incremental feedback, and addressing issues as they arise.

Tip: Ensure that you choose outsourcing partners who speak your language and have overlapping working hours for smooth progress.

 

3. Engaging with agency specialists

Collaborating with agencies with one or two special areas, like design or development, could help you to produce your solution. You must ensure the agency’s technology stack aligns with your project’s needs for compliance, security, and domain-specific requirements.

 

4. Full-service agency

A full-service agency will provide the most comprehensive solution, handling everything from technical architecture, design to build, integration, APIs, testing, hosting, and infrastructure management.

Using cross-industry expertise and deep domain knowledge, a well-rounded agency will also offer valuable insights for your project, reducing the need to coordinate multiple providers.

They can provide streamlined communication, along with both technical and commercial guidance, ensuring a solid launch that competes effectively in the market.

 

Planning investment costs for software development

The development process has several stages, all of which contribute to your overall development cost. Planning for each of these effectively will prepare you in accounting for all costs and driving cost efficiencies:

 

1. Initial build

You must decide when to enter the market, how you want to enter either with a Minimum Viable Product (MVP) or a full-featured product. This will depend on complexity, available budget, target market size, and competitive goals.

Once this is decided, allocate funds for technical scoping, building, testing, and refining the app or product to be end user ready.

 

2. Hosting & infrastructure

You must plan for where your app will be hosted – such as cloud hosting  - and account for infrastructure needs and costs.

Depending on what you need, it may be necessary to budget for databases, storage, bandwidth, reliability, security, scalability and proactive monitoring. Be mindful that hosting infrastructure and ongoing support typically requires annual costs to be covered which may increase as the usage of the product increases.

 

3. Ongoing support & maintenance

You must also set aside resources for regular enhancements, security updates, and performance improvements to keep the product functional and compliant long-term. Remember that industry standards are constantly evolving, and this may be fundamental in the industry you operate within to keep up to date.

 

The verdict: how much does software development cost?

Software development costs are versatile and subject to project scope, technical considerations, and hosting options. Excluding ongoing maintenance, hosting, and ongoing optimisation – these are often handled in the future – here are the ballparks for software development costs:

Type of Product	Estimated Cost
Simple web app or SaaS product	£10K - £25K
Web app/product with more features and limited integrations	£25K - £50K
Web app/product with complex features, capability, and multiple system integrations	£50K - £200K+

Additional considerations for choosing a custom software development partner

There are several key factors to look for when choosing a custom software development partner. These are beneficial to help you have a product that is performant and delivering on its requirements: Specialist expertise: Your development partner must be able to offer specialist expertise and industry domain knowledge that will benefit and enhance your requirements.

 

• Cross industry expertise: You need comprehensive industry expertise so you can benefit from your development partner’s previous expertise in delivering across multiple sectors.
• Inclusive service elements: Consider whether your software development partner can provide all the service elements you need like technical leadership, design, development, testing, hosting management.
• Expert accreditations: Do they have accreditations and certifications that show they are experts? For instance, if security is vital for your product, then it’s beneficial if they have Cyber Essentials certifications.
• Proficient tech stack: Consider what tech stack they deliver on and whether it meets your requirements. If this isn’t apparent, discuss it with them, emphasising how important this is for you.

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