Estimating Software Development Cost - 6 Factors to Consider

How Much Does Software Development Cost?

In this day and age, even smaller companies can benefit from investing in custom software solutions. Custom software can increase company-wide efficiency, increase innovation, and reach new customers. However, the challenge of such an undertaking often begins with projecting the budget. Smaller businesses don’t always have the biggest budgets to work with, after all.

Determining the cost of a specific software development project can be challenging. At best, you can estimate a budget that may not accurately represent the final cost of the project. Unlike products built off an assembly line, you can’t just reference a past project to determine what the cost will be. No two software development projects are the same. Instead, keep in mind these six main factors as you estimate the cost of your software development project.

Elements that Affect Cost

Before looking at these six factors affecting the cost of developing a new custom software solution, first consider the three main constraints of any software development project. These include the following:

Human Resource

Who is working on the project will have a huge impact on the total cost of the project. If you’re not outsourcing the project, then you will need to put together a team of developers. The size of the team will depend on how complex the project is. The rate at which you pay each person on the team depends on their experience and skill set. If you don’t hire enough people, the project may take way longer to complete, which will end up costing you more.

Additionally, how your team works together will impact how productive they will be. A team that has just been put together will need to get used to working with each other. There may be some issues in terms of communication that will need to be ironed out. However, the more projects that the team works on, the more efficient they will become. They will become more familiar with each other and will have learned how to work with one another.

In the end, the effectiveness of your team’s ability to collaborate and avoid conflict will have a big impact on your budget. Make sure that each team member is qualified for their position and that the team isn’t understaffed. Overloading your team with work because it’s understaffed can undermine the project. Not only are they forced to take on more tasks and responsibilities, but this is more likely to lead to errors and frustration, which will hurt their productivity.


How long a project takes to complete has an obvious impact on the overall cost of the project, since developers are paid by the hour (anywhere from $30 to $150 an hour based on their skill sets, experience, and responsibilities). The issue is that it’s notoriously difficult to determine exactly how long  a software development project will take to complete. If your team runs into one minor issue, it can have a domino effect that can cause numerous deadlines to be missed. It’s why you may want to consider an incremental approach. This allows you to break up the project into different stages so that you can budget for each stage. As each stage is completed, you can adjust the budget based on the costs of the previous stages and based on whether deadlines are being met or if the schedule needs to be extended.


Your software development project will likely have fixed human resources and a fixed schedule (whether you’ve decided to use fixed iterations or not), but the scope is more likely to change over the course of the project. This is the result of constant feedback from stakeholders as the software is being developed. You may decide to remove features deemed unnecessary, which can lower the cost, or add features, which will increase the cost.

Obviously, the larger the scope, the more expensive the development will be. To get an idea of how the scope can affect the cost, basic mobile apps with a limited set of features can run between $20,000 and $80,000 to develop, while more complex apps that have both web and mobile functionality or that are customer-facing service apps can run between $80,000 and $150,000.

Factors to Consider

Keeping in mind how human resources, scheduling, and scope can all affect your software development’s final cost (and how they make it difficult to accurately pinpoint the total cost of the project ahead of time), six factors to carefully consider to estimate your initial cost include:

Software Size

The size of the software you’re developing is based on the number of screens (or pages) that will be built. The more screens that are required, the more expensive the software is to develop. A small software application, which consists of 10 to 25 screens, typically runs between $50,000 and $75,000. Medium software applications, which consist of 25 to 40 screens, cost around $75,000 to $200,000, and large software applications, which consist of anything more than 40 screens, will often cost $250,000 or more.

Software Complexity

Some software applications are more difficult to develop than others just based on their overall complexity. The more analysis, scoring, or number crunching your project requires, the more expensive it will be. Complex apps require specialized developers who can handle all of the permutations and nuances of your project and who will be more expensive.

Creative Design

The creative design of an application refers to its aesthetic. The way your application looks is important, both in making a good first impression on users and in helping to make it more user-friendly (an ugly aesthetic will distract users from the actual function of the app). The creative design includes everything from the fonts you use to the color palette of the app to the illustrations or animations that you implement. General creative design will cost between $8,000 and $16,000, although you may need a bigger budget if you plan on using custom artwork.

Integration with Other Systems

There’s a pretty good chance that you will want to integrate your software with other external applications. This can be either easy or incredibly challenging based on how many integrations you want your software to be capable of and the difficulty of integrating with specific apps. For example, it’s not that difficult to integrate with basic payment providers like Paypal or credit check services like Experian. The challenge is not knowing how well certain apps that you want to integrate with let information in or out. As such, the costs of software integrations can fluctuate from one project to another.

Migration of Existing Data

If you need to move large sets of data from one system into your new application, then you’ll need migration. Migration is necessary unless you don’t need to import existing data or you have so little data that needs to be imported that it can be done manually (this is rarely the case). Fortunately, migration is a relatively painless process. An experienced developer should be able to create a custom script that takes the data you need out of your old system and transfers it to your new app. However, to create a custom script, you will need to determine the translation rules (data will need to be reshaped to fit your new app), write the actual script, and then perform a number of tests and adjustments to ensure that it migrates properly. This can take some time and will add cost to your project. Further, poor quality and consistency of your existing data will increase the migration costs significantly as the migration scripts become more complex to handle exceptions in data transformations.  

Designing to Budget

While there are many factors that will affect your budget, it should be of some comfort to know that you can design your software to fit your budget. A good development team should be able to take into account what it is you want your software project to accomplish and determine a rough estimate based on the previously listed factors. They can then use your budget as a guideline to add or remove features from the app. When establishing your budget, keep in mind that most custom software development projects tend to cost anywhere from $50,000 to $250,000. You will need to consider the previous factors when determining a budget that is somewhat realistic. It’s a good idea to have some allowances within your budget so that it’s flexible as well, especially since certain elements can affect the final cost.

Tips on Managing Costs

Even if you’re very careful to consider the potential costs of your software development project when establishing a budget, there’s no guarantee that the project will come in under or at the budget you’ve set, since there are so many variables that can cause your project to go over budget. However, there are a few tips that can help you manage your costs and increase the likelihood that your project will come in under or at budget:

Set and Document Clear Ideas

Writing down the goals of the project, the features you want to implement in a prioritized order, the needs you’re trying to meet, and more, helps ensure that everyone throughout your organization is on the same page. Clearly state all of your ideas so that nobody is confused about what it is they’re trying to do. This also makes it easier for your developers to communicate with one another and helps reduce miscommunication and wrong assumptions, both of which can greatly hinder the timeline of your project.

Continuous Deployment Solutions

The time between completion of the code for your app and when the app is available for use is required for feedback and adjustments; however, this process is often overly complicated. Numerous groups including release analysts, the development team, the database administrator team, and the operations team all have input to give. When this feedback is provided all at once after the code is completed, it can put your team way behind schedule. Instead, consider building a continuous delivery solution.

A continuous delivery solution is an approach in which your development team produces your software in short iterative cycles instead of the waterfall approach. This allows your app to be built, tested, and released much faster and more efficiently. By developing in increments, you will also obtain feedback from the involved parties at those increments, resulting in a much smoother development process that reduces the cost and time involved in making changes in the software based on the feedback received. Not only does this prevent the process of finishing the project and launching it less complicated, but you can have much more control over the process through highly automated delivery pipelines as well.

Cross-Team Collaboration

Collaboration is key--it helps eliminate a lot of potential challenges that could hinder the development of any individual project. And this isn’t just referring to collaboration within the team, this is referring to cross-team collaboration. Consider adopting open source practices. This allows different teams from throughout your company access to a shared software platform and results in a number of benefits, such as increasing cross-team collaboration, improving code reuse, and improving both quality and learning throughout your company.

Impact Mapping

Impact mapping is a planning technique that will prevent problems caused by wrong assumptions and unclear requirements. It also prevents over-engineered solutions and reducing waste. The technique focuses on deliverables in the context of the outcome that each deliverable is supposed to achieve. It helps your team better understand the goals of the project--as in the why, who, how and what. This also makes it easier to measure progress and success in the end.

Implement an Effective Backlog Refinement Process

Establish a collaborative discussion process towards the end of each sprint (the scheduled period of time during which certain tasks must be completed). During this discussion, feedback can be obtained and the work can be adjusted accordingly to ensure that you’re ready to move on to the next sprint. The more refined your backlog process is, the fewer delays will occur from having to go way back to make adjustments on numerous earlier sprints. Essentially, an effective backlog refinement process will help save time.

Software Development Cost Isn’t Straight Forward But Can Be Anticipated & Estimated

As you can see, there are too many variables when it comes to a software development project to be able to accurately identify how much it will cost. But if you plan out your project carefully and use an incremental approach that allows you to have better control over the process (and reduce mistakes and delays) you should be able to anticipate the costs and come up with a somewhat close estimate to create your budget.

Still unsure about how to estimate the cost of the software development project you are planning to undertake? Consult with an expert today!

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