How Much Custom Software Development Costs

When you’re thinking about outsourcing a software development project, the cost of it is probably one of the questions that interest you the most, right behind choosing the outsourcing partner.

It can be hard to evaluate how much exactly it is normal to spend, especially with an unusual project.

In this article, we provide the breakdown of the expenses associated with each stage of the custom software development cycle and the approximate costs of various types of software. To learn how to calculate software development costs for your project, check out this article.

Software development cost refers to the total expenditure involved in creating, testing, deploying, and sometimes maintaining software.

Understanding what comprises custom software development costs is crucial for several reasons:

All in all, understanding custom software development costs ensures both the success of your partnership when outsourcing and the further success of your product once it’s built.

In SENLA, we use the following helpful categorization of expenses:

Direct software development costs refer to the specific expenses associated with the process of building software first-hand.

Situational costs emerge based on specific conditions unique to a particular project or environment. They are not consistently present across all projects but can significantly impact the budget when they do arise.

There are also hidden costs of software development. This phrase is used to describe the processes that you’re perhaps not used to thinking of as “costs”. But you still spend resources on them, for example, looking for an outsourcing partner or time spent on negotiating the outsourcing agreement.

Here’s how typical software development expenses can be separated into direct, situational, and hidden costs:

*(depends on your agreements with the outsourcing partner)
** oftentimes you don’t need to invest in new tools and can use those that you already use for your business

To figure out how to calculate the custom software development costs and what you can change to decrease them, check out this article on how to estimate software development costs.

Let’s go through the different stages of creating bespoke software, what expenses they suggest, and what percentage of the budget they take up.

During the initial phase of a project, which accounts for approximately 10% of its total cost, our team evaluates both immediate and future Client’s needs, alongside existing processes and software.

They also gather functional requirements, outline the software's features, and design the user experience to define how users will interact with the system. Furthermore, the team crafts a project roadmap.

During the design phase, which serves as a pivotal point between initial planning and actual development, our team meticulously refines the requirements specification. This transformation is done to ensure the structured format is not only coherent but also primed for seamless implementation using the chosen tech stack. The design phase is multifaceted, branching out into two primary domains.

Firstly, there's the technical design, sometimes referred to as software architecture design. It describes the intricate layers and modules of the software, delineating how these modules will integrate with one another. Additionally, it highlights the data structures that different modules will utilize and any crucial algorithms that the software will depend on to function efficiently.

Secondly, the design phase delves into the UI design, which is of paramount importance for user engagement and experience. It outlines what the end-users will visually encounter and interact with when they use the software.

When it comes to engineering, the expenditure can be primarily categorized into back-end and front-end development, consuming approximately 40% and 25% of the custom software development budget respectively.

To optimize and potentially curtail these costs, there are several strategies we adopt:

This stage involves verifying that the software aligns with both functional and non-functional stipulations while identifying and reporting any discovered issues using various testing methodologies.

Although presented as a distinct phase here, our QA often progresses concurrently with development, depending on the chosen development model. The most efficient QA practices span the entirety of the software development life cycle, from initial requirement collection to eventual software upkeep.

Our cost-saving strategies for QA include embracing test automation, which, when appropriate, can curtail testing expenses and duration by up to 20%. Additionally, prioritizing early-stage QA ("shifting QA left") can lead to significant savings since preventing issues is often more economical than rectifying them later.

During this phase, our team readies the software for deployment. Activities carried out at this stage may encompass installation, tailoring to specific needs, user acceptance evaluations, drafting instructions for the future, and providing training on how to utilize the software.

We negotiate maintenance with our Clients at the beginning of cooperation and lay down its terms in a contract. The budget for this stage varies according to the software’s complexity and the essence of the work needed.

This may be addressing post-launch glitches, accommodating evolving needs, enhancing the software and its foundational systems for improved efficiency, scalability, and affordability, securing potential vulnerabilities, and so on.

Or, we may go further and assign a dedicated support team to accommodate any request of our Clients, reaching beyond written above. That’s how we did with Abbott, assigning a team to cover their needs and provide 24/7 support during live events to ensure our Client has a flawless experience.

We also provide a warranty period for our products. During its whole term, we assign a prepaid expert for a certain number of hours a month. If anything breaks down or demands fine-tuning, the expert carries out work within these hours and warranty budget.

If the work exceeds its scope, we negotiate additional payment. All of this is relevant for cases where it's a flaw from our side, not a change request.

This way we ensure that our custom software development costs are based on the quality of the products and services we deliver.

Software development is a dynamic domain where prices can vary based on a myriad of factors such as complexity, features, integration requirements, and the team's expertise.

Here are the approximate custom software development costs of different software projects, using the data gleaned from extensive experience in the field.

Such a portal serves as a digital storefront, attracting visitors and converting them into customers.

On average, setting up such a portal costs around $250,000.

This figure is exclusive of additional expenses like platform licensing fees or the creation and curation of content. These overheads can add up, especially if one opts for premium platforms or high-quality content.

As businesses expand, the complexity of managing vast stocks of inventory grows exponentially. Tailored inventory software aids in streamlining operations, reducing errors, and ensuring smoother business processes.

Given the intricate requirements of large enterprises, creating such bespoke software usually falls within the range of ~$250,000 to $400,000.

The backbone of any business operation is a sound management system. Operations management software facilitates seamless workflow coordination, resource allocation, and task monitoring.

Software of average complexity, catering to most general business needs, typically costs between $200,000 and $400,000.

The world today revolves around data. Solutions that not only manage its vast volumes but also extract actionable insights from it are invaluable.

Incorporating artificial intelligence and machine learning into such solutions amplifies their capabilities, allowing for predictive analytics, better decision-making, and more personalized user experiences.

Given the complicated technologies involved, custom software development costs for these solutions can range from $800,000 to an astounding $4M.

These tools help businesses eliminate manual, repetitive tasks, ensuring quicker turnaround times and minimal errors. A typical solution focused on enhancing digital workflows and processes comes at a price tag of about $300,000.

Financial accuracy is paramount for businesses. Automated accounting software minimizes human errors, offers real-time financial insights, and streamlines financial operations. For software of average complexity that caters to general accounting needs, expect custom software development costs between $200,000 and $400,000.

The rise of smartphones has made mobile apps indispensable. For medium-complexity ones – like those catering to booking services, event ticketing, or mobile commerce – anticipate the custom software development costs ranging from $30,000 to $70,000.

These apps, while not as intricate as enterprise-level applications, still offer robust functionalities tailored for specific services.

Some sectors demand specialized apps tailored to their niche.

Mobile banking, for instance, requires enhanced security protocols, while telehealth necessitates features like video conferencing and patient data management. Starting at $150,000, custom software development costs for these apps can escalate based on the level of specialization and feature sets desired.

Let's delve into the intricacies of how we estimate custom software development costs:

Knowing the different expenses that comprise the final custom software development costs ensures that you can optimize them more effectively. At SENLA, we provide cost estimation pre-sale, so don’t hesitate to reach out and start working together!