Estimating software development costs accurately is crucial for the success of any project, regardless of industry or business size. Whether you are in healthcare, banking, manufacturing, transportation, big data, e-commerce, or any other business domain, a clear understanding of the factors that affect project costs will help you plan your budget sensibly and achieve goals in a cost-effective way.
In this article, we will guide you through these essential questions:
- How much does software development cost?
- What affects a software development cost estimation?
- How to calculate software development costs?
Let’s find the answers together now.
On the spot
Project development cost estimates are influenced by the following factors:
⦿ Hiring model
⦿ Scope of work
⦿ Technology stack
⦿ Infrastructure model
⦿ Project size
⦿ Team composition
⦿ Team location and timezone
⦿ Development timeline
There are several methods to calculate project costs:
⦿ Analogous Method
⦿ Parametric Method
⦿ 3-point Method
⦿ Bottom-up Method
We estimate costs based on each of the development stages:
⦿ Project Planning
⦿ UX/UI Design
If you want to delve deeper into how project costs are calculated, how we approach it, explore our personal project examples, and get key tips - we encourage you to read on!
Factors Affecting Software Development Costs
Project expenditures vary greatly depending on a variety of factors. We will list them here along with the questions we ask our Clients to learn about them when estimating software costs.
Scope of Work
By understanding the project requirements, features, and desired outcomes, we gauge the level of complexity and determine the resources needed.
To identify the scope of work, here are some of the questions we ask:
- What are the problems the project aims to solve?
- Who is your target audience?
- What type of software are you looking to develop?
- What features do you want to include in your app?
Different technologies have varying levels of complexity, development time, and the availability of skilled professionals. Understanding the technology requirements will help you accurately estimate your software development costs.
Before deciding on the tech stack, we define these points:
- Benefits and limitations of each technology.
- How stable they are.
- One-time and ongoing costs for each of them.
- How fast we can build a solution with a particular one.
Let’s take a look at the average costs per hour of the most popular technologies we use:
But note that these rates are approximate and can vary depending on different aspects, such as project requirements, team members’ experience level and location, number of required developers per language, and so on.
Will we execute the project on your infrastructure or ours? Will it require any additional setup and maintenance? We carefully consider cloud hosting, servers, databases, and third-party integrations, as they contribute to the overall project cost.
The type of software you intend to develop also affects an estimate. Let’s consider some of the most common examples.
Native Mobile Software
If you’re looking for seamless performance on platforms like iOS and Android, native software is advised. However, you should understand that if you want your app to be present on both platforms, Android and iOS engineers will require separate codebases. This may make development quite costly.
Hybrid applications are created using a single codebase, allowing for cost-effective cross-platform development. You should keep in mind that the cost can still vary based on the complexity of the app and the need for third-party integrations.
Web applications vary widely in complexity and functionality. Costs, respectively, vary depending on the availability of templates, number of pages, user interactions, UI/UX design, database requirements, and integrations with external systems.
Custom software solutions are tailored to meet unique business needs. As a result, their cost heavily relies on the complexity of the functionalities, integration requirements, and unique business logic.
We ask our Clients what project size they are envisioning: small, medium, large, or enterprise-level. This is one of the defining factors because, obviously, larger projects demand more resources and cost more.
Software utilized for small projects usually has limited functionality (core features), simple design, and a small-to-medium codebase.
These apps will have greater complexity and functionality, involving core features with multiple additional components, more complex design, and the ability to process moderate amounts of data.
Large projects are more complex, include multiple modules, and may require integration with multiple systems, the existence of a database component, and security. It usually costs significantly more due to the resources and effort involved.
Enterprise-level projects include extensive planning, developing, testing, and providing ongoing maintenance and support. They include multiple modules, integration, and extensive, advanced features, supporting various diverse requirements.
The development team usually includes such roles as a project manager, a QA engineer, software developers, and a UI/UX designer. Of course, this doesn't mean that the team is limited to these positions, but it's basically a default pod.
Some positions may serve more than one role. For example, in a small project a developer may perform the role of a tester, and in a medium-sized project, a project manager may function as a business analyst, and so on.
Everyone has a level of expertise and background that defines their participation in the team, as well as their cost. Based on seniority level, the abovementioned experts’ typical rates in Poland are:
Speaking of developers: although we gather a team depending on project needs, here we will talk about a classic model, which helps allocate our resources in the most efficient fashion and significantly adds to smart cost optimization — the SENLA Unit.
Our project team usually includes:
- Senior developer. A senior expert sets up and oversees internal workflows, manages daily routine, communicates with a Client, defines the architecture of the future solution, and performs quality control.
- Several middle developers. Mid-level developers are completely self-sufficient specialists who can perform tasks on their own.
- One or several junior developers. We add one or more junior engineers to the team so that they can independently perform simple tasks and help others close complex ones so as not to distract their senior colleagues.
The cost of the project will also vary based on the team’s location. We have offices in Poland, Croatia, Israel and the UK. Here’s how much, approximately, the developers at each of the seniority levels charge here:
Please note that these are not the actual rates of SENLA developers but instead just regions’ averages for your better understanding. If you want to learn how much hiring our staff will cost you— drop us a line and let’s discuss your project!
Do you have strict time frames? Should your project fit into specified deadlines? Longer timelines incur additional project management, testing, and maintenance costs that add to a total cost of the project.
We’ve opened up in detail on how we estimate development time for our projects — drop by to read!
By asking detailed questions about all these factors, we gather the necessary information to estimate your software costs accurately.
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Methods of Cost Estimation
Software development costs must be estimated somehow. And here are the methods with which this can be done (and with which we do it):
- Analogous — a technique that uses historical data from similar projects to estimate the cost of the current one. This involves comparing the projects by size, complexity, domain, and other relevant factors. While this approach is easy to perform, an estimation may be inaccurate unless one is comparing two very similar projects.
- Parametric — a technique that involves statistical relationship between parameters to account for, such as size, complexity, duration, etc., and the estimated project duration to calculate project costs. This model is particularly useful when one needs a quick and precise estimation. However, it may be too simple for complex projects.
- 3-point — project cost is estimated based on a balanced average of the most likely, optimistic, and pessimistic projections. Such an estimate helps determine the expected costs and clarify the range of uncertainty around them.
- Bottom-up — breaks a project into smaller chunks, analyzes the effort needed to complete them and then sums all constituents for a total estimate. This process is especially useful for complex projects that require high accuracy and close management.
While each approach has its advantages and disadvantages, it's the most beneficial to combine them and consider the specific project requirements to get more precise estimates.
How we calculate software costs
Now let us show how we approach this process in every detail:
1. Our team analyzes a Client’s requirements to identify the scope of work, target audience, and the other key elements, listed above.
2. According to this information, we pick the most suitable technology stack.
4. Based on our calculations, we provide you a list of necessary experts to interview and build our SENLA units from.
5. When we have approximate hours for each step of the project and team composition, we determine the approximate timeline for the project.
6. Finally, our experts work out the total approximate cost for the project. We do it by multiplying the estimated hours by the hourly rates of your selected experts for each development stage and then summing everything up.
In order to give you a better understanding of overall software development costs, here are some of our projects:
Development & Testing for a Global Trading Platform
In this project, our software development lab offered R&D services for a web-based blockchain platform.
Domain: Financial services
Cost: $150,000 - $200,000
Salesforce Development for Cloud Consultants
Here we were hired to develop a website. Our Сlient wanted to work with a partner with deep Salesforce knowledge.
Domain: IT Services
Cost: $80,000 - $90,000
IoT Quality Assurance System for a Manufacturing company
Our experts created a customized solution that allowed our Client to expand the use of IoT in production and integrate the quality control process with the assurance evaluation algorithm.
Cost: $50,000 - $100,000
Duration: 24 weeks
Mobile application for self-management of diabetes
We developed a mobile app for Medtronic that allowed its patients to set custom reminders, export data for physician monitoring, search for detailed nutritional recommendations and more.
Domain: Healthcare & Medical
Cost: $10001 to $50000
Duration: 34 weeks
CRM Update for a Financial Services Firm
According to the Client’s requirements, we redesigned a CRM system and ensured its integration with Salesforce, as well as very carefully implemented all developments, since the system was being used 24/7.
Domain: Financial services
Cost: $50,000 - $200,000
Mobile App Development & DevOps for a Cryptocurrency Firm
Our team created an Android mobile wallet for our Client. Now they support the business infrastructure, which includes system administration and AWS server management.
Domain: Information technology
But note that these costs are for illustrative purposes only and may vary based on your specific requirements. We also invite you to take a closer look at the other success stories we've had.
Key Tips for Making Precise Estimates of Software Development Costs
If you want to perform an estimate yourself, here are a couple of tips from our experts on how to do it best.
- Include a discovery phase to determine which specific problem your project will solve and understand the scope of work, define and draft your software requirement specifications.
- Research and carefully choose the tech stack.
- Calculate the impact of technology choices on development costs.
- Divide the project into small tasks or sprints.
- Create a cost breakdown by stages: prototyping, UI/UX, code writing, and testing.
- Consider potential budget deviations to avoid future issues.
- Regularly communicate and collaborate with the team to assess progress and adjust estimates if needed.
- Consider long-term maintenance when estimating the budget.
- Finally, to make an estimate more reliable, engage experienced professionals or teams for accurate cost estimation.
In the End
Estimating software development costs can be challenging; there are many components to take into consideration.
However, by investing time and effort in studying the factors that affect the cost, you can accurately estimate and plan your budget, ensuring each project’s success.
Remember, every project is unique, and all estimates mentioned here represent the average cost of software development. Contact us at SENLA by filling in the form below, and our experienced team will help you with accurate cost estimation, efficient development, and successful delivery of your project.