Average Cost of Software Development

 

There can be no market without expenses to be paid. Much like the classic idiom, wherein you must “spend money to make money,” the crudeness of such a saying has more bearing than any one of us would like on how businesses are run. You may leverage costs, cut corners, or generate your own supply of self-sustaining resources, but chances are you’re not going to get very far running on free horsepower. Software development is as much beholden to the whims of this as any other sector.

Investment is the keyword here - with keen attention, any amount of money funneled into making the software development process run will recoup its expenses. There’s no flat cost that rounds out the entire industry’s average costs, however, that’d be too easy. Every project, every product, every development cycle will have varying costs associated with them.

 

 

There are several different variables to account for when determining the average cost of software development. The final cost may be dependent on the speed of development, who you are hiring, and the scale of the project, with those three being the most prominent factors affecting development costs. Frankly, the range of prices that could conceivably apply to any given project are broad to say the least. Care to take a guess as to the range?

On average, a project’s costs can fall anywhere between $20,000 to $1,000,000

We’ll talk more about how these three main factors - speed, hiring, and scale - contribute to the overall end costs for software development.

 

 

Main factors that determine cost of software development


Scale of the Project

More than anything else that will affect the cost of any software development project, the number one variable will be the scale. Size, workload, resources, anything and everything that contributes to the complexity and depth of a project carries weight. The greater the app’s ambitions, the more you will need to spend in order to fulfill those expectations.

For comparison, let’s look at the Statue of Liberty to a museum miniature replica that you get in the gift shop. Which do you think cost more to create? The small version, which can be easily replicated with little more than a hunk of cheap iron? Or perhaps the colossus outside New York? They represent the same concept, but you can clearly see that one version takes much less cost because it takes less resources and effort to follow through on.

The more complex a project is, the more resources will be needed to complete it. Depending on the goals of the software, those resources may culminate into tens of thousands of dollars, even building up to a full million, to realize the extent of what’s planned for that software to do.

Something as simple as a small phone calculator can’t be compared to that of a software that is expected to manage a company’s payroll. Each project takes a different amount of time to accomplish, along with having a different standard of quality to uphold. A calculator involves the most basic of algorithms, and the level of quality is only dependent on whether it can accomplish simple math or not. Company payroll management, as you can imagine, puts a calculator app to shame in terms of cost and effort.

The scope of the project will inherently weigh heavily on the cost, creating great fluctuations between different projects. Let’s say, for example, you’re looking into developing a minimalistic or otherwise small project, one that doesn’t require the intense intricacy or delicate touch that more sensitive apps may need. These sorts of projects take substantially lower development hours along with simpler designs and layouts. As a result, these tend to range from $20k to $75k.

Moving up a bracket, however, a medium-sized app increases the workload involved with its creation. There’s a necessity for more attention to detail, which means more man hours and resources dedicated to its development. The greater scale involved, compared to a smaller app, may raise the costs associated with it up between $75k to $250k.

Large projects are, predictably, the monoliths of these price brackets. Whatever is dedicated to small and medium projects essentially pales in comparison to what’s poured into something of substantial size and scope. These projects take large teams and complex designs and coding that take several months or even years to create. They tend to range between $250k to over a million dollars, quite a sum of cash to follow through on.

You’ll need to develop a firm understanding of the scale and scope of your own app if you’re planning on some forward thinking, determining how much you’re expecting to sink in to see its development through. Figuring out how much it costs to create each stage of app scope, from small to large, is the first step on that path. Surely, you don’t want to break the champagne on the bow of the project, only for it to crash out at sea once it runs out of resources, right?

 

Development Speed

No matter what scale of project you’re seeking to undertake, everything takes time. That much is an irrefutable fact of any endeavor worth its salt, and software development in particular seems to eat its own time more so than many other industries. Coding, design, and development aren’t boxes that are quickly checked off the list.

Since these projects take a significant bunch of their own time, many smaller factors can change the rate at which they can be completed, increasing or decreasing costs overall. For example, team size can shift the rate, as several developers can be overkill during development, and you may end up paying too much to justify completing the project quickly.

Alternatively, hiring too few developers is a dangerous game. You may not be spending as much money, but you may end up hamstringing the quality and speed of the project in the process. Without enough developers to work, completion will end up taking longer while the final project suffers due to a stretched workforce. You may save a few bucks, but if your standards fall in the process, then acting cheaply may bite you in the end.

There are several development approaches you may take, depending on what your priorities. If you’re looking for a Minimum Viable Product, your goal will be to get out a testing product as quickly as possible for feedback from the user base. This approach results in several iterations of the same product, and greatly speeds up development at the cost of delivering imperfect products with the intent of improving on each version.

You may not be interested in developing multiple error-ridden products, relying on the public to test your work for you. The Waterfall approach has been a staple in the industry for decades, reliably consistent in delivery while taking its time in development. Completion takes longer with this approach, but more focus and internal care results in greater room for error when the final product is released.

 

Who You’re Hiring

Subsidizing costs via outsourcing is quickly gaining prominence and preference in the software development circuit. You’re blessed with a myriad of talented options across the face of the globe, where you can ship projects off for systematic, effective, reliable completion at a modest price. But that’s just it: you have a choice. Who you hire among those options bears huge relevance on the resulting costs and quality.

The final cost of development is highly contingent on who you outsource to. You may be looking for speed over quality, quality over speed, or a contender that matches both at a steeper price. Your final selection for an outsourcing partner will change the end price significantly, depending on what services you’re expecting, as well as experience, quality, speed, and location.

An easy pothole down the outsourcing route is gunning for the cheap options. You are, after all, concerned with abiding by the most cost-effective strategy, and hiring a software developer on the lower end of the price range seems obvious. You will, of course, most likely be sacrificing quality and experience for a few bucks.

Inexperienced and new engineers are likely to occupy the cheaper end of the bar, making them tempting targets for hiring. We’re not saying that providing engineers with a learning opportunity is bad, but if you’re expecting a high-quality product reasonably quickly, you’re going to be disappointed. Not only are these engineers more affordable, they tend to take longer as well, resulting in a lower quality product. Not every project is about offering an opportunity to green engineers, especially if you’re expecting to make a profit.

Keep in mind that where you outsource to, just as much as who you partner with, is inexorably tied to your overhead costs. When researching potential outsourcing companies, you’ll first want to decide whether you want to pursue nearshore, offshore, or onshore sources to conduct your business with.

 

Onshore Development Teams

If you want to keep your outsourcing stateside, onshore will be your top pick. Working with someone that shares your culture, while also being within reasonable time zone distance, makes the working process a breeze. However, there are some significant drawbacks to hiring an onshore development team.

America is suffering from a severe lack of new blood in the software development field. With the labor pool drying up, the cost of hiring competent software engineers has skyrocketed as well. High demand and low supply means that finding a decent team is challenging, even without having to wade through the inexperienced applicants first.

Lower quality developers flood and seize the market, advertising cheap work, but subsequently deliver underwhelming results either due to lack of skills or lack of experience. In any case, while hiring an onshore development team may be comfortable, it’s hard to find the right team in a shallow labor pool. It’s precisely because of this that offshore and nearshore outsourcing have become so popular.

 

Offshore Development Teams

Easily the most easily recognized method of outsourcing, offshore outsourcing has proven to be reliable for decades. The labor pools in the most frequently used countries, such as Europe, India, and China, are full of valuable engineers ready to work at a cheap price range. Finding team members is easy, paying them is cost-effective, and you’re able to focus on more important projects back home.

The problem is distance. We mentioned how it’s easy to communicate with onshore developers due to neighboring time zones. Well, offshore doesn’t have that. Most of the companies you’ll be working with will be working eight to twelve hours ahead of you, meaning your work schedules will not match up. Without ease of communication, you lose time, work, and an increasingly slowed production.

You’ll also find that the travel costs associated with onsite meetings will dig into your budget. Communicating over video conferencing may be convenient, but face-to-face meetings remain the ideal. To do that, you’ll have to charter a plane, fly out, get a hotel room, account for food and other basic needs, and then fly home. Ultimately, you’re losing a lot of time and money maintaining your relationship with your outsourcing partner.

 

Nearshore Development Teams

Onshore and offshore both have their benefits and their weaknesses. However, there’s a third option that combines the best of both worlds, while weeding out the weakest parts. Nearshore outsourcing provides the convenience of a shared timezone and culture while also providing high quality, low cost services. In basic terms, it’s a win-win.

To learn more about how iTexico can help you with reaching out to a nearshore development team, check out our “How We Deliver” page.

 

Conclusion

Software development is expensive, that much is clear. Depending on the scope, scale, and hiring process you’re participating in, the cost can vary by an enormous margin. Setting your budgetary boundaries, while accounting for contingencies that may occur during development, is critical in the early stages of a project. Getting sideswiped by factors you should have accounted for is a black mark no one wants on their record.

After establishing the scale of your project, in which you determine whether you’re working on a small, medium, or large development cycle, finding the balance at which you pace your project follows. These tend to revolve around team sizes, how many engineers you have working on a project, and the quality of those engineers. Finally, researching your outsourcing possibilities sets the final stage, between onshore, offshore, and nearshore. While all three have their own benefits, we personally prefer nearshore outsourcing due to its overwhelming benefits in comparison. If you want to learn more about what nearshore can do for you, feel free to contact us. 

 

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Download our Free Whitepaper and learn more about why Nearshore outsourcing in Mexico makes complete sense.

This “Nearshore Plus” model of software development offers convenience at the core. 

  1. Cost-effectiveness 
  2. Flexibility
  3. Time savings
  4. Growing talent pool
  5. Access to domain knowledge
  6. Meeting expectations
  7. Scale-up team skills

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