Understanding Software Development Costs in 2024: A Comprehensive Guide

In 2024, the landscape of software development costs continues to evolve, influenced by technological advancements and market demands. For entrepreneurs and business leaders navigating this field, accurate cost estimation remains pivotal. A misstep in budget estimation often leads not just to financial strain but can jeopardise entire projects. 

This article dives into the intricacies of a software development cost, offering insights into how costs are formulated and the significant factors at play, aiming to equip you with the knowledge to estimate your software development budget effectively. 

How much does software development cost, and how can you avoid mistakes with cost estimation?

It’s a question that we are asked quite frequently. And it’s a tough one, even for someone who has been developing software for over 18 years. Well, here’s our three-word answer: “It really depends!”

The cost of developing software depends on the requirements and various other factors, and no two software projects are the same. In fact, ‘software’ is itself such a broad term that we cannot know the product development costs for sure until we know what your exact software requirements are.

We wish that it was simpler to give an instant cost estimate and a time frame. Without understanding the requirements and factors that determine custom software development pricing, it is almost impossible to say.

Let’s proceed with our discussion and find out what this really means for you. Read on to find out more about:

• What are development costs
• How average product development costs are estimated
• What factors determine the final cost of software development

What Are Software Development Costs?

Understanding how much does it cost to build a software application is crucial for businesses in today’s technologically advanced world, where software ranges from simple mobile applications to comprehensive enterprise systems used by millions. The complexity of software varies widely, as does its purpose — managing everything from vendor relationships and inventory to client interactions and employee oversight. Whether it involves project management tools or entire Enterprise Resource Planning (ERP) systems, the integration of software into business processes is intricate and extensive.

Many business owners and entrepreneurs, eager to leverage cutting-edge or potentially market-disrupting software, face significant challenges in estimating the costs associated with software development. The reason for this is simple: software development costs are inherently difficult to pinpoint without a detailed understanding of the project’s specific requirements.

For example, consider the analogy of building a house. Asking how much it costs to develop a software application without specific details is like asking the cost of building a house without specifying its features. The price fluctuates based on numerous factors such as size, the number of rooms, the quality of materials, and additional luxuries like a swimming pool or a wine cellar. Prices could range dramatically based on these elements.

Similarly, the cost of software development can only be accurately estimated once the detailed specifications of the project are known. Factors influencing cost include the software’s complexity, the technology stack used, the scale of the project, and any special features or compliance requirements.

Whether you are a startup founder with an innovative app idea, a business owner seeking custom software development, or just curious about software development rates, the next section will help you understand how much does it cost to develop software. 

How to Estimate an Average Cost Of Software Development?

As discussed before, there is no fixed answer to “How much does it cost to build a software?” question. Software project costs can be anywhere between £10,000 and £1,000,000, sometimes even more, and it all depends on the requirements of the project.

If you have a project in mind, and you want to find out the average cost of software development for it, you need to get in touch with a software development company. An experienced software team that can provide realistic estimates for your project. These estimations of software development costs are always expressed in terms of:

1. Cost (measured in £)
2. Duration (measured in calendar time)
3. Efforts and Experience (measured in person-months)

Time and efforts are closely related to the overall cost of the software project, just like the duration and the number of required construction workers and professionals required to build your house would determine the total construction cost.

Some software development companies estimate the cost in terms of the duration of the software project. Some estimation of development costs examples are projects that are spread over an extended development period. While calculating software development costs for such projects, some companies phase out the development process by splitting it into smaller parts and charging a fixed cost for software development for every phase.

Other software development firms estimate the cost based on the number of persons required. This way, they estimate the software development price by multiplying the average cost per person for a set period of time (e.g., a month) by the number of persons required.

Determining Software Development Costs by Size

To estimate the cost of custom software development, you need to consider the size of your company. The larger the number of users your solution accommodates, the greater the required capacity and development effort.

For example, the development of a basic custom CRM or BPM system for a small UK company might cost around £80,000. Conversely, a complex, large-scale enterprise CRM solution could start at £480,000 and rise significantly depending on additional requirements and features.

Software solutions are typically segmented into three categories based on company size: startups, SMEs, and large enterprises:

Startups

Startups are emerging businesses focusing on unique products or services not yet available in the market. To test the viability of their digital products, startups often engage developers to create a Minimum Viable Product (MVP). 

An MVP includes only essential functionalities to validate the product concept with real users. In the UK, the cost to develop an MVP ranges from £24,000 to £36,000, depending on the development team’s location and the project’s scope.

Small to Midsized Enterprises (SMEs)

These businesses frequently seek to enhance automation and remove technical barriers within their operations. Typically, SMEs require software solutions of medium complexity, which may include features like business process automation, integrations, and data management. 

The development of such software usually takes 3 to 6 months, with costs ranging from £56,000 to £80,000, reflecting the project’s complexity and the technologies used.

Large Enterprises

Large enterprises have complex needs due to their extensive operations and large workforce. Software solutions for these corporations, such as ERP systems, need to support multiple functions like data analysis, sales management, and resource planning. 

These solutions demand advanced features, high scalability, and robust integration capabilities. The costs for developing such high-end software start at around £80,000 and can exceed £500,000, particularly for projects that require compliance with strict regulatory standards and advanced security measures.

These estimates are indicative and can vary significantly based on specific project details, developer location, and market conditions. Continuous costs for maintenance and updates are also critical considerations, as they can represent a substantial part of the software’s total cost of ownership.

Key Factors that Determine the Cost Of Software Development

Now that you understand the basics of software costing, let’s explore the factors that actually determine why the cost of development of one software differs from another.

Software Size And User Base 

The cost of developing software can vary depending upon the size of the software and its user base. The size of the software refers to its magnitude, based on the number of modules/screens/pages it has. The more screens/modules there are, the more work it requires and the longer it takes to develop.

The size of the software user base refers to the number of end-users for that particular software. The sizes of the software and its user base are important components of the development cost because software with a large user base and more modules will need to be optimised and tested more extensively. That will make the development and testing process expensive, thus increasing the overall cost. Therefore, software size and user base are essential factors in estimating how much does it cost to make a software for a particular project.  

Complexity

The complexity of a software product can play a significant role in determining the software development cost of the project. In simple terms, it refers to how complicated the logic behind the software product is. If it has a complicated logic, it means that it is more challenging to develop, test, and deploy.

There are three things that can complicate the logic behind a software product: 

• The complexity of the software features
• Technological complexity
• The complexity of design (this, we have discussed ahead in a separate section on UI/UX design)

Feature set complexity is when the software product requires a set of complex features or needs to be conditioned according to complicated business rules. Technological complexity refers to when a software product becomes technologically complex and can not be implemented through traditional technologies. For instance, developing software with real-time push notifications is technologically more complex than an application without real-time functionalities.

Take the example of a basic calculator app, the logic behind which is based on straightforward arithmetic principles. This makes it a much easier application to develop than a stock trading application, for instance. The latter performs complicated functions like number analysis and requires complex real-time functionalities, and, therefore, would be more time-consuming and costly to develop.

The development team determines the complexity level of the project after discussing the requirements with the clients. Usually, the complexity level is categorised into three categories: basic software, medium complexity software, and highly complex software. Although there are no set criteria for each category, it is commonly evaluated in terms of the number of hours it takes to develop the software. Therefore, complexity is another important factor.

Deployment Platform

Software development prices vary according to the deployment platform of software because each platform has its own specifications. If it is an application for mobile devices, then it depends upon the operating system. Is it an application for iOS only? Or Android? Or Blackberry? All of these are important considerations to know how much does it cost to create a software. Since each deployment platform has a different number of devices that the application will be deployed for, the cost for software development for each deployment platform will differ as well.

Android has a significantly higher number of devices than iOS and Blackberry, which is why developing an Android application is always going to be more expensive than others. 

Similarly, if your aim is to come up with an app that can compete with popular apps like Uber, you will have to develop it for all the major deployment platforms, like Android, iOS, Windows, and Blackberry. This means you will require a much higher software development budget. 

Integration With Existing Or External Systems

The cost of software development also depends upon any specific integration and data migration requirements.  Most applications nowadays require some form of integration with external, third-party systems, such as a payment gateway, maps, ERP, and/or CRM. Some of these integrations are straightforward, but others can get complex and time-consuming, e.g., integration of a third-party reporting system and source databases into the software. Integration requirements like these can significantly drive up software development rates.

Similarly, some software development projects require the migration of existing data. Migration can be an equally taxing job if a large volume of data is required to fit into your new system or if it requires major adjustments. 

Complexity Of Design

Designing is an important component of the software development cycle. Depending on the complexity of the design and the required customisation, the cost of designing can constitute a major part of the total software development costs.

Certain design elements like custom illustrations or micro-animations make your application interface aesthetically pleasing, but they come with a heavier price tag because they add more design time and effort to your project. Let’s understand this in a little bit more detail.

When it comes to software design, the devil is always in the details. Take the example of a ‘pull down to refresh’ feature. Many mobile and web apps make use of this feature. When a user pulls down the screen to refresh, an animation pops up, indicating that the refresh request is being performed. A standard design of this feature is a spinning wheel icon, also known as a Throbber. But some applications have interesting custom animations for the refresh feature. Take a look at Yelp’s design:

An animation like this elevates the appearance of your application, but even something this small requires a lot of custom designing effort, which eventually adds up to the cost of software development. So when we estimate how much does it cost to develop software, we take into account small details like these. 

UX – Interaction Between The Design And The End-Users

A major aspect of software development service is to keep in view how users interact with the software. It is important to design knowing the number of people (users) who will interact with the software and the way in which they will interact with it. 

This interaction between the design and the end-users is also one of the essential software cost factors that help determine how much does software cost to develop for a specific project. For instance, if the software is intended to be used by a limited number of people, then the UX design process tends to be relatively easier, as you can rely on user training.

On the other hand, if you want to develop a B2C software that is intended for use by many people, a lot more thought and time will have to go into designing the software that is easy to understand and use.

Another aspect of the design is how end users are going to interact with the software. For some software, there is a set and specific way in which user interaction takes place, like for ATM software. In such a case, the user interaction design is easier to develop than for a software that has a distinctive and unconventional user interaction, which allows the users more flexibility and freedom in the way they interact with the software.

Software Development Cost Estimation Template

Through our decade long software development experience, we have learned that these are the aforementioned six factors that impact the cost of software development. If you still find yourself lost, here’s a simple software development cost estimation template for you:

Keeping the specifics of every software cost factor aside, there are four major cost components of any software development project, and each one of them carries a different weight in the total costs. Each one is a critical item and important for a successful product development effort. Based on our experience, this is a rough cost distribution for these major factors.

63% (Development) + 15% (Project Management) + 15% (Quality Assurance) + 7% (UI/UX Design)

= Total Cost of Software Development

Now, remember that these are mere estimates that are not always accurate for every project. The actual cost of software development can be far from this cost division based on the nature of each project and its requirements.  

How Much Does Custom Software Development Cost: GoodCore’s Approach

Now that you know the important factors that determine the custom software development cost, let’s talk about how we approach custom software development pricing at GoodCore. 

We work with clients from the initial stage of software requirements gathering and offer them an upfront discovery phase. We conduct a 2-day in-person discovery workshop where we understand their vision for the software product, visualise their product ideas, and conduct a technical evaluation. This exercise helps us understand and analyse our client’s requirements and allows us to come up with reasonable cost estimates. 

Designing to Budget

Our software development approach is always in line with the requirements and budgets of our clients. We have extensive experience in designing custom software to fit a certain budget. By taking your ideas through a rigorous discovery process, we advise you on what requirements are essential to the initial design, what is needed to successfully develop a minimum viable product (MVP), and what features can be added later.

Keeping in view the varying types of client requirements, GoodCore offers multiple engagement models that clients can choose from. These include a Fixed Price Model, Time-and-Materials Model, Dedicated Team Model, and Hybrid Model.

Fixed Cost Model

Our fixed cost model guarantees the delivery of the defined set of functionality in a specific time frame and cost. It is suited for projects with well-defined software requirements that are unlikely to change or evolve over the course of the development process. With this engagement model, you know exactly how much does software cost before starting the project.

Time-and-Materials Model

This model is suitable for smaller projects that do not have a well-defined vision. It splits the development process into smaller fixed-cost/fixed-time phases (e.g. one month long). It allows you to review the deliverables of each phase before deciding on the software development budget.

Dedicated Team Model

This one is a cost-effective option for projects that foresee ongoing product development phased over a number of years. With this engagement model, you can work with a dedicated team of GoodCore developers for your project, and make the best use of your team’s time and skill-set. 

Hybrid Model

With a hybrid model, you can choose more than one engagement method for an ongoing project if a spike of work is expected. For instance, you can have a dedicated team working on the development and maintenance of your ongoing project, and engage additional staff based on Fixed-Price or T&M engagement to manage the demand spikes.

Conclusion: A Quick Checklist For Software Development Cost Estimation

If you want to get custom software developed, here’s a quick checklist for you that sums up everything we have discussed so far about custom software development pricing.

If you are wondering how much does it cost to develop a software, there are a few things you need to consider. The custom software development cost varies, and seemingly similar projects can exhibit significant differences when it comes to determining their cost. When deciding upon your software development budget, you need to keep in mind factors such as:

1. Type of software project: The cost of software development majorly depends on the type of software project. Different types of software development, such as web, mobile, or cross-platform applications, all incur varying costs. Therefore, to get an idea about the cost, it is essential that you know the type of software development you are looking for.
2. Complexity level: This is one of the major factors affecting software development pricing. If it is a highly sophisticated software project, then it is highly likely that it will cost you more than that with a simpler logic.
3. Your location: Software development rates differ in different parts of the world, so where you are located will also have an impact on the average cost for software development. For example, if you are located in London and choose an on-shore software developer from the UK, then it will be more expensive than choosing developers from other countries. Your choice of location will determine the software development price. 
4. Different hiring options: The most popular hiring options for businesses are: an in-house team of software developers, hiring freelance developers, or outsourcing the software project to a development firm. 

These factors comprise a checklist of things you need to consider closely before you choose a software development vendor. Only a vendor can provide you with accurate cost estimates after they have all the necessary information about your software project. Therefore, having clarity about the type of software development, requirements, complexity level, and timeline will help you estimate the custom software development costs better.

FAQs

How much does custom software development cost?

As discussed, it all depends. The costs of software development can vary from project to project based on various factors, such as the scope, requirements, and technical complexity.

At GoodCore, we determine the cost of your project after a thorough discussion with you to understand your requirements and assess the scope of your project. For more details, go through our various pricing models.

How is the software development cost paid for?

When it comes to payments, every software development company has different payment terms. Our payments are based on certain milestones. There is generally an upfront payment that is required to initiate the project, followed by further payments at different stages of the product development cycle. You can expect a total of 4-5 payment milestones for an average-sized software development project.

How is software development cost calculated?

There is no pre-set formula to calculate the cost of software development but, generally, calculating software development costs is based on four major cost components: Development, Project Management, Quality Assurance, and UI/UX Design.

How much does it cost to develop ERP software?

The cost to develop software can be anywhere between £10,000 to £70,000 depending on the requirements. If you have an ERP software project to discuss, reach out to us for free cost estimation.

Have other questions for us? Drop us a message and we will be happy to help!