Top 10 Factors Influencing Cost of Custom Software Development

Custom software development has come a long way. Ranging from creating simple software to specialized industry-oriented apps, from solutions meant for startups to enterprises, encompassing web, mobile, desktop and the cloud software solutions have grabbed a huge market across the globe. And, it can be said that tailor made IT solutions are now almost an indispensable ingredient for any business.

What is becoming a hurdle is estimating the costs involved while developing and implementing a custom software solution. Especially for smaller segments, they may be lacking in funds or infrastructure or resources when it comes to developing the solutions. Whether it is in-house development or cloud-based software, organizations find it difficult to estimate the involved costs.

All businesses appreciate the worth of implementing software since they understand the basic advantages like automation of tasks, elimination of unnecessary costs, optimization of complicated procedures, competing with peers and many more. What hinders them is estimation of the different costs involved and how to plan the budget.

There are certain basic parameters and factors that play an important role in finding out the costs involved while developing and implementing a custom software solution. Let us go through these factors to understand how best it can be planned:

Key Factors That Establish Cost of Software Development

1. Time and Schedule Involved in Project Development

A major concern and an important factor in the process of software development is the time involved – in all phases, for all developers and for all types of projects. The time involved in the project has a direct connection with the cost that will be incurred. The number of hours spent per developer, the time and material arrangement, fixed price model, time taken to test and implement – these are some of the major factors that can rule the cost involvement in the project.

Time is equally important for scheduling resources for the project. If there is ample of time, work can be done with lesser resources but if there is a time crunch, there might be a need for more resources. This will be directly proportional to the costs associated with resources and infrastructure. Also, the time taken to resolve issues and implement newer features may vary since there could be unpredictable time delays, which will lead to a direct impact on the budget.

2. Number and Skills of Resources

The number of resources needed will have a direct impact on the costs involved and that can be decided through multiple parameters like type of project, timelines defined, infrastructure available, budget allotted etc. Even the seniority of resources and skills involved are a key factor in deciding the expenses involved. Different projects may need different levels of seniority in developers, designers, architects, testers, project managers, business analysts etc. there could be a mix and match of the level of expertise and that will be responsible for variation in costing.

The size of the team will be decided on the complexity of the project and the amount that you pay to each resource will determine the total costs. It also depends upon how productive the teams are and how well they gel with each other. The overall efficiency levels of resources impact the involved costs and productivity levels.

3. Expertise in Industry Segments and Technologies

Be it any kind of software development, there is a certain amount of expertise needed for the specialized kind of industry domains or technologies. At certain places, where the scope of work is dedicated to industry segments like education, finance, entertainment, marketing, healthcare etc. there is a need to have more of industry experience and that can heavily affect the costs.

Based on the nature of the project, a variety of technologies like AI, ML, IoT, cloud-based services, BI, Big Data etc. may need to be involved, without which we may not be able to achieve the output of the software solution. This directly impacts the budget estimation and may tend to increase it heavily.

4. Scope of Work and Complex Requirements

Requirements of the organization and the relevant scope of work are two major key factors that can alter the cost figures, by a great extent. With each new requirement or alteration in the requirement, there will be extra resources, time, and efforts and this directly impacts the costs involved.  The number of screens, features, business logic etc. play an important role in defining the scope of work.

Even integration of third-party tools is an important aspect when it comes to defining the scope of work. Customer feedback, changes in the software, addition/removal of features are areas that could affect the overall scope of work and hence, the costing. The size of the software will be determined by the number of screens, navigation, integration with other systems and number of fields in each screen.

5. Development Methodologies and Technologies

Whether the organization is going in for waterfall, iterative, DevOps or agile methodologies, each has its own flavor to add and thereby, its own chunk of features to implement. Each one of them needs a specific set of resources with certain skills and expertise. Even though there may be costs involved as we go towards modernized methods, there is a great return on investment that is possible.

The hourly rate for developers will depend upon the technologies that are selected, and the number of developers trained and tested for that position. Even the platform on which it is being developed like PHP, Go, Xamarin, Scala etc. will be a contributing factor in the cost calculation.

6. Seamless Third-Party Integration and Migration of Data

However much your software solution is independent, there is a seamless third-party integration needed with other modules such as ERP, CRM, PayPal etc. This can cater to extra efforts, resources, time, and costs. At the same time, the ready-made modules in these systems can be easily reused and that way, it can turn out efficient.

Even migration of current data is a huge task that must be taken up in most projects, to make the most of traditional data that has been accumulated over these years. Migration is a process that will need a lot of thought process and hence will affect the number of resources in the project and timelines may vary because of this activity. This will have a direct impact on determining the cost factors.

7. UI/UX Designing of the Software Solution

This phase of the project – designing the user interface and user experience is like framing the whole solution. It is the visually appealing part of the project and hence there are many key factors that must be considered. The app designing services will have multiple screens and visual elements and graphics for which costing must be considered. More the number of elements, more could be costing.

If there is external help taken for expert designers, it surely will cost extra. But there are specialized projects which may need expert advice from designers that have specific skills. These costs will add-on to the overall project cost but are a necessity. This will offer a better client experience and enhanced app loyalty.

8. Adapting to Outsourcing Model

It doesn’t matter if you take up resources internally or outsource your requirements. It is a big decision that involves a lot of thought process by the stakeholders. This has a direct impact on the costs that are associated with resources and location of development. Outsourcing may associate you with the best of IT partners that can give you best of knowledge, experience, and service.

Yes, in house development could cost less and outsourcing may have its own expenses involved. But the kind of service output that it will offer, is exceptional and effective. Also, if the project scope involves complications, it is highly preferred that an experienced team handles it. These decisions are key to affecting the overall costs involved.

9. Licensing Fees Involved

Be it any software or app, there must be an official way of launching it. Hence licensing the same is a must. Licensing fees are involved, which are a must to be catered to. Apply for a certificate is a necessity that is a must prior to implementing or releasing the application. To check if the project is abiding by the legal bindings or not, whether it is following the global norms or not – a thorough analysis will be done. Licensing fees must be paid in advance to avoid any hassle later.

10. Testing, Maintenance and Support Mechanisms

As a part of the SDLC, testing, maintenance and support are important phases. These must be thought of, well in advance. There are different types of costs involved in each one of them. It can affect the overall costing figures. Different testing mechanisms and tools, maintenance models and support procedures may lead to a varied costing model. Decision makers must take into consideration these factors. They should estimate the involved costs, that may keep varying based on choice.

Best Practices to Manage Costing of Custom Software Development

• Choose the right software solution and IT solutions provider
• Define your organizational goals well in advance
• Adapt the latest project execution methodologies like Agile, DevOps. It is important for continuous iterations of building, testing, and releasing software
• Obtain real-time feedback from users to ensure the software solution is as per their demands
• Get detailed ideas from the users as to what their wish is and how do they perceive the solution
• Keep a detailed feature list ready and keep updating it regularly, taking into consideration all necessary features and trying to eliminate the unnecessary ones
• Have wire frames ready by your designers, it surely helps in further course of action
• Consider in-house development and outsourcing options, based on your requirements
• Involve the QA team right from start
• Consider risks that could occur in the future

Summing It Up

The costs involved while developing and implementing a custom software solution depends upon many factors, as listed above. There are many different strategies and parameters that can influence the costing portion. It is required to be done with the help of an experienced IT partner. You must also keep in mind the best practices. The costs can be worked out based on capacity and requirements.

Custom software development is the key to business success. Identifying the costing model, costs involved and keeping the entire project within budget is the key to good software development.