How much does it cost to develop a software solution? Have you ever delayed the start of digitalizing or new features implementation, because you don’t have information on how software projects are priced or how much you will expend to build a software product? Well, now you can find out the industry standards and best practices for estimating the cost to develop software!\n\n\nCost estimation is an important way to communicate accurate, clear, and timely information that decision-makers can use to make cost-effective business decisions. However, why do so many cost estimates get it wrong?\n\n\n\n\n\nSeveral factors are involved in producing precise cost estimates rather than just estimating some numbers on a page, but you don’t have to worry! We’ve created a complete guide to demonstrate how to estimate software development projects and succeed in keeping deadlines and budgets.\n\n\nHow to Estimate Software Development Cost?\n\n\nThe cost of developing software differs from project to project. Based on the complexity of your project, features you need, types of technologies, and type of programming languages to be used, software development costs can range from a few thousand dollars to multiple millions. Use the following steps to help estimate, or price, your startup’s project and hopefully avoid loss of money on software developer cost and save time.\n\n\nThe discovery phase\n\n\nThe discovery phase informs the roadmap and it’s the point the business determines a specific problem that requires a solution. Start with the product description and its description in the marketplace. From there, you can begin to understand the feature set, technology stack for the product, outsourcing software development costs, and even estimate software development time.\n\n\nEvaluate the scope of work\n\n\nTo estimate software development costs, you first have to understand the work’s scope. Ask yourself: What is the minimum number of features to launch my product and get customers’ feedback? The scope describes the functionalities that your product is expected to have.\n\n\nYou can divide the development process into stages. For startups, it’s typical to start with a prototype, then create a minimum viable product (MVP). After the release of the MVP, then you will gather customer feedback and the business model will be determined. Then the product owner proceeds with delivering new features.\n\n\n\n\n\nYou can also estimate software costs through the scope of work by looking at similar projects that have been done previously. In this case, you need to check numbers to avoid bootstrapping in the future. Note that the benchmarking of a similar project may have some limits, as the tech stack and standards may have changed. Rates are changing from year to year, and they depend on team composition and developers’ location.\n\n\nDetermine tech stack and complexity\n\n\nThe more complex your application or software is, the more likely it is that you’ll need different kinds of programmers with variable skills sets — UI\/UX professionals, designers, front-end developers, back-end developers, administrators, QA, project managers etc. Try to estimate the tech stack, level required, roles you need to boost your software product keeping deadlines and the budget.\n\n\n\n\n\nDivide it into sprints and small tasks\n\n\nYou can get a general idea about the cost by dividing it into sprints and small tasks. For example, if you need to develop a new feature for an application, divide the cost of developing this feature into sprints, each sprint being the duration of one month. Then estimate these sprints. If you divide the total estimated system development cost into small tasks, you will have a rough idea of how long each task will take.\n\n\nEstimate each project component independently\n\n\nSoftware development is a complicated process that involves a variety of different skills. It’s easy to get overwhelmed by the number of steps involved, especially when you’re just starting out. It’s therefore important to break down the work into smaller, more manageable pieces. The key is to estimate each task independently, so you can determine the software development cost breakdown per task and come up with a realistic budget for your project.\n\n\nMake a cost breakdown\n\n\nA breakdown of the software development cost can help you to estimate the exact cost of a project. If you take the main stages of your product development process, you can get costs to compare with an all-in-one developing company estimation. So you can estimate various aspects separately, including prototyping, UI\/UX design, business analytical services and market testing, frontend and backend development.\n\n\nCalculate potential budget deviation\n\n\nUsually, people think that the cost of software development will be fixed. However, some unexpected costs might appear after the project is budgeted and started. The best way to avoid budgeting issues and get your software product in time is clear costs with some possible deviation and ways to smooth it out.\n\n\n\n\n\nSoftware Development Cost Factors\n\n\nProjects can be complex and many things go into the process. Understanding all the factors that can affect your software development cost will help you plan your project accordingly.\n\n\nSoftware development project cost estimation includes planning, which is analyzing the features, requirements, and budget for the development. Although this might sound very easy, it is highly critical because every small detail of a project has to be reviewed. Let’s take a look at the key components of software development cost factors and how they influence the price.\n\n\nType of Software Project\n\n\nThe type of software project you’re working on can have an impact on development costs. A web-based software application, for example, may require more labor hours to develop than a mobile application that runs on a smartphone. Likewise, a data warehouse application that processes large amounts of data will take longer than one that just displays data to a screen.\n\n\n\n\n\nScope of Software Project\n\n\nMVP for a payment application startup or a bank application with a number of geographical branches. Simple landing page or multi-currency marketplace, simple CRM or 360 degrees marketing automation with AI and ML functions. Surely, the project scope will influence greatly on software development cost analysis and the budget deviation.\n\n\nDevelopment Team Size and Hiring Model\n\n\nIf you’re working with an agency or a freelancer, you may have little control over those factors. But if your project is going to be outsourced to an outstaffing provider such as ProCoders to find developers for startup, there are some key areas where you can drive costs down.\n\n\nHiring models can be in-house, remote local devs, or remote offshoring (outstaff). Often, when startups see that they’re close to bootstrapping, they urgently seek for outstaff development team. Our practice shows that starting with outstaffing from the very beginning can save up to 50% of the development budget and help to keep deadlines. Most of our clients told us that time cost saving was the main cause, why they hire remote developers in the outstaff model.\n\n\n\nWith ProCoders, for example, depending on the complexity of your project, we can get started within a week once we have discussed requirements and expectations.\n\n\nOther factors that influence the final costs\n\n\n\nDevelopers’ LocationLocation can make a big difference in software development costs, especially when you consider the cost of living, business expenses, taxes, etc. Hence, it’s cheaper to hire remote developers from offshore locations like Central Europe and India than in the United States or Germany.\n\n\nQA and developing processThe QA and development process factor into the entire development life cycle, not just the design and coding stages. If you don’t do your due diligence in these areas, it’s likely that your project will go over budget or take too long to develop. To keep costs down, you should use a proven methodology.\n\n\nDevelopers LevelThis is difficult to estimate, but one thing is certain — the more skilled the developers, the higher the development cost. Usually, startups are trying to find some effective mix of developers that will guide the project, keep deadlines and budget and guarantee quality. Another tip we practice at ProCoders is some kind of level up with a rates’ downgrade. It means you will have a middle developer with 2 years of experience for a lower rate. As an additional value, our software development cost analysis can help you with a project estimation and share some more tips on how to save development budget.\n\n\n\n\n\nTech stackThis concerns the frameworks you are working with, the programming languages you use, the development environment and whether the app is open source or not. The tech stack determines how long it will take to develop the program and whether you might need to expand the development team later.\n\n\n\nSoftware development Hidden Costs\n\n\nSetting costs is not as difficult in the software development process as correctly estimating what are the cost of software engineering is as well as planning for any likely financial shortfall that might occur in your project. \n\n\nThe hidden costs of a project are those items considered as overhead or indirect costs that are necessary to complete the project but don’t appear on the project’s initial budget. They could be QA issues and additional testing, overtimes, delays and budget to additional onboarding and team augmentation. This section talks about common hidden costs and how they can apply to your business.\n\n\n\n\n\nQA and testing\n\n\nThere are a lot of unexpected errors that occur during a project, but they don’t always happen at the start of a project. You can encounter problems at any stage of the workflow, with testing and verification, QA, and production. It’s important to have processes in place to prevent issues from occurring during development, especially if you’re working with multiple stakeholders across multiple teams.\n\n\nLoss time\n\n\nThis refers to the cost of a product that doesn’t actually ship. It can be caused by a delay in delivery, which is expensive and time-consuming for you and your team to fix. It can also be caused by features that aren’t right for your customers or market. It also concerns time costs as a result of poor communication, poor expertise, or working in different time zones.\n\n\n\n\n\nExpensive infrastructure challenges\n\n\nSoftware developers need not only good equipment and proper connectivity, but also bandwidth, storage space, and power supplies — all of which can put a big dent in your budget. However, you can mitigate these challenges by outsourcing your project to an offshore team such as ProCoders. You can benefit from a much lower software development price per hour in Central Europe. Then, you wouldn’t have to worry about equipment costs.\n\n\nBudget to visit your business partners\n\n\nYou might need an extra budget for additional onboarding if the developers fail to deliver what is expected. In ProCoders, we smooth all these hidden costs and have already debugged our workflow for the level when the percentage of unexpected costs is very low.\n\n\n\n\n\nCommunication costs\n\n\nCommunication costs are a factor in all software work, particularly in this age where remote work is the norm rather than the exception. There’s a tendency for mistakes to happen, which leads to unnecessary miscommunication and lost time from employees who should have been working instead.\n\n\nMaintenance\n\n\nAll projects have some sort of ongoing support or maintenance cost. They often show up in bug-fix patches or in enhancements added after the initial release. A better way of looking at maintenance costs is by considering them upfront — before any retrofit or upgrade is even necessary — and adjusting your project budget accordingly.\n\n\nSoftware Development Budget Template\n\n\nThis software development cost example template will help you build a basic budget for your project that includes the key aspects of a typical project. Note that these are estimates and the actual figures may freely vary depending on the specific requirements of your project.\n\n\n\n\n\n\nProcess\nEstimated % of Total Costs \n\n\n\n\nDevelopment (frontend and backend)\n50% \n\n\nProject Management\n15% \n\n\nQuality Assurance\n15% \n\n\nLegal fees\n13% \n\n\nBusiness analysis\n10% \n\n\nUI\/UX Design\n7%\n\n\n\n\n\n\n\nConclusion\n\n\nDeveloping estimates for your software development projects can be challenging. However, what you need to do is to settle the basics from the outset, such as having a strong discovery phase. Then you take various factors into consideration such as the developers level, the tech stack, quality assurance requirements, etc. Likewise, do not forget to set an extra budget to cover for hidden costs.\n\n\nSo why not save that effort and outsource software development? That’s what ProCoders exists as a software outstaffing company, helping startups and SMBs to optimize their software development processes for greater efficiency. Let us help you build your next project. Contact us today to start.