Author Marko Krstic

How much does software development cost?

There is plenty of different kinds of software already ready to be used by people to save them time and cut costs. It is built in a way that satisfies a broad number of consumers.

The advantages of ready-to-use software are pretty obvious. First, we can immediately use it since it has already been implemented and tested. Second, it doesn't cost too much, and some are even free.

Since it is built in a way that satisfies a broad number of consumers, that is its downside as well. Even though many people can use it, it may not suit our needs. It's not built specifically for our use case, and we might find it not very useful for us.

In such cases, it's not rare that we need to build a custom software solution that suits our needs and solves our business problems. And of course, building custom software is not free, and it might put additional pressure on our budget.

The software development costs may vary based on many different factors like purpose, technology, load, users, problems it solves, business complexity, etc. Custom software could be simple enough to automate small tiny tasks or huge with many complex processes.

Considering all of these factors, it's easy to conclude that providing estimates of custom software development costs is not straightforward. The more information we have about the software we want to build, the better estimates will be.

We can compare it to buying a car. How much does it cost to buy a car? No one can answer that question before we give more information like: if it's used or not, what type of car, what brand, how powerful it is, etc. It might cost everything from a few hundred dollars for an old used car up to a couple of hundred thousand for a brand new vehicle of a specific type.

The same rules apply to custom software development too. Determining exact software development costs without a detailed explanation of what needs to be built is almost impossible. What we can do now is to provide a range of expenses for pre-defining requirements.

Let's start with the range that's too broad. This range of custom software development costs is where most solutions fit in. It can be everything from around $1,000 to $300,000. It can be even more than that in some cases, but it would be for huge and complex solutions that are more an edge case than a rule. As we can see, the range is pretty broad, related to custom software development costs. We are not talking about simple websites and web presentations but software solutions that solve some business problems and automate processes. Let's call that range the first-range level.

We will now narrow down a development cost range and define the second range level. We can calculate it with the basic formula of the average developers' rates and software development duration. Approximately 70%-80% of software solutions fit into this range.

Most experienced developers or development companies change their services between $100 to $200 per hour. Let's say we found a company that charges $150 per hour, and to build our software, we need two developers to work on it. Experience says that with two experienced developers, custom software development usually (in around 70% to 80% of cases) takes between 3 to 12 weeks.

Applying a simple calculation, we can get that our second-range level cost is from $36,000 to $144,000.

3 weeks * 40 hours a week * 2 developers * $150 = $36,000
12 weeks * 40 hours a week * 2 developers * $150 = $144,000

It is still too broad, but it's a bit better. As we said, it's not possible to give any better estimates without defining some requirements. But let's try to do it in the following example.

Let's have a look now at the specific example. Before we define the costs, we need to define the requirements. This example is based on our experience building a similar software solution. We will develop a custom CRM software for veterinary practices. The software will consist of the following features:

  1. Veterinarians can log in to the system
  2. Keeping track of all clients (humans that have their pets)
  3. Keeping track of all patients (pets)
  4. Keeping track of the pet medical records
  5. Creating/updating medical records
  6. Quickly searching the medical records by multiple criteria
  7. Generating invoices
  8. Reminders of various activities (vaccination due, appointments, etc.)

Based on the requirements we defined, we can create a rough calculation of software development costs. Keep in mind that these are approximate requirements without diving into details. For example, searching the medical records by multiple criteria doesn't say what and how many of them. Some of them could be complex ones that take more time to develop.

Based on our experience, we could develop the software with two developers in around four weeks, resulting in approximate software development costs of $48,000.

Conclusion

As we can see, the software development costs may vary based on many factors. The more information we have about the software we want to build, the better estimates are.

Experience says that custom software development costs between $36,000 and $144,000 (in 70%-80% cases). In 15% to 25% cases it fits between $144,000 and $300,000 and less then $36,000. Just a few percent are above the $300,000.


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