According to a recent Gartner research, in 2024, the IT spending on software solutions will see a 14.0 % annual growth. This shows that investing in software solutions continues to be a prevailing trend among companies that strive to be ahead of the competitors and drive the innovations forward.

In this article, we share insights about the key factors defining software development timeline and expenses. Here you will find essential tips to avoid critical software development pitfalls, effectively manage your product development projects, and make well-informed decisions collaborating with your in-house team or custom software development partner.

Factors of Software Development Costs

Let’s dive into the factors affecting the software development project cost and their essential components.

Scope of a software development project

According to a McKinsey and University of Oxford study, large IT projects, on average, exceed their budgets by 45%. Notably, some projects experience substantial overruns, reaching up to 200% or even 400%. One of the prominent contributing factors to these overruns is poor planning. To ensure accurate cost estimation, take a close look at the key project scope components and start outlining them.

Here is the list of key aspects you should dive in while preparing your project scope:

  • Core objectives. Deep awareness of your company needs is a crucial element in outlining the requirements for a software development project. Сlearly define the set of specific issues your solution intends to solve and the outcomes you would like to achieve. Also, think and define how it strategically contributes to your company’s growth.
  • Main features and technology stack. A set of features you plan to have in your application and their complexity significantly impacts the project costs. Outline the functionality and features you would like to develop, analyze which of them are crucial and have the biggest impact on business, define their priorities. Also, you need to think about the right technology stack that would be efficient for the planned software functionality. While there are many tech stack comparative articles available, you can also approach a reputable software development company for expert tech consulting. It may save your time and prevent future overspendings.
  • Software type. The project scope significantly depends on the required software type: web app, mobile app, embedded software or their combination. The costs vary because each software type comes with its unique set of features and demands, specific technologies, and skill sets. Developing a product that functions across several platforms is more costly, as it involves hiring multiple developers with diverse skills to work on the different versions. However, building software exclusively for one platform may result in missing some potential customers, thereby it can reduce your return on investment. Cross-platform development may be an option, but it has certain drawbacks compared to the native approach.
  • Deadline. Working under the pressure of a tight deadline is always more challenging than working on projects without strict time constraints. Short deadlines are more stressful to developers and will definitely leave less time for testing, customization, and other activities aimed at “polishing” your final product. Consider your deadlines in the project scope because this information can help your team understand more peculiarities of the project and estimate your project price more accurately.
  • UI/UX design. Given that 83% of individuals prioritize a “seamless experience across all devices”, it’s essential to put significant emphasis on UI/UX design while planning the project scope. A well-planned design safeguards you against compromising user experience and helps prevent unforeseen expenses associated with usability that may expand your project scope over time. Certain development platforms come with their set of design limitations. They offer templates and the flexibility to customize them, simplifying the design process. However, if you’re aiming for a sophisticated and entirely customized product, the development process might prove to be both time-consuming and costly.
  • Third-party integrations. Defining a list of essential integrations is crucial in project scope planning. It forms the basis for understanding your product’s functionalities, estimating project duration, and determining overall costs. But, keep in mind that the estimated cost also depends on the number and complexity of these integrations, including factors like whether they are one-way or two-way integrations. Quite often, these connections demand substantial backend work, contributing to elevated expenses.

Software development type

Most software development projects involve either web or mobile development, or both.

Web development
A well-crafted, user-friendly web application holds the potential to serve as a cornerstone for companies, enabling them to attract and retain customers, bolster their brand identity, optimize internal business processes, and achieve various other objectives.

The cost of developing a web application can vary significantly based on its type.

Single-page apps are generally quicker and less complex to develop compared to web portals. Similarly, static web apps are simpler in development when contrasted with dynamic web apps.

Although many web development projects are modest in cost, the total expenditure for constructing web apps depends on the specific features, functionality, scale, and design intricacies you aspire to incorporate.

Leobit has an extensive list of distinctive accomplishments in web development. Check out our portfolio for more information on our web app development projects.

Mobile app development

The development of a mobile app is a multifaceted endeavor that sometimes requires substantial investments in terms of time, financial resources, and concerted effort.

Recent research conducted by GoodFirms provides valuable insights about the typical cost of mobile applications, which can vary significantly based on their complexity.

  • A simple mobile app typically includes essential user features like login, user profiles, messaging, and more. It also provides administrative functions for content editing, user management, and business operations through a content management system, feedback system, and push notifications.
  • Complex apps cover advanced user engagement and monetization features. These include activity feeds, social media integration, e-commerce, payment gateways, multimedia streaming, device integration, privacy controls, and more. Developers also manage administration tasks like order, payment, analytics, and security.
  • Advanced apps incorporate cutting-edge technology like augmented reality, multi-language support, and machine learning for features like chatbots. These complex features come at a higher cost, making it essential to prioritize and start with the most crucial elements for a bootstrapped development.

To expand the outreach or get more benefits from your app, consider implementing your mobile solution across different platforms. The most pivotal step in mobile development is to determine whether native mobile development or cross-platform solutions are more suitable for your needs.

Native mobile development involves developing a codebase for a specific mobile operating system like iOS or Android. Conversely, cross-platform mobile development enables apps to run on various operating systems using a single codebase, employing tools like Flutter, React Native, and .NET MAUI. The choice between native and cross-platform development hinges on specific project needs.

According to Upwork, the following figures represent the average hourly rates of mobile developers:

Leobit stands ready to assist in both realms. Our proficiency in native development shines through an interactive walking app built with Swift for iOS and Kotlin for Android. Our cross-platform competence is exemplified by a smart home mobile app developed with Flutter.

Application deployment

Managing the expenses of IT infrastructure, especially during application deployment, can be surprisingly high. This includes substantial upfront investments, ongoing maintenance, hardware upgrades, and utility costs. Inaccurate budget management can lead to overruns, causing business complications.

There are two main categories of IT infrastructure: traditional and cloud-based. Traditional IT infrastructure demands more upfront investment resources, whereas cloud infrastructure allows gradual scaling, making it a cost-effective option for any business.

Here is a comparative table that provides a more in-depth exploration of the differences between traditional and cloud infrastructure.

Mind that to manage cloud cost efficiently, you should select a suitable cloud provider with flexible rates that correspond to your needs and cloud resource consumption. In the second quarter of 2023, AWS continues to hold the top position with a 32% market share, while Microsoft Azure follows closely behind with 22%. Leading cloud providers such as Azure and AWS provide integrated cost optimization and management tools featuring real-time dashboards, service-specific cost breakdowns, and usage insights.

Maintenance and support

The life cycle of software can be broadly categorized into two significant phases: production and maintenance. Notably, the expenses linked to software maintenance are often escalating components of the cost of software development. In fact, research has indicated that up to 90% of a software’s total life cycle expenditure is allocated to its maintenance phase. This phenomenon is largely driven by the imperative for software to continually evolve and align with shifting user requirements, industry norms, and technological progress after its initial deployment.

Software maintenance encompasses several crucial activities, including bug fixing, patch management, performance optimizations, feature enhancements, and compliance with changing regulations. Neglecting maintenance or underestimating its significance can lead to increased long-term costs. After all, unresolved issues may escalate and adversely impact system stability, security, and overall productivity.

Software development team

Forming a highly skilled team with the right level of expertise is a critical factor in determining the success of a project. This team plays a central role in consistently delivering value across the project’s duration.

Here are factors associated with software development team that contribute to the overall expenses:

In-house vs outsource
A pivotal decision in product development is determining whether to build your team in-house or outsource expertise.

Having an in-house software team is advantageous for industries bound by strict regulations that demand high-level of security. However, usually it requires a longer timeline and a bigger budget, especially when you’re on a tight deadline and need scaling and skilled tech people quickly.

Outsourcing software development, on the other hand, offers scalability, enabling rapid adjustments to your product’s evolving requirements, and is more cost-efficient. One of the main advantages here is that it opens up access to a vast pool of global talents and niche experts, which can be a challenge to find locally. On the other hand, it needs more precise planning and a good understanding of your requirements to find an outsourcing partner that fits you well.

If you can’t decide between in-house or outsourced development, there’s a third option: a mix of both. This hybrid approach combines an in-house team with an extended team to outsource some scope of your development tasks.

The budget for your software project is significantly influenced by the development rates. Notably, North America, Western Europe, and Australia are known for having higher software development service costs. Central and Eastern European countries have emerged as prime destinations for outsourcing software development due to their favorable balance of costs and quality. For more insights on choosing the right IT outsourcing approach, check our article on this topic.

Seniority level
The primary objective is to ensure that the team comprises individuals with qualifications appropriately matched to the tasks. Hiring overqualified professionals can lead to unnecessary costs, while having underqualified team members may result in extended development timelines and, ultimately, increased expenses.

Selecting the appropriate developer expertise level hinges on project requirements, budget, and deadlines. Hiring multiple senior-level and intermediate developers is advisable if speed, reliability, and efficiency are paramount. To save costs and nurture long-term professionals, consider a team of junior developers with one senior and mid-level developers, though this approach requires more time. Below is a comparative table highlighting the primary distinctions among specialists at various proficiency levels:

Tech stack expertise
The more narrowly focused the developer’s skill set is within a particular niche, the higher the associated cost tends to be. Therefore, it’s common for developers with niche expertise to command higher rates due to the market’s need for certain tech expertise. To provide further context, here are the median yearly salaries for developers specializing in the most sought-after programming languages in 2023:

Supplementary team roles for project success

Apart from software developers, a successful software project requires a diverse team comprising various roles. From software architects and developers to quality assurance engineers, these individuals work collaboratively to ensure that the project is well-executed. Eliminating or understaffing any of these roles can lead to critical gaps in the project’s development lifecycle.

Software solution architect
A software solution architect is a vital team member responsible for planning and organizing a software system. Simply given, it is a person who handles technical planning and translates customer’s ideas into technical tasks. This specialist defines system features, components, and interactions, providing software developers with a clear roadmap to building a solution. Also, an experienced software architect ensures that the team will take a well-organized and efficient approach to developing your application, serving as a barrier against pointless expenditures.

BA specialist
Business analysts collaborate with stakeholders to identify functional requirements and major features, delve into project specifics, and clarify project direction and requirements. The advantages of having an analyst on board typically outweigh the costs. Their presence is an investment that pays off, ultimately resulting in cost savings throughout the project’s lifecycle.

IT project manager
The project manager orchestrates a cross-functional team, comprising developers, QA testers, and UI/UX specialists, to collaborate seamlessly across the entire development lifecycle. They oversee daily operations, manage requirements, and ensure administrative tasks run smoothly. While their fees represent a marginal addition to the budget, the assistance they provide guarantees substantial savings in terms of project efficiency and overall success.

UI/UX designer
Effective software design arises from thorough research, precise planning, and open communication in setting expectations and reviewing completed work. An excellent UI/UX design is vital for the success of your app because it defines user satisfaction levels. Although it might appear as a cost-cutting step to forego a UI/UX designer in custom software development, the lasting repercussions could yield a less competitive and less user-friendly product, ultimately leading to increased expenses for maintenance and support.

QA specialists
Bugs can croup out even in the apps built by the most experienced software engineers. The profound expertise of QA specialists can reduce the number of issues and bugs before the app goes live. Moreover, the earlier you involve a tester in the development process, the less time and resource you will spend on fixing the bugs. It’s important to note that identifying a defect during the testing phase costs significantly less than discovering one after the app has been released. This underscores the fundamental importance of QA specialists for software development.

Contracting model

The cooperation model defines how the project is structured, how resources are allocated, and how payments are made, which means that it directly affects the overall project cost. Different cooperation models have distinct cost implications, and businesses should choose the most suitable model based on their project requirements, budget constraints, and risk tolerance. Here are the most popular contracting models:

Dedicated team
Dedicated team stands as one of the most popular and highly adaptable approaches to project collaboration. In this model, the vendor assumes the role of a committed partner, assembling a specialized engineering team exclusively dedicated to the client’s project for an extended period.

When to choose?
The dedicated team model can be highly advantageous for long-term full-time projects with evolving requirements and the need for ongoing development support.

Project-based (fixed price)
This model offers businesses the advantage of cost predictability and certainty, as the project’s total cost is agreed upon and fixed at the outset. However, it is essential to acknowledge that this model may not be suitable for projects susceptible to big modifications or evolving requirements. If a project undergoes significant changes after its initiation, accommodating them within the fixed budget and timeline may be challenging. It may lead to potential trade-offs in quality or scope.

When to choose?
The project-based model perfectly matches short-term projects. However, it fits only the most detailed and well-documented projects with clearly-defined requirements.

Time and material (T&M)
It is a flexible software development approach based on part-time or short-term involvement of a specialist. In this model, you engage a specialist with a specific skill set to handle a defined segment. Given that specialists are not working full time, clients pay for the actual hours developers invest in the project. The main drawback of this approach is, in most cases, the lack of developers’ involvement in your project, which proves to be critical in complex system development or projects with long-term goals.

When to choose?
This model is a viable solution for scenarios where a full-time commitment is unnecessary. For example, if a team decides to implement a feature that requires some specific new technology, such as BLE, there appears a need to hire a subject-matter expert. Hiring a BLE implementation specialist on a time and material basis is an excellent solution.

Let’s Wrap It Up

In conclusion, custom software development costs depend on multiple factors, such as project scope and complexity, software type, deadlines, tech stack, software development team composition, specialists’ seniority, location, etc. To make informed decisions and select the most cost-effective approach to your custom software development project, you should navigate through these factors and recognize their various aspects.

A strategic approach to project planning, focus on its core objectives, deep dive into software development requirements, and a partnership with a reliable custom software development company are vital for you to meet product development deadlines and avoid budget overruns.