Understanding how much software development costs can be a confusing thing. Budgeting and pricing software projects can depend on understanding the cost of software development. There are a number of factors to consider and understand when pricing a software project.
Managing expectations is the key to understanding software development pricing. If you go into a project with a vague idea of what you are looking for, you will probably spend a lot of time and money without any concrete result.
To understand the cost of a software project, you need to understand the problem you are trying to solve. If you are not clear exactly the problem, then what you will need is a science to develop the solution. When algorithms, formulas, workflows, and other core architectural issues unknown at the time development starts, this can add a big price to your project. Projects like these are good candidates for fixed price work. Therefore, before you start writing code it is important to have a clear idea of what you are trying to do or at least understand the requirement for science as well as engineering.
An unfortunate reality in software development is also the “ask a barber if you need a haircut” phenomenon. Every developer has their favorite tools, databases, and techniques that they like to use. When you ask a developer for advice on what tools to use, they often respond with their favorite tools, which are not necessarily the correct ones for your project. When you are aware of the different technologies available, and make the choice yourself what to use rather than letting the developer decide, you have a much higher probability of a good outcome.
At the end of the day, knowledge is power, and the more information and understanding you have about your project, the better it will turn out, and the closer to budget it will come in.
Types of Project and Costs
There are different types of software development work agreements, which are usually appropriate for different situations.
Fixed-price contracts typically have an agreed-upon price and milestones. These are beneficial because the developer absorbs the risk of time delays and the unknown regarding development time. If there ends up being more work than expected, or the developer isn’t certain how long it will take to do something, this is a good choice.
Prices for fixed-price software development work can range from a few dollars on sites like Upwork, to millions of dollars. Generally, the more money that becomes involved, the stricter the contract, and more concrete the deadlines. It is often possible to get very good value for your money with fixed-price contracts.
The disadvantage of fixed-price software development is notable. Fixed-price projects are also the most complicated way to hire. It can be difficult to regulate the hours worked on a project. If a developer is motivated and everything goes well, it can turn out nicely, however, it is also possible that the developer has other better-paying or hourly work, and the fixed price job is used as backfill. Because you are not getting a timesheet or invoice, it is very difficult to make any demands or control the number of hours worked. Another thing to keep in mind is that a fixed price job gone wrong can put a developer in financial trouble. If the amount of work is vastly more than expected, while you think you are getting a good deal, the developer is actually becoming financially unstable and could either face bankruptcy or just disappear. This can leave you with a half-finished project and no developer. So while initially driving a hard bargain for a fixed price job with a developer seems like good business, it can backfire.
You can certainly get a good, predictable price with fixed price jobs but be sure it isn’t too low a price and that the expectations are well defined, or else you might end up having trouble with the project.
Hourly contracts are the most common type of contract work used for software development. Hiring someone hourly sets upfront expectations about not only the price of the work but the number of hours they can commit to the project.
It is also easy to get an estimate of how much per hour a specific software development task will cost on a site like Upwork. You can post your job and get estimates from multiple developers without committing to hiring someone.
In general, as with so many other things, you get what you pay for. Lowball offers from offshore developers may seem tempting, but offshore developers who can command higher rates are charging higher rates.
By choosing to pay hourly, it is easy to understand how many hours are being worked on your project and make demands regarding the pace of the work. If you have a concrete deadline and you need to be sure the work is done by a certain date, an hourly contract will help make sure that indeed the hours needed to finish the project are being worked.
Disadvantages of hourly contracts are usually felt when things take longer than expected. If the project ends up taking a lot longer than anticipated, or there are scope changes this can be very expensive.
If you believe your project will require full-time work from one or several developers, hiring someone can be a good solution. The cost of this solution is easy to understand because you will have the salary and other benefits negotiated in advance of employment.
Obviously, a hire of one or more people will only be possible to the more well funded, however, if you anticipate a long term project requiring 40 or more hours of work per week, then a full-time employee can make a lot of sense. You could certainly pay a contractor or an agency for a full-time commitment, however, having someone on your payroll has a number of advantages in terms of being able to control the project.
Doing it yourself. While this solution may not be for everyone, for some software development, doing it yourself might be the way to go. If you develop your own software, the only cost is time and development overhead.
As more and more people learn to code, it is common that small projects can be done by the individual. Before you hire someone to do software development for you, it might be worth considering if this is a task you can manage yourself with a bit of learning.
Other Software Development Costs Besides Labor
There can be other costs besides labor in software development, usually related to servers and hosting, but also can include domain registration, email, cloud computing fees, and office space. It is common for developers to do work on their own workstation and deliver the code via a service such as Github. Sometimes, however, there is the more complicated infrastructure required for the development process. If you anticipate a need for a development environment for your project, it should be agreed with the developer in advance who will pay.
A typical development server should not cost more than $20 a month, and anything over $100 should start to set off alarm bells. Software that is in development does not need the same level of infrastructure as a production system, so most cases should not require expensive development environments.
Things that can create problems for a software project and make it come in late, over budget, or both are not all necessarily unique to the software industry, but there are a few things that can create problems.
One common issue is the lack of documentation. When software is poorly documented or commented on, it is difficult for others to understand. This creates a time burden for anyone who comes later and needs to understand or work on the code. Poorly commented code becomes more expensive over time.
Another common issue is unmaintainable code. Code that is not easily upgradeable and maintainable will inevitably cost more money in the long run as the amount of labor required to keep up with the progress of the industry is very expensive.
Inefficient code can also, in the long run, become more expensive due to the costs of operating the infrastructure it runs on. Certainly, efficient code costs less in the long run, although there is a break-even between hardware costs and labor.
Good code that is maintainable, efficient, and well documented will always be cheaper in the long run.
When it comes to the cost of software development there are no simple answers. There are many factors to consider, and the more information you have, the more likely you are to have a good outcome.