Understanding how much it will cost to develop a new software can be a confusing thing. Budgeting and pricing software projects depends on understanding the cost of software development, and there are several factors to consider when pricing a project.
Managing expectations and communicating clearly is vital when it comes to pricing a project and predicting just where your money will go as your software is developed. 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 concrete results.
To accurately estimate the cost of a project, you have to fully understand the problem you are trying to solve and have a clear vision of how the software will help find the solution. Having a grasp on formulas, workflows, and other core architectural issues at the start of a project will help you project costs, find places for saving money and avoid going over budget.
Discuss pricing with your developer, prioritize a list of must-have and could-live-without features, and work with your team to understand where your money is going and what road bumps could lead to spending more as the project progresses.
An unfortunate reality in software development is the “ask a barber if you need a haircut” phenomenon. Every developer has their favorite tools, databases, and they like to use them. When you ask a developer for advice on what tools to use, they often respond with their favorite, which may not necessarily be the correct or most cost-effective ones for your project.
When you are aware of the different technologies available and choose for yourself which technology to use, you have a much higher probability of a swift and budget-friendly outcome. If it helps, ask your developer to recommend multiple tools for your project and research which will meet your needs at a low cost and which are worth splurging on for the long-term success of your development.
Knowledge is power, and the more information and understanding you have about your project, the better it will turn out and the closer to on-budget it will be.
Types of Project and Costs
When working with a software development company, you may encounter different types of work agreements, each of which is appropriate for different situations.
Fixed-price contracts typically have an agreed-upon price and pre-determined milestones. These are beneficial because the developer absorbs the risk of time delays and unknown issues regarding how long your development will take. Fixed-price contracts may be a good choice if the developer isn’t sure how long it will take to complete the work.
The cost of fixed-price software development work can range from a few dollars on sites like Upwork to millions of dollars from a big-name software development company. Generally, the more money involved, the stricter the contract and the more concrete the deadlines. However, it is often possible to get excellent value for your money with fixed-price contracts.
Fixed-price projects are also the most complicated way to hire. It can be challenging to regulate the hours worked on a project. If a developer is motivated and everything goes well, it can turn out nicely. But it is also possible that the developer has other, better-paying or hourly work that they will prioritize. Because you are not getting a timesheet or invoice, it is tough 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, you may think you are getting a good deal. However, the developer is becoming financially unstable and could either face bankruptcy or disappear. This situation 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.
Hourly contracts are the most common type of contract work used for software development. Hiring a company on an hourly basis sets upfront expectations about the price of the work and the number of hours they can commit to the project.
It is also easy to estimate how much per hour a specific software development task will cost. You can get quotes 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 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. For example, if you have a concrete deadline and need to be sure the work is done by a specific date, an hourly contract will help ensure that the software development company commits to the hours required to finish the project.
Disadvantages of hourly contracts are usually felt when things take longer than expected. For example, if the project ends up taking a lot longer than anticipated, or there are scope changes, the project can get more expensive than initially budgeted.
If you believe your project will require full-time work from one or several developers, hiring someone could be the best solution. With a new hire, you negotiate salary and other benefits up front, and both parties are obligated to stick to that agreement.
Hiring one or more people will only be possible for the more well-funded employers, but a long-term project that requires 40 or more hours of work per week will often be best suited to full-time employees. You could certainly pay a contractor or an agency for a full-time commitment, but having someone on your payroll has many advantages in terms of controlling the project.
Doing it yourself. While this solution may not be for everyone, doing it yourself is the way to go for some development projects. If you develop your own software, the only cost is time and development overhead.
As more and more people learn to code, small projects are being done in-house more often. So 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.
There can be other costs besides labor to consider when it comes to software development, usually related to servers, hosting, domain registration, email, cloud computing fees, and office space. It is common for developers to work on their workstations and deliver the code via a service such as Github.
Sometimes, however, there is a more complicated infrastructure required for the development process. If you anticipate a need for a physical development environment for your project, make it clear with the developer in advance who will pay for it.
A typical development server should not cost more than $20 per month, and anything over $100 per month should start to set off alarm bells. Software in development does not need the same level of infrastructure as a production system, so most cases should not require expensive development environments.
Problems that can delay a software project or push it over budget are not necessarily unique to the software industry, but a few things commonly create issues during software development.
One common issue is the lack of documentation. When software is poorly documented or commented on, it is difficult for others to understand. A lack of documentation 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. If developers take too many shortcuts, the code becomes increasingly challenging to maintain and upgrade. This issue is called “technical debt” and will inevitably cost more money and more labor to keep your code functional with newer technologies.
In the long run, inefficient code can also 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.