Custom Software Development Costs: The 2023 Guide

Many businesses are now considering custom software development as a viable option for meeting their business needs.

Custom software development has many advantages, including modifying and upgrading to fit your business requirements, better security, and fewer bugs. However, custom software development can also be costly.

This guide will walk you through the average custom software development cost by type and size, the factors influencing the rates, calculating these costs, and where to get custom software development.

Average Custome Software Development Cost

How much does it cost to develop custom software? There is no direct answer to this question. However, software development costs in 2022 & 2023 are heavily influenced by many factors, making getting the right pricing a difficult task.

While ballpark can give you a rough idea of ​​average software development costs, estimating projects takes into account clear business requirements within approved schedules, budgets and deadlines. Therefore, it is not possible to make an accurate assessment without prior analysis of the project, business objectives and other external factors.

Depending on the technology involved, the cost can range from $20,000 to $500,000. The previously mentioned program pays around $20,000 and takes around 600-700 hours. On the other hand, if you want a cross-platform application with multiple server-side applications, be prepared to pay a high six-figure price tag. Fortunately, there are exceptions. Companies offer next-generation mobile solutions at prices lower than the market average.

Custom Software Development Cost by Company Size

The average cost of custom software development varies from company to company. Generally, software development projects are divided into startup, medium, large, and enterprise.

Startup: This business unit usually does not have a big budget available and needs to get products to market as soon as possible to get a popular market share. All communication with the customer will be "I want to change/fix" followed by "Here's how we're changing/fixing this". While a custom software solution is important for startups, these companies often cannot afford products that are pricey. This figure is especially important when producing a Minimum Viable Product (MVP).

Small and Medium Enterprises (SMEs): This category includes anything with a single source of data, such as a small mobile application or web interface. The client interaction is not as restricted, and you can expect a few sessions or regular weekly check-ins. Client interaction is not limited and you can expect multiple sessions or regular weekly check-ups. SMEs can afford more expensive software products and wait longer for their development. The average cost of custom software development for SMBs can reach above $100,000 and delivery can take up to 2,000 hours.

Enterprise Software Project: Enterprise-level projects are almost always built on a basic framework. As data security, error handling, and logging increase, data integrity has become important for these applications. Development costs for custom enterprise software can be higher than for startups and SMBs. Additionally, these companies need to pay close attention to compliance, as non-compliance can result in hefty fines. Typically, with enterprises, typical contract rates for custom software development can cost $30 - $50+ per hour, and the total project cost can reach $500,000 or more, with an average delivery time of six months. In such projects, the customer and the software development team collaborate together and their interaction includes daily status reports and calls between teams and departments, as well as weekly status, calls to upper management.

The price tag for average custom software development costs changes correspondingly depending on the company’s size.

Average Custome Software Development Cost By Type

The type of project calculates the cost of custom software development:

- A CMS product costs from $5,000 to $50,000.
- A healthcare app costs from $10,000 to $500,000.
- A SaaS product costs from $50,000 to $200,000.
- A mobile app costs from $10,000 to $200,000.

The average cost of custom software development at this stage varies according to the size of the company and the importance of the project. While these key components will help you understand the average budget estimates for different companies, you need to research specific software development cost estimates to get more accurate estimates.

Key Custome Software Development Cost Factors

The budget estimates a company pursues directly correlate with all the direct and indirect costs associated with custom software product development. These are both internal and external aspects at play. Understanding these factors grants a most accurate estimation of what a custom software development pricing will be. So, without further ado, let’s explore the key factors affecting custom software development costs.

1. Target Platforms

You may want to develop your software based on web technologies, mobile applications (iOS, Android) or desktop (Windows, macOS) operating systems. The choice should be made after analyzing the target audience of the product and knowing which type of platform is currently in common use.

Developing web, mobile and desktop software involves different technologies, requires different resources, and therefore all cost differently. For example, the number of suitable device screen sizes for Android apps is much larger than for any iOS app.

It would not be wrong to say that there are three main options in platform-based software development. Most products work with iOS, Android or multiple platforms. The choice should be made after analyzing the target audience of the product and knowing which type of platform is currently in common use.

Custom software development costs depend on the platform you choose. In short, there is an opportunity to save on development costs when choosing an overlay product. However, such software is used in a limited number of companies. This means that a customer in a financial institution is unlikely to order an overlapping software product.

You may want to develop your software based on web technologies, mobile applications (iOS, Android) or desktop (Windows, macOS) operating systems. The choice should be made after analyzing the target audience of the product and knowing which type of platform is currently in common use.

Developing web, mobile and desktop software involves different technologies, requires different resources, and therefore all cost differently. For example, the number of suitable device screen sizes for Android apps is much larger than for any iOS app.

2. Product Size & Scale

The most important factor that affects custom software development costs is the size and scale of your software product. The bigger your project, the bigger the investment you need. On the other hand, different companies and different purposes directly affect the size of the software product needed.

Startups are usually small and use an MVP development approach to launch their products. Their products are small and originally intended for testing by a small user base. On the other hand, enterprises need a large team to create their software. They have complex processes, internal systems and more. In addition, their systems may also require small and medium-sized software. They may need a website, presentation, web application, page application, or similar software with less demanding requirements.

3. Complexity of Software

Complexity, number of screens, workflow, automation requirements, process deployment, dependent/independent methods, and other factors are all considered. Here, the price of custom software development depends on its complexity. The more features you want to implement through code, the more complex your software becomes.

For example, if you want to create profiles that allow different people to create profiles, upgrade them through payments, customize them, and view other profiles, you must pay accordingly. The database will grow as the compatibility requirements for updates. The same goes for any complex and complex logic. If you want to add more complex logic and results to your s software, this will take more time and thus increase the overall cost.

4. Infrastructure and Connected APIs

Sometimes an app operating in isolation provides a lot of user value. Often, there are applications that rely on high-level background processing, which depends on an external system. What does that mean? This means that many well-known software products like Grab, Airbnb, etc. hide their complex back-end processes behind a nice, easy-to-use interface with which users interact.

If you want to add different payment options or integrate local functionality, this requires additional complexity in the backend processes. While UI/UX design is often thought of as the front end, the back end does all the moving. From product stability to product security, backend infrastructure is the unsung hero of software development. Correspondingly, a more complex backend system increases the custom software development cost.

Fortunately, instead of building a backend from scratch, there are some backend application programming interfaces (APIs). Using APIs is a great way to implement backend functionality with lower custom software development costs.

5. UI/UX Design Complexity

As you know, providing the best user experience is important these days. With the emergence of the end-user experience market, more innovative and sophisticated UI/UX design methods are being developed.

It wouldn't be wrong to say that more complex and innovative UI/UX design increases software development costs. Also, the effect of a good UI/UX is hard to detect. An intuitive and functional user interface is one of the most important factors that influence software user retention.

In short, UI/UX design includes all graphical elements such as fonts and buttons, as well as all functionality with user interfaces. Therefore, a better UI/UX means a more intuitive user interface and a more enjoyable experience for people using your product. In such a case, custom software development cost directly depends on the UI/UX you choose to develop. Although it may require additional hours of work, the investment can pay off and attract a large number of users. As you can imagine, the design affects the cost of your application.

6. Geographical Location

Software development costs also depend on the location of the development company. If you choose software development outsourcing, you can opt for overseas teams to significantly reduce custom software development costs. Hourly rates vary by geography and business value proposition and range from $20 to above $50 per hour. More important than the hourly rate is what you get for that rate. Large contractors will give you a software development team without "senior supervision", leaving you with full responsibility for leading the team. This is sometimes called resource allocation commitment. Other companies like TPP Software provide senior management who act as account managers who oversee all aspects of the development program and ultimately serve as an extension of the executive team to share responsibility for the success of your software application.

In today's global world, companies are looking for more affordable software solutions from all over the world. Similarly, although the quality of products varies, software development costs also vary in different regions. Therefore, it shows the possibility of exiting with different price categories.

Given the above considerations, the custom software development cost will vary depending on the geographic location of your development team. In short, it pays the most for US-based developers and the least for African developers. In this case, the middle ground is a place in Eastern Europe where we can find quality products at a reasonable price.

7. Integrations

Another cost factor is the number of integrations allowed and required by the software product. Instead of building a new feature from scratch and incurring additional development costs, companies can also use third-party integrations. However, it needs the expertise of the development team to properly integrate the features into your software and more so if the integration of parties is quite complicated. In large and complex solutions, integration with the existing enterprise legacy systems takes place. Integrating with APIs and third-party apps is a cheaper option than developing everything from scratch. However, with the integration factor, you cannot avoid changes in custom software development costs.

8. Hiring Model

The cost factor is associated with the hiring model you choose. We have removed the outdoor surface. Now is the time to look at the different options and different price points of custom software development. When looking for developers, you can refer to the following recruitment models:

- In-house team extension: This model requires hiring software engineers to work in your office. This means that the best cooperation has the highest price.
- Outsourcing:  This model involves outsourcing the project or part of it to a software development company that does the work for you. This means less control over product development, but less control over property selection.
- Freelance: This model includes hiring developers through platforms like Upwork, TopTal, and Fiverr. This is an inexpensive option but comes with questionable service quality.

Choosing between different recruitment models changes the custom software development cost. That's why you need to choose wisely.

9. Development Team Composition

A typical web software development team consists of a business/requirements analyst, a front-end developer, a back-end developer, a UI/UX designer, a QA/control engineer and of a project manager. Some of these resources are dedicated to your project and some work on multiple projects (i.e. work part-time on your project). In practice, you hire software developers from different expertise to create software. There are three categories of improvement in this regard:

- Junior: Although the younger categories do not correspond to developmental age, they correspond to the person's years of experience. It varies from 0 to 1 year of experience for junior developers. These professionals can perform simple tasks under the mentoring of mid and senior-level developers.
- Middle: These professionals have between 1 and 3 years of experience. They know how to manage complex tasks and work on projects independently
- Senior: Senior developers have more than five years of experience under their belt. They can take any technical summary and show project aspects that are causing unexpected costs.

As a result, the composition of the group shows evolutions with many different experiences and different hourly wages to pay.

Custom Software Development Cost Estimate From TPP Software

At TPP Software, we know how to reduce software development costs. By helping companies since 2015, we have succeeded in bringing a unique approach to software development. Proven to deliver twice the speed to market and save 60% on traditional software development costs. How can we do this? Here is the answer:

- We use an advanced delivery model and create a unique team for our product.
- We select qualified and experienced software engineers and experts who can achieve the desired results.
- Throughout the entire product journey, our team is responsible for the delivery and results throughout the entire product journey.

TPP Software delivers long-term organization coupled with 100% dedication to your project for a reasonable price. As a result, you will have no headaches and hiccups associated with logistics and operations. In addition, TPP Software development team has worked in almost every domain. The company has more than 17 years of experience that translates into unique ways of helping customers meet their business needs.

Wrap up

When asked how much custom software development costs, there is no single answer. Custom software development costs, project complexity, platforms used, creative design, system integration, team, location, etc.

The key question is whether you have enough time to do the heavy lifting yourself, or do you prefer to let the professionals do what they do best – deliver quality products that fit your budget.