Software Development Cost Estimation Guide

Find out how to estimate your budget in our article:
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Creating an estimate for the budget of your software project can be difficult if you don't know the factors involved. In this article, you'll learn about the key cost factors influencing software development costs and the key steps to do it right.
How to Estimate Software Development Cost?
The cost of developing software differs from project to project. Based on the complexity of your project, features you need, types of technologies, and type of programming languages to be used, software development costs can range from a few thousand dollars to multiple millions. Use the following steps to help estimate, or price, your startup’s project and hopefully avoid loss of money on software developer cost and save time.
Software Development Cost Factors.
Software development project cost estimation includes planning, which is analyzing the features, requirements, and budget for the development. Although this might sound very easy, it is highly critical because every small detail of a project has to be reviewed. Let’s take a look at the key components of software development cost factors and how they influence the price.
Type of Software Project.
The type of software project you’re working on can have an impact on development costs. A web-based software application, for example, may require more labor hours to develop than a mobile application that runs on a smartphone. Likewise, a data warehouse application that processes large amounts of data will take longer than one that just displays data to a screen.
Scope of Software Project.
MVP for a payment application startup or a bank application with a number of geographical branches. Simple landing page or multi-currency marketplace, simple CRM or 360 degrees marketing automation with AI and ML functions. Surely, the project scope will influence greatly on software development cost analysis and the budget deviation.
Developers’ Location.
Location can make a big difference in software development costs, especially when you consider the cost of living, business expenses, taxes, etc. Hence, it’s cheaper to hire remote developers from offshore locations like Central Europe and India than in the United States or Germany.
Developers Level.
This is difficult to estimate, but one thing is certain - the more skilled the developers, the higher the development cost. Usually, startups are trying to find some effective mix of developers that will guide the project, keep deadlines and budget and guarantee quality. Another tip we practice at ProCoders is some kind of level up with a rates’ downgrade. It means you will have a middle developer with 2 years of experience for a lower rate. As an additional value, our software development cost analysis can help you with a project estimation and share some more tips on how to save development budget.
Tech stack.
This concerns the frameworks you are working with, the programming languages you use, the development environment and whether the app is open source or not. The tech stack determines how long it will take to develop the program and whether you might need to expand the development team later.
Software development Hidden Costs.
Loss time.
This refers to the cost of a product that doesn’t actually ship. It can be caused by a delay in delivery, which is expensive and time-consuming for you and your team to fix. It can also be caused by features that aren’t right for your customers or market. It also concerns time costs as a result of poor communication, poor expertise, or working in different time zones.
Communication costs.
Communication costs are a factor in all software work, particularly in this age where remote work is the norm rather than the exception. There’s a tendency for mistakes to happen, which leads to unnecessary miscommunication and lost time from employees who should have been working instead.
Maintenance.
All projects have some sort of ongoing support or maintenance cost. They often show up in bug-fix patches or in enhancements added after the initial release. A better way of looking at maintenance costs is by considering them upfront - before any retrofit or upgrade is even necessary - and adjusting your project budget accordingly.
Conclusion.
Developing estimates for your software development projects can be challenging. However, what you need to do is to settle the basics from the outset, such as having a strong discovery phase. Then you take various factors into consideration such as the developers level, the tech stack, quality assurance requirements, etc. Likewise, do not forget to set an extra budget to cover for hidden costs.
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