How to Estimate Software Development Costs in 5 Steps
January 17, 2025
October 24, 2024
Freshcode
When it comes to the development of a project one of the key concerns is how much it will cost. Clients want to know in advance when the project will be done and how much it will be. There's hardly a fixed unified list that defines a cost for every case. However, we can find out crucial factors influencing software development costs. This article will provide you with a brief guidance on the software estimation process. Additionally, it offers tips and how-tos to help you navigate the pricing aspects of software development.
Collect information about the project: 7 Questions
At Freshcode, we collaborate with clients throughout the entire software development life cycle, from gathering requirements and conducting a discovery phase to deploying the product.
The best starting point for development is a detailed meeting with stakeholders to analyze product goals, the problem it aims to solve, and key requirements.
Save a list of questions to answer for a more accurate calculation of the software development cost:
After conducting a detailed analysis, we provide clients with a cost and time frame estimation document. This approach ensures transparency and predictability throughout the project development process, leading to timely delivery and a faster time-to-market.
We foster team commitment and a proactive mindset to achieve desired outcomes. The charts below illustrate the levels of team involvement across different units.
Determine project complexity
The key findings suggest that the software cost ranges from just $5,000 to $500,000.
The number, type, and complexity of the features in your product impact the final cost. There are plenty of other influencing factors, such as UX and UI, business analysis, marketing, QA, and even the location of the IT vendor.
Every single case is unique and app development costs depend on the complexity of the project. The more features you add to your app, the more complex it becomes, requiring more resources for development, testing, and deployment.
Within the context of technical complexity, applications can be divided into 3 categories:
1. Basic (Simple) Complex Software:
- core feature set without third-party service integration
- simple design with common interface elements
- processing small to medium amounts of data
The development timeframe ≈ 1-3 months.
2. Medium Complex Software:
- core feature set plus additional features such as payments, real-time chatting, and analytics solutions
- responsive design with more complex interface elements and visual effects
- processing of medium to large amounts of data
The development timeframe ≈ 3-6 months.
3. Highly Complex Software:
- advanced feature set (e.g. video processing, synchronization, and different third-party integrations)
- adaptive design with advanced interface elements, complex interactions, and visual effect
- processing of large-scale data with high performance and capability
The development timeframe ≈ 6+ months.
Estimate size of software
The estimated software is the basis of software estimation or any business case that involves software functionality.
Applications can be categorized into different types based on their size. Here is some common classification:
- Small-scale software refers to applications with limited functionality and a relatively small codebase. These are typically simple programs or utilities with few features.
- Medium-scale software encompasses apps that have a moderate level of complexity and functionality. These programs are more comprehensive than small-scale software and may involve multiple modules/components.
- Large-scale software refers to extensive applications that involve multiple interconnected modules, databases, and complex business logic. Large-scale software is typically found in enterprise systems and complex software solutions.
The larger the application, the more resources it requires. As a result, its overall cost will be much higher. Determining the size of software can be done through various methods, including function points, story points, use case points, and more.
Create development team structure
Building a project team involves several key steps, such as defining project requirements, the necessary expertise, and roles. A сommon staffing plan typically involves the following specialists:
Involving the team in project estimation is a crucial step in the software development process. When multiple team members with different expertise participate in the estimation process, it leads to more accurate results. Each individual brings unique insights, experiences, and knowledge, reducing the risk of bias or overlooking critical factors.
To get more info about how to choose the right specialists for your project team, check our blog or contact us to get a consultation.
Choose deployment platform
When it comes to creating your outstanding Uber-like app or a Clubhouse-like application, choosing the right deployment platform is crucial. It sets the foundation for the successful deployment, scalability, and performance of your project.
The cost of software deployment can vary based on the platform you choose. It's important to carefully assess the pricing details and terms of the deployment platforms, the specific requirements if your software project, the expected usage patterns, and scalability.
Here are more key factors that can influence the cost:
- pricing model
- resource usage
- data storage and transfer
- support and service level agreements (SLAs)
- additional services
- geographic location
- contract terms and commitments
Software development cost breakdown - Freshcode template
Feeling overwhelmed about where to start, how to set project time frame, and what developer's hourly rate is reasonable?
By leveraging their knowledge, experience, and estimation techniques, software companies can provide businesses with realistic and informed project estimates. This helps make informed decisions, plan resources, and set appropriate expectations for software project costs.
The example below demonstrates how we estimate software development at Freshcode (based on a real case).
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Hiring option as additional factor that affects the final price
The hiring option can have a significant impact on the final price of software development. The two common hiring options are hiring an in-house team or outsourcing the development to a software company. Here's how each option can affect the final price:
- In-house (insourcing) refers to the software development process within the company instead of seeking a team outside. You are assigning a project to in-house IT specialists that can immediately take care of every unpredictable issue. They are always in touch and you can request them at any time. But let's mark that building an in-house development team is a rather expensive and time-consuming way.
- Outsourcing as opposed to insourcing refers to hiring a third-side part, i.e., an already formed outside team to complete a project task. It's a more cost- and time-efficient way to develop software. You don't need to onboard specialists because outsourced companies offer you already experienced specialists. Some businesses see outsourcing partnerships as the possibility of security risks. But the prevention is simple and foolproof: signing a nondisclosure agreement (NDA) or other additional agreements to ensure your data is safe and protected on the legally binding level.
Final Thoughts
Accurate cost estimation sets realistic expectations for stakeholders, clients, and project teams. It helps in communicating the anticipated financial investment required for the software development project, including development, testing, deployment, and ongoing maintenance costs.
Calculating the most realistic amount of effort, time, and money is crucial for effective project planning, financial management, risk mitigation, and decision-making.
Contact us by filling out the website form or text our COO on LinkedIn to get a professional cost estimate for your project, or any additional services to drive your product development with suitable tech solutions.
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