Blog Post

What Determines The Overall Cost Of Custom Software Development?


Raspal Chima -

There are many variables that determine the overall cost of custom software development. Amongst them is the stage your business idea is in, what you intend to achieve with the custom software and what business outcomes you’re looking for.

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Firstly, let’s start with the development you have in mind. Are you looking for a new mobile application? An upgrade to an existing business system? An expansion into eCommerce, or integration of your existing systems? Whatever the development, the cost depends on your specification, your budget and what outcome you are looking for.

The quality of the specification can also impact costs. For example, scope creep due to new or modified requirements after development has begun risks budget / cost overruns. And the longer a project is planned for, the higher these risks become. Therefore, it’s important to know what result you want before finalising your budget and to go through a business justification process to find out what the ROI of the project is going to be.

A good development partner can help immensely with filling in any gaps in your specification to deliver your end goals.

In the case of mobile development, typical questions you might be asked to clarify in your spec include:

  • How are you going to handle your software users?
  • Are they going to simply login via username/password?
  • Where is this data coming from?
  • Are they going to have to create a username password again?
  • Do you expect multi-factor authentication?
  • Do you want the application to remember user’s devices?
  • Is there any social component to user login/authentication?
  • What platforms would your application run on?
  • Are you looking for a hybrid or native mobile app?
  • Will the system be located on your premises, on the cloud, or both?
  • Are you expecting data to be shown in the app?
  • How many screens is this app going to have?
  • What kind of data are you going to store?
  • What data are your members going to store using the app?
  • Are there going to be any media files, or is this just going to be structured data coming from a single data source?
  • Is the data coming from multiple data sources that the app must connect to? Would any part of member data come from 3rd party APIs?
  • Would member data updates need to be shared with one system or would it need to sync with multiple backend systems? Does this have to be in
  • What level of security are you going to need?
  • Does the app have to connect with any outside devices, such as Bluetooth?
  • Do you know how many people would login to the app or would be using the app at the same time? This will have server implications.

And so on. The answers to these sorts of questions will ultimately affect the price of developing your custom software.

Another cost factor in software developed by an external software development company is the integrity of the agency itself and whether the company is on shore, near shore, or offshore. Offshore firms in less developed countries tend to be cheaper. However, a company that’s geographically in the same neighbourhood is more likely to understand your vision due to better communication and a natural subtext of understanding without the need for detailed explanations. One that’s entirely located overseas may be technically proficient but suffer in the exchange of communication, or risk limited legal redress if things go wrong, so curtailing its suitability for critical developments (in other words, trust, integrity and security considerations don’t always align with the cheapest route!).

Hourly rates

Hourly rates for software development can range from £10 – £250/hr. At one end, there are freelancers that can work cheaply, depending on your budget and risk tolerance levels (projects can get stuck midway if you’re relying on one person). However, even if an individual contractor specialises in your niche area, it would take them longer to complete the project than it would take a team.

Then you have small, focused software development firms that have been in business for a few years and where every client represents a significant piece of revenue, and they will take the time to do proper quality control and produce robust code. Their ability to execute larger development projects really depends on the experience of their developers and the size of the company.

Next you have mid-tier software development companies that have been in business for decades, serve medium to large enterprises and most of their client-base are medium-sized businesses. They usually only take on projects with a sizeable budget but offer robust processes, methodologies and a wider array of skill sets to better guarantee project success.

Finally, there are large enterprise software development companies that serve the largest enterprises with a development budget of more than £500K. Although they have robust project management skills and methodologies in place, there is another kind of risk to consider – is your project big enough to matter?

Fixed price vs hourly cost

Next is the rate you pay for the man-hours spent by the team working on the project. Some companies bill hourly, but that can be problematic. Questions arise such as how much time should a particular task take? And if it took longer, why did it take longer? Does this mean you need to monitor every hour’s work? And so on.

A fixed price makes things simpler and shifts the risks entirely to the development team. With a fixed price estimate, it’s up to the development team to go through excruciating detail of every aspect of the project before being able to produce a fair fixed price estimate. And provided there’s no scope creep, this leads to finalising all aspects of the product being developed, up front.

Monthly flat rate

Another option is a monthly fee. Spreading the cost of the project across a monthly basis is almost the same way as having full time employees on the team, with the flexibility to add additional time should difficulties or scope creep be encountered.

The costs are higher than having full time employees, but there are no overheads associated with having full time staff either.

In practice, elements of each of these payment types can be blended to fence costs and manage development time efficiently. For example, the start of the project – when prototyping the system and agreeing the detailed requirements – could be either a fixed cost or an agreed percentage of the final quoted cost. Once the project development plan has been agreed and milestones assigned, the bulk of the remaining cost could be spread across the project as a monthly flat rate, with a final payment or remaining portion at the end, after delivery.

So, there you have it. These are the things that determine the overall cost of creating bespoke software.

Where does Blueberry fit in?

Blueberry Consultants was formed over twenty years ago by the current CEO, Martin Green, and has over 50 full-time software developers and 120 staff members. The company sits comfortably between a small, focused software development house and a mid-tier software development company. This makes us just the right size – not too big, not too small. We have enough people to handle the big projects – but we’re not so big that any customer projects become unimportant.

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