An illustration of a computer monitor and coins, representing software development costs.
How to Estimate and Reduce Software Development Costs
An illustration of a computer monitor and coins, representing software development costs.

How to Estimate and Reduce Software Development Costs

When scoping out a software development project, one of the most important factors any manager considers is cost. With so many variables — from individual engineer salaries to varying types of projects — figuring out how to estimate and reduce software development costs can be a major challenge. However, with most sources citing the cost of software development to be between $50,000 to $250,000+, it’s something you want to figure out before starting any project. 

While there’s no one-size-fits-all method for 100% accurately estimating the cost of a software project, there are some tried-and-true strategies that can help forecast any associated costs as precisely as possible. Let’s break down the costs involved in a software development project, the factors that can affect these costs, and proven tactics for cutting down on expenses. 

What are software development costs?

The phrase “software development costs” refers to any expenses associated with the process of building, maintaining, or improving software systems, platforms, or applications. 

These costs include labor (ie. what your software engineer, UX designers, quality assurance specialists, project managers, etc. charge), tools and software, infrastructure and hosting (ie. web hosting or any cloud services), legal fees if applicable, licenses and intellectual property, documentation and training, and anything else that needs to be paid for to complete a software development project. 

It’s important to remember that software development costs can vary widely depending on the nature and complexity of your project, along with several other factors. Let’s take a look at what that can include. 

Factors that affect software development costs

With software development projects ranging from something like a simple new app feature to building a full-blown operating system, countless variables go into the cost of any project.

Project scope

To make as accurate an estimate as possible, you need to understand the project’s key objectives, main features, and core deliverables. By defining the project’s scope, you can better forecast how much the other elements will cost. 

For example, adding a simple calculator feature to an existing app would have a much smaller scope than building a high-quality multiplayer game that requires intricate graphics, complicated game mechanics, and extensive server infrastructure. 

The size and complexity of the project

Related to the scope, a large and more complex project will cost more than a small and simple one. If you’re making a minor bug fix on an existing app or platform, the time commitment and level of expertise needed would be minimal — and so would your costs. 

In comparison, building a complicated, involved app or platform that involves significant user interaction, external systems, or sophisticated and high-level security features will require a major time commitment from more expensive, senior-level developers, along with additional labor costs like full-time project managers and other support staff.  Other factors, like having a project spread across multi-domain SSLs can increase costs as well.

The timeline

Timing is key when it comes to predicting a software development project’s cost. While a longer timeline and time commitment will cost more, it will also allow for more quality assurance testing and developers who can focus without added pressure — factors that usually result in a better product in the end and less maintenance costs in the long run. This is something you’ll have to balance and analyze to figure out where you want to focus. 

The development team and labor

While the number of software engineers involved in your project will have an impact on your estimated costs, the seniority level and location of your development team can also influence pricing. For example, the average hourly rates of developers in the USA or Canada are higher than those in Eastern Europe or Asia. 

Marketing and promotions

While not every project requires marketing support, this is something that can impact how much is spent overall if needed. For example, you might want to employ a PR firm to create buzz around your new app — something that can cost between $2,500 to $20,000 per month

Number of platforms

Are you building an app just for iPhone and iOS users? Or, will your app be available for Android and the web, too? The more platforms you’re building software for, the more your overall project will cost. 

The technology stack

The more complex the backend processes are, the more skilled your developers will need to be — and the more expensive their labor will be. You might also need to hire more costly specialists if the software needs to interact with external systems or frameworks, as this process can be complicated and time-consuming. 

Many factors influence how much a software development project should cost. When creating your estimated project budget, you’ll need to carefully consider each of these elements so that your project can stay within your timeline, scope, and budget. 

Tactics for reducing software development costs

Once you’ve evaluated all of the different factors required for your specific software development project, you’ll probably want to figure out if there are any ways to cut down on some of these expenses without sacrificing the quality or your end product. Here are a few ways you can reduce the cost of a software development project: 

Open-source technologies and third-party tools

When software engineers on the development team can use pre-existing code, libraries, components, or technologies instead of building completely from the ground up, you can save substantial costs. As open-source software is typically free to use, you’ll also save on some licensing fees. Plus, cloud-based services offer cheaper hosting options so you won’t have to invest as much (or at all) in any in-house servers or hosting solutions. While you’ll still want to hire developers with intermediate to senior coding skills, open-source technologies, and third-party tools help give them a jumpstart so your project can be completed sooner.

Clear and organized project scope

As labor will be one of (if not the) most significant portion of your total estimated cost, the project scope must be clearly defined and well-organized. This helps avoid scope creep (which can add significant costs to your initial project estimate), reduces the amount of potential pivots and rework that can happen when things aren’t clearly defined or understood, and helps project managers allocate resources accurately to maximize ROI. 

No or low-code development platforms

Research by Forrester found developers can create software up to 10 times faster using no-code/low-code software — software that uses visual techniques like drag-and-drop tools and reusable components instead of lines of programming. Plus, since no and low-code options allow less experienced developers (or even those with very limited or no coding experience) to quickly ship products, you’re able to save costs that would be associated with hiring senior developers. 

Test automation 

The manual QA process can be time-consuming — something that adds to your overall software development budget. With test automation, your team can use automated testing tools to make sure your product is functional and reliable in a fraction of the time it would take to go through that process manually. While you might not want to solely use automated testing, it can help cut down on costs where possible. 

Planning for maintenance 

While getting your product out the door is probably your main concern, it’s important to factor maintenance into your overall estimate. From fixing bugs to updating security features, staying on top of your software’s performance and making sure it’s operating optimally can help save on overall costs. For example, by keeping track of resources your product uses — such as APIs, server capacity, or licenses — you can identify any that are no longer necessary and remove them so you aren’t paying for resources you don’t need.

Integration platforms with a two-way sync

One of the common problems with software development projects is keeping developers and stakeholders on the same page. The tools developers use in their day-to-day work aren’t necessarily well-suited to project management or regular reporting, meaning stakeholders can be siloed in their own dedicated tools.

That’s where a two-way integration solution like Unito comes in. Unito has some of the deepest integrations on the market for tools developers and project managers use daily, like Jira, GitHub, GitLab, Asana, Trello, and more.

With Unito, developers can focus on their work, knowing that any updates generated by their work will be automatically synced to the tools stakeholders use to manage projects. And then, if stakeholders have any comments or questions, they can just add them to their tool and Unito will automatically sync them to your development tools.

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With a wide range of variables at play, estimating software development costs can be a challenge. Factors such as project complexity, scope, labor, existing tech infrastructure, timeline, and tools can all make a major difference when it comes to the final cost of any software project. However, with the tactics described above, you can not only better estimate the costs associated with software development — but significantly reduce them.