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    Added on 26 May 2022

    How can Enterprises Estimate the Cost of Software Development?

    26 May 2022

    Whenever any enterprise envisages initiating any major software development or up-gradation program, there is that one question that pops up for sure – “what is the cost of software development?”

    The cost of software development projects varies a lot depending on various factors. The estimation of average cost of software development is difficult even for seasoned business players. Regardless of the hustle, the question is, what would be the cost of a software development company?

    The cost ultimately comes down to the work hour required and the technology stack involved in building the software. As per Uptech, the ballpark range of software development costs is between $50,000 to $250,000.

    Since no project is the same, the cost estimation is tedious. The article takes a serious attempt at answering the question – “how much does it cost to develop a customized application software?” We will discuss three main criteria that seem to have the most impact on the project cost and timeline.

    Factors that Affect the Costing of Software Development

    1. Type of Software Project- Custom application development company broadly break down their offering into three categories-

    • New Software Development: Software development in any language such as agile software development python, Java, Ruby, etc. including custom software development

    • Software Modification: Depending upon the current scope and scalability of the software application, organizations can choose to enhance existing business software

    • Software Integration: This includes adding custom code to add the capability for integrating existing software into other processes. It involves plugins and packages and manipulating data flowing between an inventory system and an accounting system

    • Web Development: This includes software development services such as the creation and maintenance of websites, provided by web development enterprises.

    All of such projects have a different end goal and procedure. The team makeup and the amount of time required for each are thus different. Understanding your requirement should be the first step toward estimating the software development cost and step by step breakdown.

    2. Size of the Project- The size of the project is related to the features and functionalities expected out of the software. The more complex project requires more time and hence more money. As per, DDIY, on average, a custom software development project is expected to take about 4.5 months. Less than 10% of developers can deliver a basic product in less than 2 months.

    • Small-size Development: The category involves those projects which require a few minor changes. It mostly includes changes such as bug fixing and making tweaks to the user interface that come into small software development

    • Medium-size Development: Such software development projects are more extensive than a small tweak and have pre-defined deliverables. These are mostly standalone solutions or integrations to existing software. It may include projects like a small mobile application or an addition of a web interface to an existing inventory system. The requirement to interact with stakeholders is more extensive as compared to small scale software’s

    • Large Sized Development: These solutions are more complex and have a greater depth. Large size software development company catering to the broad database, integrating multiple systems, and addressing logging and security features. Any multi-party application development involving numerous platforms such as Android, iOS, web, etc. would also fall in the large software development category

    • Enterprise Sized Development: By nature, Enterprise Sized software has the greatest complexity owing to the structure of the underlying frameworks. Such software has higher security compulsions, error handling, and rigorous logging since enterprises have enormous dependence on them for business operations. Data security and integrity are of paramount importance to such business-critical software.

    3. Development Team Size- Once the project type and size are well understood, the last step towards the assessment of the cost would be to analyse the size of the development team. A development team would require at least three roles – a developer, a project manager, and a QA tester. However, the requirements should be well aligned with your project.

    Here are a few roles that you may need to fill in according to the size and type of the project –

    • Project manager
    • Business analyst
    • UI/UX designer
    • Architect
    • QA tester
    • Developer

    The Final Verdict – Cost of the Project

    Project Resource Cost x Project time = Project cost. But the maths is not this simple and straightforward.

    Some resources may be deployed over more than one role on a project. While most resources do not work full-time on a project. For instance, once the design role of a project is over, a design expert will not be needed full-time. He may be called in later for some tweaks and updates.

    Below are some essential tips for making estimates that can be implemented.

    • Breakdown the Work: Start your cost assessment process by breaking down bigger tasks into smaller ones. This is the most realistic way to get a clear picture of your requirements. The analysis of each small step will help you to realise additional software development-related questions

    • Ask Question Rather than Assuming: The task description helps in estimating software development time and cost. Communicating with the development teams and asking them the right questions helps to gain a wider perspective on why the software development cost is justified in the process

    • Trust your Development Team: Making accurate estimates is a near-impossible task. Make sure that the business team and the development team are on the same page and that they both nourish and enjoy mutual trust. The business team must believe that the enterprise software development company wants the best for the organization and therefore the estimated cost is justified

    • Remind Yourself of the Things Usually Ignored- There are many sub-factors that may be ignored unconsciously. The actual cost assessment should include all such factors, for instance, initial set-up, bug fixing, testing, revision and deployment.


    There are many factors and steps involved in reaching a cost estimate for software development. Every project has its own nature and therefore there can not be any standard cost template that can give an accurate estimate of the development cost.

    The cost of software development by country is also a factor that affects the cost. For instance, as per DAXX by Grid Dynamics development cost in India is around $19–$40 per hour as compared to $35 to $70 in Latin America.

    Defining the project type and size, team size and resource costing coupled with the consideration of sub-factors can get you to the basics understanding of the project cost.

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