How Much Does Custom Software Development Cost in 2024?
By Thayer Tate
In this article, we will tackle one of the first questions we get asked by our clients: How much does custom software development cost to build?
It is a tough question to answer for anyone in the industry, even when you’ve been building software for decades. Why? Because there isn’t a universal answer when it comes to custom software development costs. It depends on specifics that can vary greatly from one project to the next.
What we can do is offer a general estimate for the cost of custom software development. Then, we’ll look into seven factors that often have a major influence on the cost of custom software.
Custom Software Development Pricing: The Short Answer
In our experience, most custom software development prices range from $100,000 to $400,000 depending on the size, for designing and developing the application and delivering it ready for use. Generally speaking, small apps tend to run between $100,000-$200,000, while medium-sized apps are around the $200,000-$400,000 mark. It’s only large and enterprise-grade applications that typically cost upwards of $400,000.
It’s a broad range, and probably not that useful if you are ready to put a number in your budget. That’s because there are so many types of software. A custom development project means anything from a calculator on your phone to a full enterprise billing system that supports millions of users. No two custom-built applications are the same.
To get a better idea of where you might fall on the spectrum, you can consider the top six factors that we find have the biggest impact on a project’s cost.
Considering Long-term Scalability and Flexibility
Unlike purchasing a license or paying for a subscription, buying custom-made software is a long-term investment that needs to accommodate your company’s needs for years to come. That’s why it’s crucial that you design for flexibility and scalability from the ground up, to avoid facing issues later on.
Scalability allows you to plan ahead and adjust to growth, as well as low periods, where you may need to conserve or splurge on your IT infrastructure. A flexible system can easily accommodate modifications, updates, and changing integration requirements that static systems cannot, rendering them obsolete much sooner than custom solutions. Being able to trust your software empowers your company to respond to market changes without fear that an influx of new users and visitors may overload your infrastructure.
Building for flexibility and scalability requires strategic planning and foresight during the early development stages. It involves careful consideration of the programming language used, architectural design, and technology stack, ensuring the software can grow and evolve organically and sustainably with your business.
Addressing Challenges and Risks
Investing in custom-made software is generally less risky, as you won’t have to worry about integration and incompatibility issues present in ready-brought software. However, that’s not to say that the development journey, lasting from a few months to a few years depending on the size and complexity of the software, isn’t without its difficulties.
Going over budget and falling behind on scheduled milestones are two of the most prominent issues you might face during development. That’s why it’s important to maintain an open and honest line of communication with your development company and team to best work through any issues that could arise. Regular updates, transparent feedback loops, and proactive engagement from shareholders and employees can help foster a collaborative environment less prone to hurdles.
Working with a company with plenty of experience developing software for other companies, often means that they’ve mastered the art of effective communication. You should be able to trust your development team leaders to deliver the best result and mitigate any difficulties along the way.
What’s the Cost to Build Custom Software? 7 Key Factors
To start understanding your custom software development pricing, consider the seven factors below.
1. Software Size
This one is straightforward. As the number of screens or pages increases, so does the amount of work required in the development process. The total cost of development will increase along with that additional work.
Software Size Classifications
- Small applications: 10-25 screens
- Mid-size applications: 25-40 screens
- Large applications: More than 40 screens
What Constitutes a Screen?
Generally, you would count anything that the user sees when they first come to your application. The total number also includes each unique screen behind every button click, link click, or menu click.
For example, a screen to view client information and a screen to edit client information are two different screens. That’s true, even though they show the same information.
2. Software Complexity
Complicated logic means more time for coding and testing. Will your application perform a lot of heavy analysis, scoring, or number crunching? Does your company’s secret sauce have a lot of nuances and permutations?
As software becomes more intricate, requiring advanced features, sophisticated algorithms, or extensive customization, development and maintenance efforts escalate.
Software complexity often goes hand-in-hand with the quantity of code. While smaller applications consist of a few thousand lines of code, larger software often requires tens of thousands of lines of code to function, with some enterprise-scale software requiring upwards of 100,000 lines of code.
3. Creative Design
Creative design is fun! This is where you get to select your fonts, color palettes, and images as well as have custom illustrations and animations made to give your application some sizzle.
It’s similar to when you decorate a house or buy a new wardrobe. There are nice options, extravagant options, and a range in between. While not directly tied to software performance, creative design allows for a more pleasant user experience, whether it’s for employees or clients.
We typically recommend a budget of about $15,000 – $30,000 to cover design planning and a few iterations of feedback and re-design. If you need more design time or have a lot of custom artwork that needs to be created, then the cost of the project will go up.
4. Integration With Other Systems
Integrating with external software introduces a lot of unknown variables into the equation. You don’t know how well the other system lets information in or out, and what hoops you have to jump through to make these integrations reliable.
Sometimes, the integrations are effortless. In other cases, they are extremely difficult. Typical integrations like payment providers, such as PayPal or Authorize.Net, are extremely easy to perform. The same goes for credit check services from Equifax or Experian.
However, older and lesser-known systems may pose a challenge and increase the project cost.
5. Migration of Existing Data
Do you have data in an existing system that needs to go into your new application? Assuming it is more than you can feasibly type in by hand, then you will need migration. Data migration is nothing more than custom scripts that take data out of your old system, dust it off, and reshape it so it can fit into your new system.
The steps of the process are fairly straightforward. However, there are a lot of questions and decisions that need to be made as the two systems will store the data differently.
Most migration efforts are run a few times after the software is finished to make sure everything is getting translated correctly and the new system is using the data as desired. The effort of figuring out the translation rules, writing the scripts, and performing a series of tests and adjustments, will add time and cost to the project.
6. Who’s Making Your Software
The primary cost of your software solution is the wages of the software engineers, developers, and designers who are creating your software from scratch. That’s why the average cost of custom software can vary greatly depending on the location of the software developers you’ve hired. After all, hourly wages will differ based on the country, and even the city within the country, where the workers are located.
In the United States, hourly rates of software developers tend to be at the upper end of the spectrum. Depending on experience, you can expect anywhere from $80 to $250 per hour per developer. If you’re building on a budget, it may be tempting to look outside of the United States for assistance. For example, hourly wages in Eastern Europe range from $30 to $80 per hour. You can find similarly low hourly rates of $20 to $60 in parts of Asia and Southeast Asia, including India, Vietnam, and China, which are known for their rapidly growing tech and IT sectors. However, the cost savings can come with numerous obstacles, such as different working hours because of varied time zones and miscommunications caused by language barriers or cultural differences.
Despite the varying costs, developers based in the US remain the top pick for most US companies. In addition to the expertise of the developers, the similar time zone makes it easy to communicate and collaborate on projects. Similarly, there’s no cultural or language barrier that employees will be forced to overcome in order to work well with their teammates, allowing for quicker and faster integration and onboarding processes. It’s also much easier to switch workers from a remote model to an in-office model when they’re already based in the US, compared to abroad.
7. Designing to Budget
Similar to building a house, software can be designed to fit a certain budget. You may want a butler’s pantry and a finished basement as part of a new home. However, if those luxuries don’t align with your available funds, then it makes sense to exclude them from the design first.
The same goes for building custom software. A good software development team can take your ideas and create a design with a target budget in mind.
Once the initial design and cost estimate are complete, certain features can be added or removed to hit your target number. It is definitely worthwhile to put a reasonable number to your target budget when you start a project. You can always come back to have new features added when you allocate the budget for them or as the need arises. Categorizing the features you want based on priority can certainly help in building a queue of upcoming features.
But what is reasonable? Well, we all know that you can’t build much of a house for $15,000. Similarly, you can’t build much software for $15,000. If your budget falls somewhere within the $100,000 to $400,000 range, and matches the size figures shared above, with allowances given to the factors that typically increase cost, chances are it can be designed to your budget.
Frequently Asked Questions:
Is custom software expensive?
Building custom software can be a costly investment, with factors such as complexity and design influencing the price tag.
How much does it cost to build software for a small business?
The cost of building software for a small business can vary significantly depending on several factors, including the complexity of the software, the features required, and the development approach. On average, small businesses often opt for smaller software solutions, which generally fall within the price range of $75,000 to $100,000. However, this is a base estimate and can increase if more specialized or complex features are added.
How much does it cost to build custom enterprise software?
The cost of custom enterprise software is influenced by the program’s size. Such projects are typically undertaken for corporations, rapidly growing mid-sized businesses, or well-financed startups.
Given their scale, these software programs need to support a large user base and include numerous pages or screens. These factors collectively increase the cost of enterprise software.
Why is custom software more expensive than licensing an existing software?
Custom software tends to be more expensive than licensing existing software primarily due to the individualized development process it requires. This process involves a team of designers, developers, project managers, and testers, all working to create a solution tailored to specific business needs. The bespoke nature of this development is both labor-intensive and time-consuming, leading to higher overall costs. Additionally, custom software often involves complex, unique requirements that demand advanced technical solutions and extensive testing for quality assurance, further increasing expenses. In contrast, licensed software offers a pre-built solution at a lower upfront cost, as its development expenses are distributed across many clients.
Custom software also incurs additional costs in maintenance, support, and potential user training. Moreover, it may require scalability and updates to accommodate future business growth, adding to the long-term investment. Licensed software, while generally less costly, may not align as precisely with a business’s unique processes and needs as a custom-developed solution would.
The Checklist For Sharing Your Software Vision
There are indeed many benefits to building custom software. Before you begin developing your software app, your thoughts and ideas should be clarified and written down so they can be consistently and easily shared and understood. To help you get started on the right foot, we have created a checklist that helps you answer all of the important questions. Grab a copy of that checklist below and share it with your team!
Thayer Tate
Chief Technology Officer
Thayer is the Chief Technology Officer at SOLTECH, bringing over 20 years of experience in technology and consulting to his role. Throughout his career, Thayer has focused on successfully implementing and delivering projects of all sizes. He began his journey in the technology industry with renowned consulting firms like PricewaterhouseCoopers and IBM, where he gained valuable insights into handling complex challenges faced by large enterprises and developed detailed implementation methodologies.
Thayer’s expertise expanded as he obtained his Project Management Professional (PMP) certification and joined SOLTECH, an Atlanta-based technology firm specializing in custom software development, Technology Consulting and IT staffing. During his tenure at SOLTECH, Thayer honed his skills by managing the design and development of numerous projects, eventually assuming executive responsibility for leading the technical direction of SOLTECH’s software solutions.
As a thought leader and industry expert, Thayer writes articles on technology strategy and planning, software development, project implementation, and technology integration. Thayer’s aim is to empower readers with practical insights and actionable advice based on his extensive experience.
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