As companies globally navigate digital transformation, custom software development has become an integral part of business strategies. In 2028, the market size for custom software development will reach an impressive $85.9 billion, rising at a CAGR of 20.3%.
Meanwhile, this article is a comprehensive guide detailing the custom software development cost in 2023. It elaborates on the costs by type, including CMS, CRM, and ERP, discusses various cost factors, and uncovers hidden expenses that businesses often overlook.
It also provides a unique perspective on software development costs at Appstrax, substantiated by client testimonials. It will also answer frequently asked questions, which cover the most common queries regarding custom software development pricing.
What is Custom Software Development?
Custom software development involves designing, deploying, and maintaining software tailored to specific user needs or organizational functions. Unlike commercial off-the-shelf software (COTS), which may target a broad set of mass marketing and distribution requirements, custom software targets niche requirements. Examples include a specialized maintenance program for a manufacturer or a bespoke online banking app crafted for a bank’s unique needs.
Development of such custom software can be done by in-house teams or third-party agencies, applying methodologies like Agile or DevOps. Custom software development encompasses application customization, modernization, and management. Customization tweaks COTS applications to meet unique needs. At the same time, modernization ensures the software remains relevant to changing user and market needs. Management optimizes the software’s effectiveness and oversees installation, updates, and performance optimization tasks.
Custom Software Development Cost: The Short Answer
Based on our experience, the cost of software development projects typically ranges from $75,000 to $350,000, including design, development, and delivery. However, this range may not be particularly helpful when planning a budget due to the vast diversity of software types.
From a simple phone calculator to a comprehensive enterprise billing system, custom projects differ considerably and make each application unique. To gain a more precise cost estimate, you should also consider the factors that greatly influence the overall project cost.
Average Custom Software Development Cost
First, we’ll examine the usual components, project types, etc., before determining the particulars that affect custom software development rates. What are the most popular bespoke software solutions, and how much does it cost to build software in 2023? Let’s figure this out.
Content Management Systems (CMS)
Creating a tailored content management system allows companies to specifically cater to their user needs. It provides tools to generate and modify content like blogs, videos, and press releases. Although existing CMS solutions such as WordPress or Magento are available, custom CMS development offers better expansion and potentially lucrative opportunities, especially for businesses with innovative products or services. The custom software development cost for a basic CMS platform typically ranges between $20,000 to $50,000.
Enterprise Resource Planning Systems (ERP Systems)
ERP systems enable companies to manage daily operations like accounting, compliance, supply chain tasks, and procurement. While smaller businesses might suffice with pre-existing solutions, growing businesses might benefit from a custom ERP tool. Tailored to specific business needs, a custom ERP tool can expedite the benefits. Custom software development costs for an ERP system start from $100,000 and can escalate to between $150,000 and $500,000 for large enterprises with more advanced requirements.
Customer Relationship Management Systems (CRM Systems)
Customer relationship management systems assist businesses in managing customer relationships, attracting potential clients, and overseeing vendor and partner interactions. Despite various CRM systems being available, those with unique management styles or target demographics might find a custom CRM system more beneficial. Custom CRM tools can better fit your business needs and potentially offer cost savings. Average CRM custom software development costs are around $100,000. But larger, complex solutions could exceed $600,000.
eCommerce software helps businesses set up websites to market and sell their products. Though pre-existing platforms like Magento, OpenCart, Shopify, and WooCommerce suffice for many, businesses with unique or complex needs might prefer custom eCommerce solutions. The typical software costs for popular eCommerce CMS start from $20,000. They can rise above $70,000, depending on the customization level. On the other hand, a fully custom solution can begin at $50,000 and increase massively for more sophisticated systems.
SaaS (Software as a Service) applications, which offer secure, convenient services on a subscription basis, have seen increased popularity recently. Applicable to diverse industries and businesses, the custom software development cost of a SaaS product can vary significantly. It can range from $25,000 to over $100,000 for complex products.
Supply Chain Management Solutions
SCM software facilitates the optimization and automation of supply chain management processes. It encompasses various participants, from suppliers to consumers. With the potential to enhance performance and boost revenue, SCM software is a critical tool for businesses. Average custom software development pricing for a supply chain management product typically ranges from $100,000 to $300,000, with more complex solutions costing more.
Custom Software Development Cost Factors
The crew’s size and the intricacy of the project both have a role in the hefty price tag. The development cost might be reduced via careful planning in light of this knowledge. First, we’ll look at what often adds the most to the final price tag of a custom development endeavor.
The Software Development Team
Custom software development costs heavily rely on the team working on it. Geographical location notably influences the price due to varying global developer fees, with outsourcing to places like India, Asia, and Eastern Europe offering a more affordable solution. Another factor is the experience level of the team members—senior developers tend to charge more than their junior counterparts.
The team size also impacts the cost, with larger teams requiring more investment. A team of 6-10 members is seen as a sweet spot for an average app project. Additionally, hiring developers with special expertise in cybersecurity, blockchain, and AI development will add to the price and the necessity of certain roles within the team.
The Target Platform
The platform you choose to deploy your app on will significantly affect the custom software development cost due to the need for code refinement. Cross-platform apps typically require less effort and cost less than native multi-platform apps. Besides that, android development also tends to be costlier due to the larger variety of devices and programming complexities that need to be accounted for, unlike the more unified iOS development.
The Complexity of the Software
The complexity of your app largely influences the development cost. More advanced features and functionalities, like enhanced security protocols, e-commerce capabilities, or AI and machine learning integration, will considerably increase the cost. You can reduce these costs using third-party solutions, although customized solutions might still have higher costs.
The Design Complexity
Complex design elements can also increase development costs. For example, custom UI/UX design often constitutes a significant portion of the budget. Designing mobile games or incorporating custom graphics and animations will require hiring specialized team members, further driving up the costs. The cost of logo design can also be a substantial expense.
Software Integration Ability
Software often needs to integrate with other systems, which is an additional expense. Custom integration is typically costlier compared to using commercial software. The cost also depends on the type of system you want to integrate with—legacy systems are the most expensive due to compatibility and security issues. Instead, cloud-to-cloud integrations are generally cheaper.
Database Migration Requirement
Migration of data from older systems can add to the cost. This process can become complex if the data is in the wrong format or incomplete and might require the creation of custom scripts. The size of the datasets, the amount of migration code needed, the switching time, and potential differences between programming languages can all affect the cost of database migration.
Hidden Custom Software Development Costs
Several hidden costs must be accounted for when developing custom software. Those expenditures consist of marketing and maintenance. These two expenses should be calculated before commencing development on a web project. What do these two terms mean, exactly?
Marketing costs refer to the money spent to promote your product to potential users. These custom software development costs are typically twice to thrice the yearly cost of initial development. For instance, if you invest $50,000 in creating new software, your marketing budget should be between $100,000 and $150,000 annually.
Remember that these types of funds cover a variety of marketing strategies, including on-site and off-site SEO, email marketing, information architecture, social media campaigns, and public relations. They also fund Product Hunt launches, among other initiatives. Moreover, a portion of this budget covers overhead costs for the marketing team.
Annual maintenance expenses should be roughly twice the custom software development cost. Take, for instance, a piece of software developed for $50,000; you would anticipate a maintenance bill of approximately $100,000. Yet, if your software solution is complex and must adhere to governmental legal standards, these expected costs could be higher.
A comprehensive maintenance budget should encompass expenditures on email services, SSL (Secure Sockets Layer) certificates, domain names, and web and app store hosting for iOS and Android. It should also cover the cost of technical support. This funding ensures that your software remains functional and offers speedy resolutions during downtime or in the event of errors. The maintenance needs persist for as long as the solution is in use.
Additional Hidden Custom Software Development Costs
Scope Creep Costs: During a project, it’s common to encounter changes in requirements, known as scope creep. It can result from varying factors like changing market conditions or end-user feedback. Incorporating these changes requires additional development hours and leads to hidden costs that can quickly inflate the total budget.
Software Licensing Costs: Developers often utilize third-party software, tools, or libraries to speed up development. While some of these resources are free, others require license fees. These types of costs can be a considerable portion of the development budget and might not be transparent at the outset.
Compliance and Security Costs: Ensuring software complies with industry regulations or standards can introduce hidden costs. These might include costs associated with implementing necessary security measures or undertaking audits and penetration testing to validate the software’s compliance and security.
User Training Costs: Once your custom software is ready, end users need training to use it effectively. Developing and delivering this training program, whether in-person or digital, is a cost that’s often overlooked but essential for successful software adoption.
Technology Stack Update Costs: Over time, certain components of your software’s technology stack may become outdated or unsupported. Keeping these components up-to-date may require unexpected development hours, incurring additional costs.
Costs of Scaling: If your software needs to support a growing number of users or handle large data volumes, you may need to scale your infrastructure. It involves server costs and the work required to optimize software for scalability.
Redundancy and Backup Costs: To ensure business continuity, have redundancy and backup systems in place. Implementing these solutions incurs costs, not only for the necessary hardware and software but also for regular testing and maintenance.
Documentation Costs: Comprehensive documentation helps ensure the software can be effectively maintained and updated. Creating this documentation requires effort and therefore constitutes a hidden cost that can be overlooked in initial project estimates.
Custom Software Development Cost Estimate at Appstrax
To have information about the custom software development rates estimated at Appstrax, let’s infer some elements that would contribute to the cost from a client testimonial named Code Capsules. It lasted for a year, and the cloud and the web were the distribution channels. Furthermore, the technology sector was the industry that it belonged to.
As per the case study, the cost of software development depends on several factors, like:
Project Scope: The larger and more complicated the project, the higher the cost. In this case, the client required a Platform as a Service (PaaS) solution to enable developers to build, deploy, and scale applications more efficiently. It is a relatively complex project that would require significant expertise and resources.
Project Duration: Longer projects usually have higher costs due to ongoing labor and resource requirements. The project described in this case study lasted for 12 months, which is a massive amount of time and would likely contribute to a higher overall cost.
Expertise Required: The client’s project required handling complex cloud infrastructure and custom software development requiring highly skilled developers. Their demand often results in higher costs due to their salary expectations and market value.
Distribution Channel: The distribution of the software (whether through the cloud, web, etc.) can impact costs associated with hosting, security, and ongoing maintenance.
In this case, studied, the product was distributed via the cloud and web, which have associated deployment, maintenance, and scaling costs.
Given the above factors, the total cost would be calculated based on the time and resources required for the project’s execution. But it’s impossible to provide an exact figure without specific numbers or rates. For accurate estimates, contacting a custom software development company like Appstrax directly with your specific requirements and constraints is best. They would typically conduct an initial analysis or consultation to determine a more precise cost estimate.