Understanding The Cost Of Custom Software Development

Delving into software development quotes, you encounter varied costs. Understanding common expenses—planning, development, integration, testing, deployment, and maintenance—empowers better comparison and informed decisions, crucial for your project's success.

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You have started reaching out to various software development companies to find out how much your next million-dollar app idea will cost you. You quickly realize how varied each quote is and start to question whether or not you want to go ahead with any of them at all.

However, some costs appear in the quotes over and over again. If you can identify and understand them, you will be better prepared to compare different quotations and make a final decision.

Let’s break down those common costs for getting your custom software development built.

Planning and Project Management

The same way you get an architect to map out the building plans of a construction project, software needs to be understood, planned out, and architected before any work can begin.

In the software world, this often entails a lot of meetings with the various stakeholders to understand the business problem and desired workflows well in order to design and plan a high-quality software project.

Don’t under-estimate this crucial component when it comes to costing out your software project. Depending on the quotes you receive, time may or may not have been allocated to this step. Question this often and budget for it properly.

Expect to spend 10% – 20% of the entire cost on planning. This means for every 80 hours of developer time, expect 8–16 of those hours to be spent on planning. By allocating time for planning, and following some other tips to better manage your custom software project, you will be ready to kick off your project.


Every quote you receive will include the bulk of the estimate going towards developer hours. This component is the most difficult to estimate accurately and often ends up being the most expensive.

Due to the nature of the work, it is difficult to understand the value of certain development work. Progress can seem extremely fast one week compared to others, which will often lead you to question whether your development company is taking you for a ride.

Every project has its own challenges that have never been faced by developers before, which requires extended time on thinking and understanding the problem, testing, and re-iterating the code that they write. Any minor bump in flow can delay a programmers’ thought process and slow down the output of development.

It is important to budget your project for this step properly. Include a healthy buffer on top of the estimates you receive to manage your own expectations and avoid disappointment down the line.

With enough budget allocated to planning and putting a lot of effort and time into ensuring all stakeholders communicate the requirements correctly, this component could be reduced significantly.


Another common component of custom software development that is often under-estimated is the integration between two or more systems. Today’s world is filled with beautiful off-the-shelf SaaS software that rapidly speeds up your business’s processes. It would be awesome to magically have them all talking and passing data between each other.

Developers need to learn the interfaces exposed by each service, understand the limitations and features available to them, and then figure out how to implement the code in such a way that meets the requirements.

During the implementation, developers may face tons of unknown and unforeseen circumstances, due to the many possible points of failure. This can easily extend and delay the delivery of any software project. Therefore, it is crucial to have healthy expectations when it comes to this component of your project costs.


There are many different forms of testing. The most common is manually testing the software that the developer writes. Developers often manually test their work after they write the code.

Depending on the type of project, you may want to budget for some form of automated testing. This requires additional development time as developers write scripts to automatically test out their functionality.

Depending on the budget, it is recommended to add up to 50% extra time per line item for automated testing. This will ensure cheaper and faster maintenance down the line and improve the code quality throughout the project.

When it comes to manually testing out the functionality delivered by the development team, it is important to be extremely specific on the expected outcomes of the test results. This will assist the development team in ensuring the functionality works as expected.

For example, put together a simple excel or Google Sheet with sample input data, simple descriptions of what should happen, and what you expect to see (a screen change or the result of a calculation, etc.).

The test outcomes could possibly be included in the planning phase early on to give the development team more details on expected outputs. In either case, plan to spend 30% of the total cost on testing the functionality, plus a lot of time from you and the stakeholders involved (end-user testing).

Deployment and Infrastructure

Once you have built the software, it needs to be hosted and accessed somewhere. This can either be a mobile device, a desktop, a browser, or a server. Each form has various channels of deployment and ongoing cost of infrastructure.

Depending on the type of project, you may simply let the company take care of the infrastructure and pay them a monthly fee, or have the development company use your own infrastructure. Either way, expect to pay an ongoing monthly fee for any infrastructure costs required to host your software.


It would be naive to think that once the software is developed, it will work forever. This is mostly due to the ever-changing business requirements.

Over and above functionality changes, there are underlying infrastructure, operating system, security, and vulnerability fixes that need to be made across the entire tech stack monthly. This comes with additional costs.

Depending on the company, you may enter into an ongoing monthly maintenance agreement or agree to have changes done ad-hoc. It is advised to go with an ongoing monthly maintenance agreement, as the cost is usually cheaper, and you ensure that your software continues to run smoothly over a longer period of time.

Depending on the type of software and pace of changes in requirements, expect to pay up to 30% of the cost of initial development for ongoing development each year once it has been deployed. If there are major feature additions, treat those as entirely new projects.


Ultimately, custom software development is done by highly skilled and expensive humans, which requires a lot of time and effort. The more complex the requirements and integration scenarios are, the more man-power it will take, which will impact on the costs of your project.

Allocating time and budget from the initial planning phase is a good place to start. Don’t forget to add a healthy buffer on top of the development phase to avoid disappointment if the project runs overtime.

Lastly, remember that integration, testing, deployment and maintenance phases might require more work than estimated. For this reason, ensure realistic expectations and budgets.

By understanding the components of the common costs of custom software development, you will be able to better manage and reduce the costs of your next project.

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