Why and How of Software Development Cost Estimation: Enterpreneur Version - Prismetric

Software Development Cost Estimation: Entrepreneurs’ Version of Why & How

Software Development Cost Estimation

Before you start dreaming of smooth business automation, you need to embark on a hassle-free software project development with user-friendly features, and most importantly, a comfortable cost to develop software.

It is your vision and farsightedness as an entrepreneur that keep you hale and hearty even though you have outsourced your project to a top software development company from any corner of the world. With accurate project planning and management, your software product development would set you worry-free so that you can concentrate on better things, after all, you have a better fish to fry!

This detailed guide is intended to get you out of the software project development cost quagmire to reduce expenses and yet increase profits. Don’t invest a fortune in development of software product; instead, calculate and set forth the estimated budget for your software development team.

A bad prediction dumps the project even before it kicks off

Even seasoned players in the software development company opine that they have noticed terrible consequences of bad estimation that are almost irreversible. Even though the product is done and out, the collateral damage becomes hard to heal as it results in these three jinks –

  • Malfunctioning of the entire business due to budget mismanagement
  • Appearance of bitterness between the vendors and buyers
  • Faulty automation produces terrible escalations, non-functional operations

Software development cost estimation – three pillars

The three offbeat pillars that provide the software development cost estimation a solid foundation include a holistic approach including every perspective of the product from the perspective of the budget of the company. Unfortunately, they are often overlooked; but we surely shall emphasize them –

The vision: the base to gauge the present business objectives, as well as future prospects due to changes in markets and clients’ demand, should be kept in mind.

The background: the chief technology and its impact on the cost to develop software always leave the buyers baffled. Jotting down the estimations and assumptions helps in this regard.

The data: considering a new norm, data fuel and accelerate your company’s growth, it is important to consider this ultimate fact that the data has a big role in software development costing.

Factors that affect the cost to develop software

The software development life cycle consists of many stages or milestones, and each factor involved in it affects the software development budget. Hence, let us put all the top budget-influencing things you should check at your end carefully before you select the ideal software development company as your technology partner.


Technology or platform plays a primary role in deciding the software development costs. Whether you are building a simple website, a complex web portal, a single-interface mobile application, or a multi-page tool, the technology you use influences the total pricing structure of developing software.

Another aspect of the technology platform is the type of mobile solution you are looking for – a native mobile app (Android application or iOS application), a cross-platform app, or a hybrid software tool. All such factors come with different software development cost estimations. If you are confused about such decisions, companies that provide software development as a service can assist you with a suitable platform and dedicated remote developer hiring models to calculate the budget.

Scope and features

Your business depends on the experience of users whether external or internal. If the users find hassles in finding what exactly they want in the software tool, you are likely to fail the automation of the business processes and operations. It is because a software tool is judged by its features and scopes, the pillars of its overall functionalities. Chiefly, there are three factors that affect the scope –

  • Project size – small, medium, large
  • Complexity – the number of features, privileges, UI/UX, and so on
  • Project nature – whether starting from the scratch or adding features to existing tools

Software Project size

According to Dave Snowden’s Cynefin Framework (originally developed by IBM), the software development is closely knitted with business management wherein you need to look at the product from a bird’s view (top view). The sight would then run from top to bottom categorizing the product further into several small pieces. While considering the pieces, it is important to keep in mind the efforts the software project development requires – little, moderate, or high.

Breaking down the complex project in several iterations (small tasks) could be taken as small chapters of a story that describe its features or functions from a user’s perspective. On the other hand, business and technology consultants at your remote software development partners may assist you in getting this done because they can easily estimate the time and efforts needed for your project based on their experience in the past.

Software Complexity

Software development time and average cost depends on the complexity of the project. Even if you hire the best custom software development company, the number of hours increases when the software product is complex in terms of its features and offerings.

Opting for Software Development as a Service can be beneficial but the more hours programmers dedicate to your product development or alteration (changes) of the existing prototype according to your feedback, the more bucks you’ll have to shell out. Thus, defined complexities and project scopes would help both parties decide upon the number of human hours required.

In addition, the complexity of the project also affects the number of resources a digital product development requires. Tools, developers or programmers, materials, licensed packs, fees, subscriptions, and infrastructure also affect software development budget estimation.

Even further, the complexity also includes the risks that can affect your software development cycle and so the overall cost. Leaving some corners for calculated risks shall help you prevent your budget go haywire.

You can also ask your software development consultant in case you have little or no clue about how to gauge the risk. They shall explain and assist you with their past experience in handling such risks in similar projects. These days risk management in software development is an important aspect.

Worried about the high cost of software development?

The cost of the software development may also depend on the UI/UX, the latest but major factor these days. Enterprises of the present generation allocate much of their budget on unique design creation and, therefore, the design complexity has been one of the crucial factors to consider for the cost of software development.

Software Project nature

Enterprises contact bespoke software development firms for two reasons – to build the product because they do not have one or they simply want to upgrade their obsolete systems. It is also possible that business owners contact IT outsourcing firms to expand their existing software which is not capable to handle big data or the present demands of the market or users.

In all the above-mentioned cases, the project nature becomes a determining factor to estimate the cost to develop software tools especially when it is customized to specific business objectives or company goals. The buyer should also mind the existing software tools they have and the expense they would have to bear for replacing the hardware. In most cases, licenses or subscriptions to software maintenance contracts are mandatory as suggested by the outsourcing software development service providers.

Software Engineering and costs

Custom software development cost is nothing but a good financial forecast for a specific task. However, it is worth noting that according to a McKinsey report, in around 65% of cases, the cost to develop software application overruns the estimation. As a result, the product turns out to be different than expected giving birth to skirmishes between the vendors and buyers. Hence, to avoid this hassle, the buyer should mutually sit and discuss with their software solution partners what software engineering method they follow. Indeed, it helps in getting a close estimate for software development.

Waterfall Model

It is a traditional way to develop a digital product wherein the planning phase is crucial. The product’s time, scope, size, risk, resources, and quality are kept in mind while developing the waterfall model wherein the estimation could be revised depending on the newer information available. The moment any project risk is detected or anticipated, the model is upgraded and damage is minimized.

Agile Model

It is a powerful engineering method for software development as it divides the project into several sprints or iterations to avoid complexity. Most software product development by renowned companies follow this method to avoid clashes with their clients. Average software development cost estimation is made at the beginning of the project when the project is first outlined with its to-be features and needs. The agile methodology then defines the project and estimates its risks through feedback at almost every milestone or progress step. The software development costing is also considered into account while planning a new milestone.

Other methods to estimate the cost of software development

There are several other methods available to predict the software development costs because there is no one concrete estimate that makes the budget a perfect guess. Building a customized software solution houses a complex development process where more than one department and expertise is required.

Constant changes in the market demand and consumer expectations make technologies and tools evolve every day. Some software outsourcing companies, based on their experience, define a few more methods to outline the budget.

Top-down estimate

the overall time of the project is broken down into several milestones based on the requirements. For instance, if the project is asked to be completed in six months, this approach classifies the tenure and project development into several parts. Each part is evaluated and achieved according to the budget allotted.

Bottom-up estimate

quite opposite to the top-down, estimation of every piece of progress is noted down and gathered to make the entire software product. Many believe this software development method to be more accurate than the previous one because the focus shifts to tiny details and roles and responsibilities of software development teams are clearly defined.

Experts’ approach

cutting down the extra edges, expert’s judgment tops the list for many enterprises especially when they have no clue about software development budget estimation. Nevertheless, it requires a solid trust in the software service providers because the cost to develop software solely depends on what the technology consultants quote to buyers.

Comparative approach

in this software development approach, the cost of the custom software product is based on the duration to complete it. This approach of software development blends two methods – a top-down, and the past project (similar project) record. For instance, if a similar project had taken six months to complete, this product too is expected to take the same period and development budget. Furthermore, to reduce the vagueness, the project is further divided into smaller milestones as a part of the top-down method.

Parametric model estimation

in this method of developing a software, the previously completed software project’s data are used to compare the present product’s development. The references of the previous projects completed by the software development company are taken to build specific features or models for the present project. Some of the complex structures of the current software’s time and cost can be calculated by multiplying or dividing the previous project’s similar features.

Other than the above-mentioned factors, the place of outsourcing software development also matters in estimating the budget of the overall digital product. While the first-world countries would cost you an arm and a leg, you can hire the best custom software development company from Asia that can get you the optimum software product at a very pocket-friendly rates, or as they say, the most affordable prices.

Not sure about the software development cost?

A special team for software development cost estimation

A large chunk of entrepreneurs search for and select the right software company with years of experience to avoid all hassles and estimate the cost of software project development. This is because only a seasoned offshore custom software development outsourcing company can tell you the average software product development cost and estimated time through their experienced eyes.

In other words, most projects have one or the other features similar to the previous projects they have in their portfolio. Such estimations often become a norm to consider for almost all cases and that is why many enterprises prefer building a special team for estimation. The team may comprise experienced software developers who have preferably worked on similar projects in the past. In some cases, the buyers themselves ask the partner companies providing software development services to get them the dedicated development team for which they may charge some extra bucks.

Get software development cost estimation by the team as they review the business objectives and goals before identifying any risks. Applying their skills, cognition, and experience they prepare a probable cost to develop software that is quite near to the actual budget you will spend at the end of the deal.

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