Software Development is among the few industries that have seen an upward trajectory over the last 4 years. With news of a global economic slowdown by the IMF & World Bank, enterprise software development has remained strong, with a phenomenal 11.9% growth rate predicted for 2023.
Enterprise Resource Planning (ERP) systems, A.I.-powered business automation, Customer Relationship Management, and eCommerce software were the top four solutions identified by software development providers as the most popular solutions organizations are building in 2023.
Widespread research has discovered that ‘nearly 1 in every 4 businesses’ outsource projects to custom software development companies. The primary reason for outsourcing identified was the cost of hiring resources & developing the software in-house. The research also determined that flexibility, speed to market, and access to tools were significant reasons to outsource software development to specialist service providers.
Today, we answer the all-important question “How much does custom software development cost in 2023?” with insights from professional software developers and prominent business researchers.
What is Custom Software Development?
Our professionals define custom software development as analyzing concepts, planning, designing, developing, installing, and maintaining software built specifically for a unique organization. This organization can be a startup, an SMB, or a larger organization. At the same time, the custom software can be a fully-featured system (like an ERP), a single module (like an accounting & finance tool), or a user-based solution (like a sales & marketing CRM).
Where to Hire the Most Affordable Software Developers?
Custom software development rates can vary not only by their skills & experience levels but also by where they reside. Different professional researchers have already established the variability of software development costs across the world; we have listed these below:
Ten Factors That Influence Software Outsourcing Costs in 2023
More than 10 factors can influence the cost of software outsourcing in 2023. We list the top ten factors organizations must consider before contracting providers for software development, as identified by researchers & industry professionals.
In-Demand Skills ZDNet editor Owen Hughes writes that with demand for software developers soaring, recruiters anticipate a challenging year for hiring tech resources. A survey of 14,000 developers and tech recruiters by CodinGame & CodePad identified that nearly half of employers find it challenging to fill development roles. 53% of employers have had to increase their hiring budgets, but still, there is a vast talent gap in the global industry.
Pieter Danhieux writes in his Forbes article that with demand for software developers soaring, there will be a shortfall of almost four million development professionals by 2025. Although this seems like an opportunity for software developers, the complexity of solutions enterprises demand is also increasing consistently.
Language barriers adversely affect software development costs, with slow development, unsatisfactory solutions, and the need to rework solutions all adding to the budget. Accelerance recommends hiring development companies with fluent English speakers in management and development teams.
Fred Monnier writes that language barriers can lead to delays, inaccurate information, and lack of understanding, making project success problematic. A University of Limerick (Ireland) research has previously concluded that English is the standard language for software development. It affects the quality of communication and the choice of communication tools, and its absence (or limitations) leads to asynchronous communication styles.
It is always suggestible for enterprises to have an initial consultancy or orientation meeting with providers to ascertain the proficiency of the software development company’s management and developers. For example, before onboarding partners at Progatix, we conduct a comprehensive consultancy to introduce our services, team, and processes, all in English.
Research has determined that different regions have varying reputations for unique skills, creating demand for their services and increasing prices. Development costs are higher in countries located near development regions. For instance, outsourcing development to a Central European country is twice as expensive as in South Asia.
Professionals discuss that outsourcing to overseas providers can significantly decrease the development budget, and hourly rates can vary from $20 to upwards of $50 per hour. Many offshore providers only provide developers, and no project managers supervise the contract. Progatix provides a complete team of project leads, developers, testing experts, and DevOps to ensure you get all the expertise within your budget.
Tech contributor Sean Peeks writes that location significantly influences the cost of the development project. Those in the USA can charge up to five times compared to Asia or Europe. Therefore, it is vital to balance cost & quality through proper vendor research.
The seniority of the developer or the development team determines how costly the project will be. However, a senior development team means added benefits & skills. Our project management team identifies that a developer with basic or mid-level experience can cost between $25 and $65, while a senior developer’s services cost between $70 and $110.
DeveloperExperience discusses in an article that the more experienced development teams are, the faster and cheaper product development will be. With different experience levels, professional development companies assign tasks based on the developer’s proficiency, delegating more straightforward tasks to junior devs while experienced personnel handles more complex tasks. This is a great way to manage costs by minimizing development hours on complicated modules while completing simpler tasks with low-cost developers.
Progatix’s project management team discussed that we brief all our partners about what is included in the development cost. Our partner organizations pay for more than just skills and creativity; they also retain the experiences, vast knowledge, and pre-enacted best practices within a single development environment. Outsourcing development to Progatix as your offshore development partner can lift the quality of the entire project, deliver added value, and enrich the organization in return.
Length of Engagement
The length of the project is critical to the overall budget, and long-term projects secure better pricing than short-term ones. With long-term development contracts, organizations can negotiate pricing and access specialist expertise like designers, project managers, testing experts, and DevOps engineers.
Our experienced project & development teams discuss that providing the timelines within the scope of work is beneficial. This can be either in the form of months, weeks, days, or total hours. Our project managers provide the length of the contract based on the product’s complexity, features, and functionality in the scope of work.
Complexity of Software
The complexity of business software signifies the customization & interoperability of various features of the solution. The more features a software has, the more complex the relationship between these features contributes to the cost of the solution. More functionality means more coding and hence more testing from the development team.
Complex software also grows over time, requiring more developers to write its code. Signing up multiple users, synchronizing payment systems, assigning user roles & access, and customizing other aspects for each unique user will carry a higher cost of compiling and synchronizing features.
Multiple professionals have established that size remains one of the most detrimental factors of custom software costing. The bigger the size & scale of software, the more investment is required for development.
While startups can make do with minimum viable products and even off-the-shelf solutions, medium & large-scale organizations require more personalized software. The more U.I. screens or pages a software requires, its cost will increase.
An excellent example is enterprise resource planning software that integrates various screens, including H.R., payroll, inventory, administration, logistics, maintenance, sales & purchases, quotations, taxation, customer support, finance, and others linking all these screens via buttons on the home screen. Below is a live example from Progatix’s custom ERP system:
If you notice on the left-hand side of the image, the various functions of the ERP where each opens a new screen, and that is the size of our leading-edge software. Generally, a small software has 10 to 20 screens; a large-scale solution like QSA ERP requires between 20 and 45.
The number of platforms your software is compatible with highly influences the project’s cost. Cross-platform software always carries a higher development cost since it includes desktop, web, and mobile access. This is where you have to be clever to choose a cross-platform development solution like ReactNative that can build apps using the same code; the desktop version, however, will be built using a different tech stack but would still be affordable.
Building native software & apps requires a dedicated developer for each platform, raising the cost. The best way to start is by building the software for only one platform instead of indulging in cross-platform compatibility. It’s always recommended to analyze which operating systems and devices are popular among your end users. If the app is for organizational use, it can be built at a lower cost for the devices used across the enterprise.
Custom U.I. & UX Design
The bottom line is the simpler your U.I. & UX design, the lower the cost of your software. Although a simple design works out for startups & SMBs, a poor user interface & user experience will be unattractive and less engaging for end-users.
Professionals discuss that a great U.I. & UX is essential to retain and engage users daily. Although a more straightforward unappealing design will cost less, it will have a higher business cost later.
The UX & U.I. generally include all design elements like buttons, font styles, color palettes, responsiveness with different features, and other aspects. We dedicate an entire phase in our software development process to accommodate design which is always completed before coding begins.
Do remember the more elaborate and complex the design, the higher the overall cost since the development team will integrate this U.I. & UX.
Size of the Development Team
It’s pretty simple to understand the more platforms you develop for, the more complex your design, and the larger the software size, the higher the cost. A usual development process requires a designer, developers, a project manager, DevOps engineers, and testing experts to achieve a high-quality solution. Hence the larger the team, the more the cost of the solution.
It is recommended to choose the services of an enterprise software development provider who can provide access to these resources without having to hire and remunerate each team member individually. Progatix offers a complete team of professionals, including business consultants, project managers, designers, developers, testing experts, and DevOps engineers, to deliver end-to-end development services.
How to Reduce Software Development Costs in 2023
Organizations can consider several steps to reduce the overall cost of their software development projects. Professionals suggest some excellent tactics to ensure development budgets are not exceeded.
Simple Scope of Work & Clear Requirements
Planning is considered one of the most crucial aspects of the project. Therefore, it is imperative to decide on the necessary features beforehand. Harry Nguyen mentions in his LinkedIn blog that communicating the project scope, objectives, and functional requirements is essential for accurate cost estimates. He recommends utilizing Software Requirements Specification documents to communicate requirements better and negate misunderstandings.
Our project team mentioned in a focus group session that conducting proper research to determine the ideal requirements and documenting them in the scope of work provides more accurate estimates for development. In addition, precise requirements also enhance communication with offshore teams. There is less confusion and fewer errors, leading to a cost-effective and high-quality product.
Forbes council member Vlad Vahromovs writes that the scope, objectives, and functional requirements are essential when working with outsourced agencies. This, he discusses, reduces the time spent in meetings and communicating with developers. Development teams can quickly avoid improving the same tasks; there is less expenditure on development hours and no missed deadlines.
Outsource Development to Enterprise Level Companies
Development professional Harry Nguyen discusses outsourcing as the way to go if you want cost optimization. Hiring remote development professionals in low-cost regions is quickly gaining popularity, with almost 40% to 60% savings up for grabs in regions including South Asia (Pakistan & India) and South East Asia (Vietnam, Singapore, Malaysia, Philippines).
Delegate Management to Project Managers
Having project management expertise from your outsourcing partner can be very favorable to saving time & costs, managing deadlines, and motivating developers. Project managers can proactively resolve concerns and communicate with development teams without micromanaging the process.
Daniel Fluery mentions in his article that project management is vital to determine the cost of projects. The project manager also actively manages resource allocation, scheduling, staffing, and risk management, enabling organizations to manage development budgets conveniently.
Progatix project management professionals explain that processes can quickly deviate from planned targets. A project manager understands the prevalent risks in the development process, and using agile project methodologies, we can easily accommodate changes without delays or incurring unexpected costs.
Select Open Source & Ideal Tech Stacks
Open-source technologies have made it easy for even the smallest enterprises to develop high-performance software at a minimal cost. Choosing the ideal tech stacks for front-end, back-end, database development, and other integrations can be detrimental to reducing the project’s overall costs.
Developing enterprise software with popular open-source tech, including MEAN, React, Python, Ruby, .NET Core, Apache, Kubernetes, MySQL, and others, is more cost-effective than a paid coding stack. With open-source stacks, the main cost contributor is the price of hiring the development team.
A.I. solution providers Pandio discuss that open source software provides a significant cost-saving opportunity. Since the software has no fee attached, organizations can have as many instances as they desire. Outsourcing development with open-source tech stacks to a managed provider is a prevalent tactic.
How Progatix Offers You Cost-Effective Custom Software Development?
Progatix offers a rich history of developing high-performance software at desirable pricing. Our portfolio includes high-quality ERP, CRM, collaboration tools, B.I. & analytics tools, communication & chatbot solutions, SaaS, and A.I. integrations.
Planning & Ideation Consultancy
We begin our projects with comprehensive project planning and software ideation consultancy. We outline schedules, resources, developer rates, tech stacks, functionality, communication tools, reporting, and other aspects, detailing the scope of work for clarity.
Our project management & business advisors clearly outline the costs and timelines, dedicating a project lead to collaborate with your organization. The project lead will also choose developers based on their skills & experience, ensuring your software is built for performance.
Using agile methodologies, we closely monitor various iterations, enact constant improvement, accommodate changes without compromising timelines, and deliver faster time to market.
A Complete Professional Team
Our services include a remarkable design team that creates the front-end U.I. & UX to build an easy-to-use interface and complement it with a fantastic user experience. Managed by the project lead, the design team forwards the U.I. & UX to the development team to begin creating the solution.
Each development project is managed by a dedicated project lead, who collaborates with organizations and the timelines & costs. We also provide access to professional DevOps engineers, testing experts, and support engineers to deliver a high-quality experience in addition to high-performance software.
Experience with Open Source Tech Stacks
A fantastic team of front-end, back-end, and full-stack developers empowers Progatix. Our teams are proficient with a rich selection of open-source development technologies to build high-quality & low-cost solutions. You can view our list of software development technologies.
We integrate DevOps professionals to achieve better functionality, faster development speed, premium quality, and high-performance solutions. Our DevOps team enhances communication with all project participants, improving integration and managing the entire development lifecycle.
By following the principles of automation, iteration, continuous improvement & collaboration, our team delivers MVPs faster while enhancing the ROI with every feature improvement. Following DevOps principles also leads to developing premium quality software by identifying bugs quicker and improving within the available timelines.
Professional QA & Testing Team
Progatix custom software development solutions include a prolific Q.A. & testing team to ensure high-quality solutions. By conducting ongoing tests over multiple platforms, our team identifies errors & bugs early, working in collaboration with the project lead. Our experts deploy the latest manual and automatic testing that reduces the chances of costly bugs within enterprise-level systems.
We streamline the development process from the very start, identifying human errors and assisting the dev team to simplify the process. Our team focuses on quality while maintaining time & cost efficiency to deliver solutions faster and at the right price.
How to Choose the Right Pricing Model for Outsourcing Custom Software?
Determining the suitable pricing model when outsourcing software claims Accelerance is imperative. Even when organizations feel they have found the right partner to do the job, price is generally the top reason outsourcing contracts are renegotiated, as discussed by the Boston Consulting Group.
There are four popular software development outsourcing models identified by research:
Fixed Price Model
Generally suited to SMBs, the fixed price models require a detailed & defined scope of work. Enterprises must have clarity in what they require with complete requirements of the software’s features, functionality, security, and compatibility. Timelines and budgets are clearly defined, while rewards are based on efficient completion within schedules.
Time & Materials Model
The time & materials model enables developers to bid on projects and complete the software following their timelines. Suited to long-term projects, developers can be flexible with changes, and businesses can save on additional costs.
Incentive Based Model
The incentive-based model rewards developers for exceeding the goals outlined in the scope of work. Developers are better motivated and stay focused on the goals & objectives of the development project.
Shared Risk & Reward Model
The shared risk-reward model agrees upon a flat development rate, and developers must deliver on specific objectives. This model is focused on sharing funding for new products by both the client & outsourced development partner. The rewards of the software are shared with the development partner for a defined time.
Estimated Costs of Building Custom Software
At Progatix, we offer a range of high-performance custom software personalized to organizations’ specific requirements & needs; you can learn more about our premier custom software services on our custom software development services Here is a list of estimated costs of solutions we have built over the past decade:
Cost of Custom Software Development Solutions at Progatix
Progatix has been developing custom software since 2003 with a winning selection of solutions, including ERP, CRM, CMS, SaaS, chatbots, payroll, school management, fleet management, B2B & B2C mobile apps, progressive web apps, websites, and e-commerce marketplaces powering businesses worldwide.
Enterprise Resource Planning Systems
ERP systems are software designed to manage daily operations like H.R., finance, sales & purchases, project management, risk management, taxation, logistics, and other functions. ERP systems can also be equipped to provide data analytics, B.I., and reporting systems for performance management.
Depending on the functionality, design, and features required for custom ERP software, we have built high-performance enterprise solutions ranging between $80,000 and $550,000. The cost can deviate depending on the ERP’s design, complexity, size, functionality, features, and security.
Customer Relationship Management Systems
CRM systems are built to manage an enterprise’s relationships, communication, and interactions with its audiences & customers. This software aims to improve relationships, grow business and enhance customer experiences. The idea is to stay connected with customers, simplify & streamline customer processes, and improve ROI.
We have had the opportunity to build several high-performance CRM systems for multiple platforms, including desktop, mobile, and web. The general range for CRM software is between $75,000 and $700,000 based on features, integrations, functionality, design, mobility features, and maintenance.
Software as a Service Solutions (SaaS)
SaaS solutions are developed over the cloud and delivered over the internet. SaaS solutions are hosted over remote cloud servers, with access provided through web browsers. The exciting fact about SaaS solutions is that they cost less to develop & integrate since there are fewer infrastructure requirements and they can be subscription based.
Modern technological advances make Developing SaaS solutions more effortless than desktop and mobile enterprise software. The cost for SaaS solutions can vary between $50,000 and $200,000 depending on the software’s complexity, features, functionality, and security.
The popularity of custom software solutions is already influencing global business. With the radically growing demand for custom solutions, a massive shortage of talent and experience has arisen to create complex software.
Organizations are seeking software development outsourcing partners in other corners of the world for more cost-effective development. However, outsourcing must be based on essential considerations like a clear concept & scope of work and project management.