The Average Cost of Software Development in 2023

The global pandemic has taken a major toll on the business landscape. IBM reported that as a response to the COVID-19 fallout , 67% of companies have accelerated digital projects to ensure business resilience.

While the adoption of technologies varies across industries, there is one commonality. Software development pricing hasn’t got any clearer as the tech revolution gains traction.

Today, we’ll flash out the average software development costs in 2023 and the main catalysts behind the cost of software development.

Average Software Development Cost in 2023

There is almost complete unanimity online that software development price lies in the range of $70K to $250K. However, software development costs in 2023 are impacted greatly by a raft of factors that make accurate pricing a challenging task.

While the ballpark can give you a subtle idea of the average software development costs, professional project estimating factors in clear business requirements within the approved schedules, budgets, and time frames. Therefore, accurate estimation is impossible without prior analysis of your project, business objectives, and other externals.

To give you a better understanding of what comes into your software development costs, we’ve outlined the main cost drivers below.

The Cost of Software Development by Types

Software development projects come in different flavors. Be it web or mobile development, each of the projects requires a different team makeup and takes up a different amount of development effort. We’ve collected the most popular project types below.

Custom VS Off-the-Shelf Solutions

On a high level, all solutions can be divided into tailored and commercial software. The latter calls for less investment since you need to shell out for a purchasing fee once. However, ready-made solutions lag behind custom software in terms of customization and business fit. Therefore, most companies opt for custom software development to ensure business equity and to increase their ROIs.

Custom software development cost tends to require a higher upfront investment compared with off-the-shelf solutions. The high pricing stems from the individual approach that considers a whole range of success factors to make your solution top-grossing. Your development team digs deep into the business requirements to come up with a winning combination of tech tools and technologies.

A typical team structure of a custom software project may include:

  • Business analysts;
  • UX/UI designers;
  • Product/Project managers;
  • Developers;
  • Quality assurance specialists, and others.

Each of these team members contributes to your product performance at a different development stage. Therefore, a diverse team makeup is one of the core cost drivers of bespoke development.

From Scratch vs Modification

Unlike brand new products, software upgrade is limited to enhancing a particular component of your existing software. This may include UI improvements, integrations, or other additions that help a company keep up with the evolving user needs.

Since the project scope of software enhancement is quite narrow, the software development cost is lower compared to fresh-baked solutions. On the contrary, from-scratch development has a higher price tag due to the greater number of development hours.

Web Development

According to the research by TeleGeography, global internet bandwidth increased by 28% in 2022, compared to the previous year, and it continues the return to "normal" from the pandemic-generated bump of 2020.

So it's no wonder that web development picks up steam. As such, web development refers to creating custom websites and web-based applications that can be accessed via the Internet.

The key cost drivers behind web development projects include:

  • Size — more coding translates into more labor hours;
  • Domain — huge e-commerce websites are likely to require more investment than simple corporate websites;
  • Functionality — advanced features such as APIs, social and payment gateway integrations, and others are priced higher than standard add-ons like user profiles and static pages;
  • Level of innovation — cutting-edge automation solutions stand on a pricier side of the tech matrix.

Technological stack, security, and design also have a say in calculating your total of web development.

Mobile Development

If you're looking to reach your customers on mobile, mobile app solutions will help you establish a direct rapport with the users. The costs of building a mobile application depend directly on the number of platforms you're targeting. If your development team is creating two stand-alone applications for iOS and Android, be prepared to pay more compared with a one-platform solution.

Native and hybrid mobile applications also come with different price tags. Thus, platform-specific solutions are more expensive, while hybrid applications cover multiple operating systems with a single code base. The latter translates into reduced development effort and less investment.

Backend infrastructure and application programming interfaces also contribute to the overall mobile app cost. Thus, API integration can be rather big-budget based on the API complexity and availability.

Understanding the type of project is the first and most important step in calculating the estimate. This input will be used in combination with the project scope and team structure to put a figure on your project.

The Cost of Software Development by Size

To estimate the cost of software development, your tech development partner should also be aware of your company size. The more users your solution caters to, the more capacity and development effort it requires.

For example, custom CRM software development of the system for a small company with just a basic set of features will cost around $100K. But if you need a large and complex enterprise CRM solution the price will start from $600K.

Typically, the size classification sits on three groups, including startups, SMEs, and enterprises. The complexity of your solutions corresponds to your company's size. Let's have a closer look at this criterion.

Startups

Startups are young companies that are just making strides in the business landscape. Usually, startups are focused on one unique product or offering that hasn’t reached the market yet. Since young businesses are born out of a desire to solve a user problem, startups aim to target user pains with tailored solutions.

To verify the viability of their digital product, startups reach out to software development companies to create a Minimum Viable Product or an MVP. The average cost of MVPs is lower than a full-fledged solution since MVPs include a basic set of functionality.

As a startup, you can create a Minimum Viable Product of your application in a few months or 600 to 800 development hours. The total for MVP software development varies based on the location of your development team.

Small to Midsize Companies

SME businesses are usually looking to add more automation to their daily business processes or eliminate technical silos. Moreover, scalability is often at the top of mind for SMEs since they need to handle their business growth with the same speed and performance.

All totaled, small to midsize companies typically require solutions of medium complexity that support a wide range of unique needs. As for functionality, SME software may include business process automation, integrations, data management, built-in communication, and other features.

On average, software development time estimation for an app of medium complexity stands at 3 to 6 months and requires the dedicated attention of the whole development team.

Large Enterprises

Established organizations have a lot on their plates, including countless internal operations and a considerable workforce. Therefore, enterprise software aims to support multiple tasks, including data analysis, sales management, resource planning, and others. Enterprise solutions are also large-scale with advanced features, high scalability, and integration capabilities.

Tailored enterprise software often needs to meet compliance regulations and have a robust security framework. Due to their complexity, large-scale solutions may take over 6 months to develop from scratch.

Top Seven Software Cost Factors

The average software development cost is a difficult number to pin down. There are so many variables involved — from the size of the project to the type of development process used — that it's impossible to get an exact number. Besides the type and size of your project, you should also consider the cost drivers listed below.

Team Location

Good location decisions can significantly reduce your cost to build custom software. While some destinations have affordable talent attractions, others have higher rates due to the skill shortage and high living standards. Thus, Switzerland tops the ladder among the best-paid locations. An average software developer's salary in Switzerland stands at over $100K annually, according to Glassdoor.

Other locations such as Poland are below this benchmark which makes them more cost-effective for global businesses. Thus, the average annual salary of a Polish developer is about $65K. Therefore, we recommend choosing the vendor with the optimal price-value ratio and cost-friendly location.

Core Features

Software functionality is one of the main factors behind development pricing. The richer your feature list is, the more resources it needs to be implemented. Diverse functionality also mandates more coordinated development processes, more comprehensive testing, and thought-out UX.

Based on the feature saturation, all applications can be divided into simple, medium, and complex. We’ve outlined the main differences in the succinct table below.

If you want to strike a balance, we recommend building a Minimum Viable Product first to eliminate unnecessary spending. An MVP is an early solution version that includes only basic functionality. The bare minimum of features should be enough to test and validate your MVP idea with real users.

UI/UX Design Complexity

To set up your app for success, you should also create an engaging interface that allows the user to seamlessly flow from screen to screen. Therefore, customization of visual design is another aspect included in the cost breakdown. A bespoke design leads to higher costs compared to a basic one that relies on ready-made templates.

Personalized user experience, animations, and data visualizations are just a sliver of custom design features. The quantity of screens is also important in estimating the design output.

Backend Requirements

Backend infrastructure refers to the variety of internal app components that aren’t visible to the user's eye. The backend line-up may include everything from databases to a server. Combined, these components allow the user to interact and share data with your digital solution.

The more complex your app is, the more backend processes it will include. For example, a high-end application like Airbnb is fueled by thousands of backend processes that allows a user to browse listings, view featured rentals, or become a host.

Integrations also reduce a significant part of your backend expenses. In some cases, your developers will need to build a custom API, which can shoot up your total as well.

Testing

Once both your design and system architecture are up and running, QA specialists will run comprehensive tests. The testing stage of your development is crucial since it helps identify flaws in the software code and validate your app's alignment with the predefined requirements. QA engineers also validate that the end product is competitive, secure, and user-friendly.

The cost of QA implementation varies by app. The more complex your solution is, the more testing scenarios and test cases it needs.

After-Release Activities

When your solution is in the wild, it still needs some polishing to keep up with changing traffic and market trends. Therefore, you should also take heed of maintenance and support costs to ensure your solution is at its peak performance.

Hiring Model

Last but not least, an engagement model can tip up or down your invoice along with other factors. The current hiring landscape is vibrant with a wide range of engagement options. The most popular include in-house development, freelance workforce, and outsourcing services.

In-house development gives you full and direct control over your hires. Yet, on-site employment is short on flexibility and it may take up months to find the right candidate.

Freelance collaboration is quick and easy. However, freelance hiring lacks transparency and exposes the company to numerous risks. Delegating your development process to a third-party provider is a compromise between hassle-free hiring and close team management.

The Average Cost of Software Development

How to Estimate Software Development Cost

It’s impossible to act on a hunch when you take stock of your software development investment. In the best-case scenario, you should contact your development team to get at least a ballpark on your project. Here's how the estimation goes step-by-step:

Step 1: Analyze Your Business Needs And Objectives

To save your time and money, you should first articulate a well-defined vision of your future product. Market audit, competitor research, and user personas should become the pillars of your project idea. With these insights on hand, you can proceed with the further estimation step.

Step 2: Contact Your Software Development Partner

Unless you have a ready-to-go team on site, you’ll need to hand over your development to an external vendor. Scour the market and choose the team that clicks with your project agenda, domain, and project type.

Step 3: Perform Initial High-level Scope

To provide an estimate, your tech partner should first analyze the backbone set of features that guide the direction of the project. The batch of core features should sit on clear business objectives and project deliverables.

Step 4: Get an Estimate

Once all high-level requirements are clarified, your vendor will provide a proposal with a ballpark figure. The estimate at this stage is the least accurate, yet gives a general idea of whether the development cost is up to your expectations. The exact number will be documented after the planning stage.

Cost of Software Development at CleverDev Software

At our company, we follow a two-step estimation process. In the early stages of our collaboration, we first do a rough assessment to inform you about the possible project investment. Accurate costs and timelines are provided further in the process after we perform a detailed analysis of your project and break your requirements into project milestones. Detailed case studies of our leading-edge projects are a vivid demonstration of our ahead of the times expertise.

Thanks to our iterative workflow, we make sure your final product meets and exceeds your expectations. Flexible iterations allow our developers to improve on your original deliverables guided by real-time user feedback and your reviews. The agility of our team can accommodate changes to overall requirements, thus scoping at lower costs and reducing the total of your development expenses.

Summing Up

The path to a digital transformation looks different for every company. Based on their unique objective, businesses are pursuing different technical capabilities, which gets reflected in software development costs. The overall price of technical solutions stems from a wide range of factors, including the level of technical complexity, team location, and other enablers. To get an accurate cost breakdown, you should first outline the core milestones of your initiative to a vendor.

CleverDev Software has a track record of creating accurate software development cost estimates. We include both technical and non-technical factors that influence the cost of your software project so that you have a clear understanding of the needed investment.

Have a project in mind? Contact us to get a ballpark estimation of your business idea.

How Can We Help You?

Get in touch with us, and we will gladly get back to you as soon as possible. If you need a professional team, CleverDev Software will be happy to assist you in making your vision a reality.
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