Factors that influence the cost of custom software development

11 min read
January 11, 2023

Custom software might have many benefits, but it doesn’t come cheap.

Even the most basic project can set you back around $50,000. And if you want a cross-platform app with all the bells and whistles, your tab could easily reach six digits.

Several factors contribute to this steep price tag, including team size and project complexity.

Understanding them could help you control your budget and make the development more affordable.

Let’s start with the biggest cost contributor for any custom development project.

The custom software development team

One of the highest costs of any software development is payroll. Thus, how much you’ll actually pay depends on your team.

Here are some factors that shape your labor costs.

First, where are they located?

This is very important, because developer fees aren’t equal globally, as this infographic clearly shows:

App development hourly rates by region

Source: Mobindustry

As you can see, the discrepancy is huge. A developer in the US could charge up to six times more than his counterpart from India.

This difference is what makes outsourcing a viable and cheaper alternative.

So, if you want to lower your costs, it’s best to consider outsourcing destinations like India, Asia, and Eastern Europe.

Developers there tend to charge relatively less compared to their counterparts in the global West, yet still deliver stellar work.

The team members’ experience level also plays a role.

Senior developers typically charge nearly twice as much as a junior role, as this graphic shows:

Software developer rates in North America

Source: Devox

Mixing senior roles with middle or junior developers might be a good workaround if you’re on a tight budget.

The size of your team also impacts your price. This one is a bit obvious—after all, larger teams mean more developers that you need to pay.

So one good way to manage your costs is to optimize your team’s size.

But what’s the ideal size?

According to SmartBear’s survey of over 1,000 developers, the sweet spot is around 6–10 members for an app of average complexity.

Development team size percentage

Source: Perception Box

Of course, this is just a benchmark. The actual number will depend on your project’s requirements and the roles it entails.

Whether certain team members can juggle multiple roles will also be a factor, as it will determine whether you’d need to hire only one coder/tester for each of them, or if multiple hires will be necessary.

Speaking of roles, if you need developers with special expertise, that will also add to the price.

For instance, if you’re developing a fintech app, then you’ll need a cybersecurity expert. Unfortunately, expertise like that doesn’t come cheap—around $75 to $200 per hour.

The same is true of other professionals you’ll need, like blockchain and AI developers.

This is partly why creating a fintech app isn’t cheap—expect to shell out up to $300,000 for really demanding projects.

The choice of the target platform

Where you choose to deploy your app will affect development cost, chiefly because refining your app to fit the platform takes work.

This is especially true if you’re developing a cross-platform app, rather than a native multi-platform one. Consider the difference:

Cross-platform vs native app development costs

Source: Systango

This all boils down to extra effort.

With a native app, you must create and maintain two separate codebases for iOS and Android.

That also usually means hiring separate developers to handle them, effectively doubling your payroll costs.

Contrast this with a cross-platform app, where you only need to write code once and then deploy it to multiple platforms. Thus, this approach is both time and cost-efficient.

Also, you need to know that iOS and Android development have slight differences in cost. Take a look:

iOS vs Android development cost

Source: Ego

Notice how Android development costs more than a similar iOS app in North America. The exception is in Eastern Europe, where the difference is negligible.

That’s one of the reasons why we think you should outsource your projects there.

This discrepancy is largely due to the fact that it takes more work to develop an Android app.

There are hundreds of devices in the Android ecosystem, each with different specs, operating systems, and screen sizes.

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Thus, you must test your app on multiple devices to ensure it runs smoothly for all users. If it doesn’t, you need to think of a workaround.

All of that takes significant time and manpower.

iOS, in contrast, is more unified. Many programming complexities like memory are also handled in the background. That makes development far simpler and easier.

Also, many developers find that using iOS programming languages like Swift is easier and requires less time than their Android counterparts, like Java and Kotlin.

This can speed up your development time and, therefore, lower costs.

The complexity of the software

App complexity is perhaps the factor that influences development costs the most.

It’s common sense. The more features you want to have in your app, the more resources you’ll need to create them. That means added time, effort, and manpower.

To give you an idea, here are some ballpark estimates of how much complexity can affect development costs.

App complexity cost

Source: DECODE

Complexity can be measured by the number of features or screens the software has. But it can also be influenced by how advanced they are.

Take the humble login functionality, for example.

Building a basic login screen with minimal bells and whistles can be as cheap as $100.

But if you want to add advanced security protocols like 2FA or encryption, the cost could balloon up to $10,000.

The same is true with other advanced features like e-commerce capabilities. In fact, adding it to your software can add anywhere from $2,000 to $25,000 to your budget.

And that’s just the upfront cost. You also need to worry about maintenance, which could set you back a few hundred dollars a month.

Officience website building cost

Source: Officience

Adding automation technology like artificial intelligence (AI) and machine learning can significantly increase your development costs.

Fortunately, you can rely on third-party solutions to lower your costs.

For instance, you can use popular platforms like Zendesk or Meya to add chatbots to your app, typically costing less than $100 a month.

However, if you require a customized AI solution, be prepared to shell out $6,000 to $300,000, depending on the complexity.

Most of this cost comes from AI expert fees, usually $200 to $350 per hour.

The complexity of the design

Just as complex software can pump up development costs, so, too, can complex design.

That’s because custom UI and UX design take up a significant part of your development budget—around 18% for the average project.

app development budget example

Source: Freshcode

Software with a fancy user interface (UI), custom graphics, and elaboration animation requires specialized skills to develop.

That requires you to hire graphic artists and UX designers for your team.

As expected, expertise like that doesn’t come cheap. To give you an idea, here are the annual salaries of design professionals around the world.

UX design vs graphic design salaries around the world

Source: Career Foundry

This is especially apparent with mobile games.

As you know, games require plenty of custom graphics. Even the simplest 2D games have several assets that need to be built from scratch.

And if you want to develop a 3D game, that will cost even more. 3D graphics is a very demanding field, and talent is rare.

That translates to a high professional fee, which adds to your development cost.

Indeed, it’s why 3D mobile app costs start at $20,000, whereas a 2D game can be as cheap as $5,000.

Another consideration is your app’s logo.

Great logo design provides plenty of benefits to your app, including attracting more clicks to your app store page.

Unfortunately, it also doesn’t come cheap. Reputable designers can charge up to $15,000 for their work.

Logo design pricing

Source: Just Creative

The bottom line is that your software design tends to have a noticeable impact on your costs.

So it’s best to consider whether the added expense can also add value to your project rather than just being mere eye candy.

The ability to integrate with other software

Nowadays, most software is rarely standalone. More often than not, it needs to integrate with existing systems or third-party platforms.

Unfortunately, this is another added expense during development. How much it will cost you depends on several factors.

First, using custom integration is generally more expensive in the long run than using commercial software to do it.

Custom integration vs integration software relative costs

Source: Exalate

This is understandable. Building integration functionality from scratch requires significant development time, human resources, and funding.

Fortunately, plenty of cheaper, third-party options exist nowadays that can do the integration for you.

One example is Plaid. It’s an API that allows fintech apps to connect to a user’s account on other financial institutions.

That way, developers don’t need to implement integration for every existing bank.

Another is Open Banking, a free API that enables financial institutions to offer their services to third-party apps.

Open banking API

Source: Fortunesoft IT

Another factor that affects integration cost is the system you want to connect to.

The most expensive option is if you want your app to integrate with legacy systems.

That’s because older systems tend to be incompatible with modern software. Most are closed off and don’t support APIs, which means no external app can directly access their data.

They also present several challenges, such as security flaws and compliance issues.

This issue with legacy systems is common in financial institutions that want to modernize their infrastructure.

For example, they might want a mobile app to access their customer’s account information.

To get around this, you’d need to develop custom integration solutions such as a new API or data access layers (DALS).

Depending on the underlying system, this can cost anywhere from $5,000 to over $35,000.

3 common types of legacy systems integration

Source: Mod Logix

Contrast this with cloud-to-cloud integrations, which is far easier as most cloud platforms have APIs and web services for access.

As such, connecting your app with these systems can cost as low as $4,000.

The need for database migration

If your new app needs to import data from an older system, this will cost you as well.

In an ideal world, migration would be as simple as copying the data to the new software, and everything would run perfectly. But it’s rarely this straightforward.

Thus, you’d need a developer to write scripts to handle the migration process. As you can expect, this costs time and money. Plus, pitfalls during migration can further affect the price.

Key factors affecting database migration cost

Source: Mod Logix

The first factor influencing the cost is the data itself. If the data is in the wrong format or incomplete, it must be cleaned and processed first.

Larger datasets could make the process complicated.

Second is the amount of migration code developers need to write. Messy and incompatible systems would require complicated scripts to migrate.

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Chances are you’d also need to hire an expert to write it for you.

The third factor is the switching time from the old system to the new one. During migration, your current system might be down for a while, which could cost money.

Lastly, there are the potential differences between programming languages.

For example, if you need to migrate data between two different database systems, the incompatibility could be a roadblock.

Migration is often priced depending on the number of data entries. A ballpark estimate is $500 for every 1,000 records.

Make sure what you pay is worth it!

Unfortunately, sometimes there’s no escaping the fact that software development is expensive—especially if you want the best results.

That’s why the best thing to do is to ensure you get what you pay for!

And teaming up with the right software development team like DECODE can help you get the best return on your investment.

Have a project lined up? Get in touch with us today, and let’s talk about how we can bring it to reality—and within a reasonable budget.

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Written by

Marko Strizic

Co-founder and CEO

Marko started DECODE with co-founders Peter and Mario, and a decade later, leads the company as CEO. His role is now almost entirely centred around business strategy, though his extensive background in software engineering makes sure he sees the future of the company from every angle. A graduate of the University of Zagreb’s Faculty of Electrical Engineering and Computing, he’s fascinated by the architecture of mobile apps and reactive programming, and a strong believer in life-long learning. Always ready for action. Or an impromptu skiing trip.

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