Tips for reducing custom software development costs

11 min read
February 13, 2023

Cost is perhaps one of the biggest headaches in software development, for clients and developers alike.

It’s no secret that software is becoming more expensive to create than ever before. Nowadays, it’s going to be difficult to create a quality app for less than $10,000.

And that’s not counting the uncertainty that surrounds software development. Even a few planning mistakes can balloon costs dramatically.

That’s why it would be prudent to familiarize yourself with tactics that could help you minimize your software development costs.

Let’s begin with the most important.

Document your requirements

Having clear requirements is critical if you want to control how much you spend on a project.

After all, how would you know which resources you need if you don’t know exactly what you aim to accomplish?

The problem is that most software project teams don’t document the requirements well enough. Or they just prefer to forego documentation to save on costs, as the comic below depicts:

Software project documentation comic

Source: Soshace

The situation above might be more common than you think. Unfortunately, a lack of documentation guarantees misunderstandings throughout development.

The result? You’ll spend more time and money fixing those errors. Not to mention it’ll give the client a bad experience.

The best way to avoid this is to define your project requirements clearly. Then, write them down in a software requirements specification (SRS).

An SRS defines what the software does, who it’s for, and the problem it’s trying to solve. In other words, it’s a blueprint of your software.

Here are some crucial components to include:

SRS document elements

Source: Relevant

An SRS should contain both functional and non-functional requirements.

Functional requirements describe what the system does. Specifically, it lists the product’s features and how it will fulfill the user’s needs.

For example, one of the functional requirements of Uber would be to “allow users to select the specific type of ride they would like to book.”

Non-functional requirements, on the other hand, refer to how the system should do it. This pertains mostly to performance metrics.

For instance, a possible non-functional requirement for Uber would be to “allow users to book a ride within five minutes.”

Functional vs non-functional requirements

Source: Lvivity

With a comprehensive SRS, it’s easy to determine the exact resources required to make it a reality.

It will also help you write other documents, such as a statement of work and master service agreement, that can help you manage the project better.

It might seem tempting to skip documenting your project requirements because it takes time and money.


It’s hands down the most important tool you have for keeping your costs manageable.

Consider your outsourcing options

A big chunk of any software development budget goes to payroll.

Thus, it’s a good idea to outsource development to someone who provides excellent results at an affordable price—through outsourcing.

This is viable because developer rates aren’t equal globally. In fact, the discrepancy is huge, as the map below makes evident.

Offshore software development rates by region

Source: Fulcrum

Now, you have two options here—nearshoring or offshoring.

Offshoring is the classic setup, where you hire a team from a distant country that offers the best cost savings, such as an American company sourcing an Indian developer.

However, there are huge obstacles, such as the language barrier and time zone differences.

A good alternative is nearshoring or hiring a developer from a nearby, usually neighboring country.

Doing this still gets you the benefits of offshoring while reducing cultural and time differences.

Offshore outsourcing vs nearshore outsourcing

Source: Timour Procopovich

Consider a company in Western Europe that wants to hire a software development team.

They can cut their costs by up to 75% if they hire a Croatian developer like DECODE (which offers both nearshore and offshore services) instead of sourcing it locally.

By the way, if you’re a North American or Western European company, Croatia is a fantastic outsourcing destination.

It has a large talent pool, excellent English proficiency, and great value for the cost.

Indeed, the 2022 Future of IT Report considers Croatia an “underrated ICT hotspot.”

But no matter where in the world you choose to outsource, you should consider it in your next project. It could lead to significant savings.

Choose the right methodology

Choosing the right software development methodology can single-handedly help you control your costs.

Agile approaches like Scrum or feature-driven development work best for this.

The reason is that these methods are iterative. Scrum, for example, divides a project into mini-phases called sprints.

Each sprint includes all activities of a full development cycle, from planning to testing.

Scrum methodology

Source: DECODE

As a result, you can build and evaluate software faster and much more often. The process also naturally involves the client more, so they can constantly give feedback throughout.

You can also find defects and issues much earlier in the development cycle. Not only does this lead to a more stable product, but it also helps you avoid costly fixes later on.

For proof, check out the diagram below:

Agile vs Waterfall defect detection


You can see that bugs were detected almost immediately using an Agile approach. In contrast, a more traditional methodology like Waterfall delayed detection until much later.

Agile methodologies can also help you navigate a phenomenon called the Cone of Uncertainty.

First coined by software engineer Steve McConnell, this refers to the fact that cost estimates vary by as much as 400% when done at the beginning of the project.

Thus, any predictions will most likely be wrong.

The variance is most severe when using a linear methodology like Waterfall.

Waterfall cone of uncertainty

Source: Envoc

This uncertainty, however, can be reduced with Agile methods. Thanks to rapid iteration, the team can quickly refine the software earlier in the project.

This can also help narrow down a more accurate time and cost estimate much earlier.

Agile cone of uncertainty

Source: Envoc

Note, though, that there’s no one-size-fits-all methodology. Every software project requires a different approach.

In fact, the Agile approach can end up costing you more money when used inappropriately.

If you’d like to know more, we’ve written an excellent article on software development methodologies.

Select the right tech stack

Selecting the right tech stack can make a huge difference in your bottom line, so you must put the appropriate amount of time and effort into that decision.

Your tech stack refers to the technologies you’ll use to develop your software. This includes the programming language, third-party tools, hardware, database systems, and cloud services.

Here’s a typical tech stack:

Tech stack example

Source: Surya Solutions

Every software requires a different tech stack. For example, fintech apps would benefit from a more secure language like Java and APIs like Open Banking.

The danger here is discovering you used the wrong tech stack in the middle of development.

When this happens, you have no choice but to redo everything—wasting time and money in the process!

So, how do you choose the right tech stack? Here are a few best practices.

First, look at your budget. Some tech stacks will be much more expensive than others, so you must decide if they’re worth the cost.

Also, determine if a free alternative would be a better approach. For instance, OpenStack is a free, open-source alternative to Azure for cloud computing.

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Next, look at the expertise of your team. It’s better if a team member is already well-versed in the technologies you will use.

Otherwise, you’ll spend time and money ensuring that they learn it.

If you plan to scale your software in the future, make sure your tech stack allows you to. Otherwise, it might disrupt your growth later on if you need to migrate to a new platform.

Finally, you should consult your development team before making any decisions relating to the tech stack.

They would know the technologies and programming languages that work best for your project.

Build an MVP first

A minimum viable product (MVP) is a bare-bones version of your app that contains only the essential features.

Its main purpose is to validate your idea before you commit more funds to the project.

An MVP is a powerful cost-reduction tool because it allows you to get feedback from end users and clients early in the process.

You can use this feedback to refine your MVP, enabling you to get even better insights.

This virtuous loop can help you detect and fix problems sooner when they’re cheaper to tackle. At worst, you’ll avoid spending money on a project that’s doomed to fail.

Feedback loop

Source: Prototypr

MVPs also allow you to collect key metrics early on, such as load times, user engagement, and crash rate.

This valuable information can help you improve app stability before launch, reducing the chance of expensive downtimes.

No wonder almost every successful app right now, from Uber to Facebook, began life as an MVP.

Uber app MVP

Source: Enlume

MVPs work because they’re relatively cheaper and faster to produce than a full-fledged app. The typical app costs a minimum of $40,000 to build, but an MVP is only a fraction of that.

So while MVPs might cost you money, in perspective, they could save your budget.

Begin testing early

Traditional software development postpones the testing phase until later in the process. But this could be a critical and costly mistake.

If you want to minimize costs, testing your software as early as possible is the best approach.

The reason you should do this is shown in the diagram below:

Relative cost of fixing defects

Source: Segue Tech

As you can see, fixing a bug is 100 times more expensive when the software is already launched. In other words, you can cut your costs by up to 99% if you catch errors early on.

This is called the 1-10-100 Rule.

The 1-10-000 Rule is why Agile methods like Scrum are so great at producing quality software. If you recall, these methodologies involve early and constant testing.

But there are also other frameworks that you can use to ensure you test early enough. One of these is the software testing life cycle (STLC).

Software testing life cycle

Source: Jelvix

The software testing life cycle is a framework that ensures systematic and consistent software testing throughout development.

In this method, the QA team is involved at the very beginning. Once the project requirements are fulfilled, the testers begin to analyze them and devise a testing plan for the project.

They’re also vital once the software is launched, as they compile all the test documents and hand them over to the maintenance team.

With the STLC, the QA team takes on a more prominent role. This allows you to achieve a stable, high-quality result.

Take advantage of automated testing

Testing is an essential task for ensuring quality software, but there’s no denying that it can be expensive and time-consuming.

Fortunately, you can use automated testing to help reduce some of that cost.

Automated testing runs a test case on behalf of a human tester. It does this through a test script, which is code that instructs the computer on evaluating the software.

As expected, automation speeds up testing dramatically. This, in turn, reduces the payroll costs of your QA team.

Pros and cons of automated testing

Source: DECODE

Automated testing is also capable of consistent, repeatable tests. It helps mitigate human error, which could help you uncover more errors than manual methods.

Unfortunately, automated testing only applies to tests that can be quantified. For example, measuring load times and uncovering technical errors can be revealed with automation.

However, subjective metrics like UX and aesthetics are beyond the capabilities of automation. These require the judgment and opinions that only a human tester can provide.

Nevertheless, using automation when appropriate can help lower your project costs.

The best cost-reduction tip

We have one last tip for you, and we feel it’s the most impactful.

Hire the right team!

An experienced, skilled, and reputable development team like DECODE can do wonders for your budget.

Our ability to create quality software on time and with minimal bugs can help you manage your costs easily. Not to mention we have a few proven money-saving tactics up our sleeve!

Interested? Schedule a free consultation with us today, and let’s talk!

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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