How much does software product development cost? 6 key factors to consider

Ante Baus

11 min read

March 5, 2024

The software product market will reach a value of $2.5 trillion by 2028.

So, developing your own should be a no-brainer, right?

And it is – but, the cost of software product development is a common obstacle.

Here, we’ll discuss how much it costs on average and the factors that influence the cost.

We’ll also give you some tips on how to reduce these costs.

Let’s dive in!

Table of Contents

How much does software product development cost on average?

There’s no easy way to pin down how much your software product will cost to develop.

Every product has unique requirements and the cost of development can vary wildly.

Unfortunately, the best answer is – “it depends”.

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That’s because there’s a number of factors that influence the cost, like:

Type and complexity of your software product
Size and experience of the development team
UX/UI design complexity
The tech stack
Product maintenance and updates
The pricing model

But, on average, we can break down software product costs like this:

A simple product – $20,000-60,000$
A medium complexity product – $60,000-90,000$
A complex product – $100,000+

And this doesn’t include other services like product discovery.

In short, there’s no one-size-fits-all answer on how much software product development will cost you.

Your total cost will depend on a lot of different factors – we’ll discuss the main ones in more detail and give you tips how to reduce them.

Key factors influencing software product development cost

Now, let’s talk about the key factors that influence the cost of your software product’s development.

Type and complexity of your software product

The type and complexity of your software product is the biggest factor that influences software product development cost.

The first thing that will determine your cost is your product’s platform, like:

iOS
Android
Cross-platform mobile
Web
Desktop

Of course, if you target more than one platform, it will cost you more.

But, even then, building a cross-platform mobile app will be much cheaper than building 2 separate native apps.

And the second thing is the complexity of your product i.e. how many features and functionality it has.

A fintech app will be significantly more expensive than a simple utility app.

But, you can reduce these costs – even if you’re building a complex product.

And the best way you can do that is by building a minimum viable product (MVP).

source: TatvaSoft

An MVP is a bare-bones version of your product with only the core features included.

It’s the best idea validation tool and will show you if there’s market demand for your product.

And it’s much cheaper and less risky to build an MVP than a full-featured product.

And that’s why you should do it.

How to reduce these costs

Build a minimum viable product (MVP) – building an MVP will help you get your product to market faster and reduce development costs
Feature prioritization – make sure that the features you add actually meet your users’ needs and add value to your product
Use third-party solutions – if you use off-the-shelf solutions wherever you can, you’ll spend a lot less money than if you build everything from scratch

Size and experience of the development team

A good, well-balanced development team is essential for successful software product development.

But, the size and experience of the team is a major cost factor and can seriously affect your budget.

A larger team can work faster but increases the overall cost, while a smaller team might be cheaper but will take longer to develop your product.

An experienced team will also work faster and make fewer mistakes – but that expertise will cost you.

Glassdoor estimates that the average salary of a senior software engineer in the U.S. is $195,000 per year.

So, what are your options when hiring a team?

The first is hiring a whole in-house team – but keep in mind that just hiring and onboarding come with a lot of added costs.

source: Scribe

According to SHRM, the average onboarding cost is $4100 per new hire – so, just onboarding a team of 5 engineers will cost you $20,500.

The second option is hiring a group of freelancers to work on your product.

This is a much cheaper option but it has major downsides like the difficulty of coordinating them and quality issues.

And that’s why hiring a dedicated team is the best option.

The right dedicated team will feel just like an in-house team and it’s cheaper than hiring an in-house team and more reliable than hiring freelancers.

And the best part?

When you hire a dedicated team, you also gain a long-term development partnership.

And that’s why it’s the best option.

How to reduce development team costs

Use Agile methodologies – Agile methodologies like Scrum or Kanban will help you better manage your team and speed up development, which will reduce development costs
Hire a dedicated team – hiring a dedicated team is cheaper than hiring a full in-house team and more reliable than hiring a bunch of freelancers, so it’s the most cost-effective option for the long-term
Effective project management – effective project management is essential if you want to speed up development and cut costs

UX/UI design complexity

Your product’s user interface (UI) and overall user experience (UX) are critical to its success.

And investing in UX and a good design is a no-brainer – for every $1 invested in UX, you get a $100 in return.

source: UX Collective

If you do the math, that’s an ROI of 9,900%.

So, investing in UX is an absolute must.

But, if you have a complex UX/UI design, the costs can quickly add up.

Complex animations and interactive elements will drive your product’s development costs up.

And a fully custom design will be more expensive than a design made with pre-made templates and UI components.

But, the best way to reduce your UX/UI design costs is thoroughly researching your target audience and getting their feedback early.

No matter how complex your design is, getting it right from the start is much cheaper than re-doing it later.

And it’s the best way to reduce unexpected costs.

How to reduce UX/UI design costs

Use pre-made templates – using pre-made templates and UI components is cheaper and faster than designing everything from the ground up
Do iterative design – iterative design is a great way to cheaply test out ideas before committing to a final design
Keep it simple – designing a simple, user-friendly interface is not only cheaper but will also improve your product’s UX

The tech stack

The tech stack you choose when developing your software product has a significant impact on your development costs.

If you pick the right tech stack, you’ll develop your product faster – and time is money.

But, what is a tech stack, anyway?

A tech stack is the set of technologies used to develop your software product.

Here’s what a typical web app tech stack looks like:

source: Aha!

In other words, a tech stack is the toolkit your engineers will use to develop your product – and you want them to have the right tools for the job.

A number of different factors will influence your choice, like:

Your product’s platform
Your requirements
The project scope
Your team’s expertise

Also, it’s a good idea to choose tools and frameworks that support faster development.

For example, if your team uses React (front-end web development) and Flutter (cross-platform mobile development) they’ll be able to build your product faster.

And that can save you a lot of money.

But, the easiest way to cut those costs is using tools and frameworks your team is most familiar with.

This way, they can start immediately building your product and do it faster.

And that’s key if you want to cut costs.

How to reduce tech stack costs

Use open-source tools – open-source tools, libraries, and frameworks are free to use and often have large communities behind them, so using them can significantly cut development costs
Use cloud services – cloud services like AWS and Google Cloud charge on a pay-as-you go model, so they’re much cheaper than physical infrastructure
Focus on cross-platform tools – if you’re building a product for multiple platforms (iOS and Android, for example) focusing on using cross-platform tools like React Native or Flutter is a cheaper option than 2 native apps

Product maintenance and updates

Regular maintenance and updates are key for your software product’s long-term success.

They will keep your product functional, secure, and relevant in a highly competitive market.

But, maintenance and update costs add up quickly.

And over your product’s lifetime, they account for over 50% of the total cost of ownership (TCO).

source: LinkedIn

There are 4 types of software maintenance:

Corrective maintenance – finding bugs and errors post-launch
Adaptive maintenance – updating your product to work with new hardware and software environments
Perfective maintenance – improving features and performance based on user feedback
Preventive maintenance – updating security measures and optimizing code

As a general rule, you should budget 20% of your initial development cost for maintenance annually.

That sounds like a lot, but you also get a lot in return.

One great benefit is an improved user retention rate – 90% of users stopped using an app because of poor performance.

Regular maintenance and updates will stop that from happening to your product.

And that’s why it’s so important.

How to reduce product maintenance costs

Start testing early – if you start testing early, you’ll catch bugs and issues early in the development cycle which will significantly cut maintenance costs
Invest in continuous monitoring tools – using continuous monitoring tools will help you proactively address your product’s performance issues
Use automated testing – automated testing tools like Appium and Selenium will help you find bugs as soon as they happen and reduce your time and labor costs

The pricing model

If you’re hiring a dedicated team from a software development vendor, one major cost factor will be the pricing model you agree on.

There are 2 main pricing models – fixed-price and time and materials.

Fixed-price is where you agree to a set rate at the beginning of your product’s development.

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It’s a good choice if you have a simple project with well-defined requirements and you’re afraid of overpaying.

But, if your requirements change mid-development (which happens often), every change request will cost you extra.

And that can quickly add up – that’s why the time and materials model is a better choice.

It’s the best fit for modern, Agile software product development.

Here are the pros and cons of the time and materials model:

Pros

Flexibility
Control over the project
Scalability
Budget management
Quality

Cons

Over budgeting
Risk of a bad contractor

It’s the fairest compensation model for both clients and vendors, because it matches the actual hours and resources used to build your product.

And that’s why it’s the best choice.