Software-making cost estimation means calculating the overall costs associated with a software development project within its scope. Software development costs mainly entail the direct and indirect costs linked to making a project plan to completion, and this may include labor costs, overhead costs, vendor fees, etc.
However, the process of estimating software development costs is complicated. Without proper technique and strategy, there will be a high risk of budget overruns. Nobody can figure out the exact cost before the development process, but if you follow the proper technique and tips, you will get a clear idea about cost & prevent unwanted expenses. Continue reading to know how to avoid development cost overruns.
Prerequisites to Calculate The Cost of Software Development
The process of software development cost estimation is long and daunting. So, you need to follow certain conditions to streamline your cost estimation process. Prerequisites to estimating development costs include:
1. Project Goals
The very first step is to set your project requirements and explain them adequately to your developers through an initial conversation. Highlighting a reasonable goal and requirement will help you estimate software-making costs effortlessly. On the other hand, project goals allow developers to stay aligned and focused on your project. Therefore, a well-defined project goal makes the custom software development process seamless and provides better cost estimation.
2. Target Audience
Determining the target audience is another critical stage of the software development process. The target audience clearly shows people’s interest in your products or services. So, before you estimate the cost of making software, you need to focus on the target audience. For that, you may conduct market research, in-depth competitor analysis & find out the latest trends and technologies. All of them will help you learn about your target audience so that you can effortlessly estimate the budget based on your customers’ requirements.
3. User Journeys
A complete user journey map helps to visualize overall user flow through the software. Technically, if you make a customer-oriented map, it will allow you to determine the entire development flow, and it will give you an idea about custom software-making costs.
4. Software Type
Finalizing the software type is important before estimating the budget, and this is because the overall development cost strongly depends on the features and functionalities of the software. Simple software with a very basic feature costs very less than highly complex and well-integrated software with multiple features.
You also need to focus on ongoing software maintenance and upgrading costs. For your convenience, here we have shared a table that mentions average development costs based on complexity.
| Software type | Software Features | Time frame | Estimated cost (USD) |
| Simple software | simple UI/UX, zero third-party API, standard data processing | 2 to 3 months | $10,000 – $45,000 |
| Software with medium complexity | Real-time data analytics, payment integration, personalized UI/UX, chatbot support, and device integration. | 3 to 6 months | $50,000 – $85,000 |
| Software with high complexity | Complex UI/UX, 3rd party API integration, encryption, optimized performance, data-synchronization, high software compatibility. | 6 to 9 months | $90,000 – $200,000 |
Software Development Costs – Tips to Avoid Your Budget Overruns
A custom software development project has several stages. So, there will be a high risk of budget overruns if it’s not properly estimated. So, as a business owner, you need to focus on specific tips that will help you avoid such unexpected overruns:
1. Align Your Project: The fastest way to prevent project cost overrun is that you need to align your project scope as early as possible. You can also conduct a primary assessment of the budget estimation that will help you address flaws before development.
2. Consult With Your Experts: Every reliable custom software development company has proven expertise in this field. So, once you have set all your project requirements, you need to consult with your expert developers directly. They will help you make a proper estimation based on your business needs.
3. Make an Alternative Plan For The Unexpected: Custom Software or custom application development is a long process, so you have to be prepared and make an alternative plan if any problem or delay occurs during the development phase. Alternative plans may help you save from unexpected cost burdens and find the right solution to prevent them.
4. Define Your Project Milestones: Try to divide your entire software-making project into several deliverables and create targets for all of them. This will help you track the costs of each development stage.
5. Monitor Work Progress & Costs: Regularly monitoring and reviewing the work progress help you analyze software development costs and save you from unexpected burdens. Apart from that, during the development stage, making strong communication with your developers is also important.
Techniques for Software Cost Estimation
Software development cost estimation is a technique that helps to find out the overall cost evaluation. There are three important techniques used for accurate cost estimation. These techniques will give you an idea of the overall cost estimation process.
1. Empirical Estimation: This technique utilizes data from the same projects that were previously used for calculating the costs of software development. It also helps you collect information depending on assumptions & guesswork as well. Apart from that, evidence-based techniques can also be applied to predict the cost of software development. This cost breakdown method needs previous & similar software development experience. Though this technique depends on assumptions, it has the ability to offer rough and clear cost estimates.
2. Heuristic Estimation: The heuristic estimation method is used for calculating the average software development cost. This technique or approach can effectively address cost estimation & help in making the right decisions on highly complex software projects. Apart from that, the heuristic estimation methods also allow you to estimate the cost by finding out the relationships between several project elements and parameters. Constructive Cost Model or COCOMO is a great example of this technique that utilizes a regression method with some important parameters to estimate development cost.
3. Analytical Estimation: This is a work-measuring method that depends on dividing tasks into several component operations & elements. After that, each standard time of operation is properly applied based on gathered information from previous experience. This process is done by industry professionals who have the expertise and know all aspects of important workflows. That’s why analytical estimation only gives an accurate result as compared to other techniques.
Final Words
The cost estimation of software development depends on your software type, the developers you choose & technologies they use. The above-mentioned tips and factors may help you avoid budget overruns and give you proper knowledge of software development cost estimation. Need a proper estimation? Talk to our experts. Here at Sphinx Solutions, our professionals are always upfront about software development costs, providing an honest & precise algorithm for estimating the costs of custom software applications.