# Software development pricing in 2021: a short guide

When you buy something for the most part you know what is it you’re paying for. In software development it’s not always that obvious. Maybe somewhere in the web you can find an average price for a piece of cake, but it’s much harder to find an average cost of custom software development.

So, what will be software development cost per hour?

Let's say that in 2021 the average custom software development rates are from $50 to $125/hr. custom software development rates depend on where your dev located or how experienced they are; is it the freelancer you’re working with or the software developing company. If we’re talking about an European company, you’ll have costs somewhere around 50-70$ per hour (according to Clutch), but if you need something closer - custom software development rates from 75$ and all the way up to 200$. We’re not talking about those companies because since you’re here you’re looking for someone like us. Here, in MassMedia Group 25-50&/hr is our average cost.

Way too many “average” prices, don’t you think? Well, but here you have it.

The costs of custom software development will depend on how many hours people are working on it. For example:

• basic software development takes around 500-700 hours;
• medium complexity software - somewhere in the range of 700-1200 hours;
• and if you need a complex software, it’ll take more than 1200 hours of development.

So now you can calculate yourself what will the costs of your software development be. It’s only roughly speaking because the amount of time that will be spent on your project also depends on what your project is. Mobile apps usually take less time, developing a streaming app will be somehow less expensive than marketplace app; but will take more costs than writing a booking app!

Complicated? And that’s not all!

But fear not, this article is meant to be a shortcut or a simplest instruction to how you can evaluate your software development pricing. So what can you do to make the costs as transparent as a glass?

Talk to the developer

Sure, you hire them and you already know what you want to see in your software. But being involved in the process by learning some of the new things can help you understand better whole process of the software development costs. Developers can enlighten you on a few things. Maybe they see something that can be added or fixed, and we really think you should have a talk with them about it.

Keep it simple

You want a transparency - make it yourself. Write down every single task, try to keep them as simple as possible until you can be sure that the developer you work with will be able to understand you clearly. That’ll help you define costs for each step and how necessary all these steps really are. Ask your team how many hours will they spend on your software development - you need simple but truthful data to do everything right.

Choose right

Choose to work with the right people. Look on their profiles on different services (like Extract or Clutch), look on what were their previous projects and what do their clients tell about them.

If you see your team is trustworthy - be sure, your project is in the right hands.

The developer company that is reliable enough won’t make the too high costs. Be sure you’ll get a fair custom software development costs if you put your trust in your people.

What also can affect costs from the inside of the company is:

• How many holidays will your developers team celebrate during working process?
• How many days off they need?
• How much time will take all the preparations for the work and how many hours will software development actually take?
• Which is the number of people working?
• THE DEADLINES - it can affect costs greatly, if a big project needs to be done in short terms.
• How big is your project?
• What platform do you chose?
• How many features do you need?
• And so many more…

Custom software development cost: determining factors

Fisrt: the platform

If you’re in the process of thinking we have one thing more for you to think about. If you need an app on which platform will it be? Is your app made specifically for iOS or Android, or both? Or maybe it’s a web-application? It is a big deal!

If you have an software designed only for Android you can’t magically transform in into iOS software. It’s impossible to change an iOS software to Android as well. They’re just too different and for developing each one different development tools are necessary.

If you need both - the costs will magically rise.

Also iOS software development usually is cheaper to develop but Android applications are more popular because Android took over almost 85% of the market. And therefore - since OS Android is so popular - development an software for this platform will be more time-consuming and the custom software development rates will be higher. There’s just too many devices running on Android and your software needs to work perfectly on every and each of them.

Second: who’re you working with

The experience of your staff determines custom software pricing. If you choose to work with juniors your software may not be perfect but will be cheap; if you’ll work with seniors, you’ll pay more but you’ll have quality. It’s not guaranteed though. Paycheck you’ll have in the end of project also depends on who your developer are and where do they live.

If you’re giving all the technical aspects of your project in the hands of a freelancer don’t expect any guarantees. If you’re hiring a full-time developer - be prepared to control them. And, finally, if you choose to work with companies... be ready for an impressive cost! But if you hire an offshore company to do all the work for you - you will be able to save some money and most likely get good results.

As we said before - location of your developer is also important. Nearshore companies are more expensive than offshore, and custom software development costs in US usually is high above the ceiling.

Third: UI/UX design

Better work on your app design because it’s the first thing to capture users attention. And, of course, you’ll have to pay for a better option. But remember that there’s always a way out from every situation.

If your budget is short and you need everything in its best shape, you’ll have to think sharp. What’s more crucial to your software - minimalism or a lot of functions and feature? If you need something as booking app or e-commerce, there’s probably no need to put lots of colorful things in it. But if your project is a social network you’ll need something unique just to make the cut. Ask your developer what they can do here, and if you can cut the costs here - do it. If not then not.

Forth: testing

Every single component of your software has to be tested. It’s important and we all know why. Your software will be tested by your developer many times but even after it’s all done you’ll have to make sure and do an acceptance testing. If something is wrong - give it back so all the bugs can be fixed. You don’t want your software to be glitchy of to crash every 5 seconds. Tests are crucial in the development process. That’s one thing you can’t cut you budget on. The testing costs will depend on the complicity of your project but it doesn’t matter how expensive it is - it’s vital.

How To Get Transparent Custom Software Development Pricing

We all pay for something every day, either coffee, water, gasoline, bills, etc. You probably would agree that getting a fair price on the items or services, has always been important. After all, who wants to pay more? We always have a desire to compare prices, whether for a sit-down dinner or shopping for different luxuries.

The startup founders and managers are experiencing something similar in the matter of custom software development pricing, since the average development bill is quite significant. On the one hand, they want to get a quality product. On the other hand, they are afraid to get an invoice, not fully understanding where such an amount of money came from. Customers worry about overpaying for the services of an IT company. This fear is justified, because according to cbinsights.com, pricing and cost issues are among the top 5 main reasons of startup fail.

We will tell you how you can get an honest price for software development, to stay aware of the whole product creation process, and succeed in your business.

The formation of a transparent custom software development pricing includes the following steps:

1. Quality project planning
2. Choosing the right pricing model
3. Contract with indicated planning results
4. Experience and reliability of the development team

Let's take a closer look at each of these stages.

.1 Quality project planning

Like any project involving costs, processes, and people, custom software development requires preparation. To make your tech startup successful, with all stages and processes established, it is necessary to carefully plan and organize its development. First of all, you need to carry out strategic and tactical planning. During strategic planning, your team determines the goals of the business project and develops a strategy to achieve them. After that comes the time for tactical planning. At this stage, you have to determine the deadlines for achieving goals, decide on the necessary resources, and most importantly, write down the specific actions.

That's where the fun begins. During tactical planning, you carry out:

• architectural planning;
• operational assessment;
• implementation planning.

More to the point, you need to:

• create a logical architecture for product development, define milestones (large parts of a project) and specific tasks;
• discuss all organizational issues, estimate the work load, assign different tasks, ensure that you have the appropriate quality and quantity of performers, and the necessary finances;
• choose a methodology for development (scrum, waterfall or another);
• select the appropriate pricing model.

Of course, you can try to do this on your own, or you can go the easier way and seek the help of specialists with experience in creating unique projects for the individuals specific needs.

A great advantage of startup planning is that you can create an architecture in a way so that you get only the essential functionality. It will be developed without any unnecessary features, the creation of which requires more costs. That is, IT consulting allows you to get a product solely developed on the basis of customer goals and desires.

High-quality project planning with the help of Startup consulting, even before the conclusion of the contract, enables you to plan all aspects of the project in such a way that prevents the risk of overpaying for the custom software solution development. Consulting allows you to fairly accurately determine the amount of work on product development and make accurate estimates and calculation of cash. In turn, your company loses the risk of overpaying or receiving not what was expected.

.2 Choosing the right pricing model

As you can see, part of the planning of the custom software development is the choice of an engagement model or pricing model. In simple terms, the pricing model is a way in which the cost of software development services and the method how the customer pays for these services are formed. So the choice of pricing model is that the software customer and their supplier decide how much, when and how the payment for the IT company services occurs.

There are several types of pricing models that suit different projects. Each of them has its pros and cons, but they are only their particular features. Their characteristics suggest which pricing model is the most suitable to your circumstances and will help you to be aware of what you are paying for, and when you are doing this. You have the right to choose the model that will be the most effective in your specific case. For example, you can opt for a pricing model that allows you to be as involved as possible in the development process.

Software development pricing models :

• Fixed price - Fixed Price;
• Time and Materials;
• FFF - Fixed time, Fix budget, Flex-scope;
• Dedicated Team;
• Milestone based model.

Pricing Model - Fixed Price

The name of this software project pricing model speaks for itself. After a detailed analysis of the complexity and scope of the startup, the software company sends their client a project implementation plan and a fixed budget of the entire software product development. Due to this pricing model, the exact cost and terms of startup development are determined and do not change for the client.

Be aware, there is one "but"! If the client wants to add a new function that is not in the documentation, after the agreement of the parties, it's drawn up by an additional agreement to the contract. In this case, the client will have to pay extra. Strict terms of the Fixed Price contract provide minimal risks for the customer and high risks for the software provider, because the customer will not pay extra for additional development hours that may be needed.

Pros

• Works for medium and small projects, as well as for MVP
• For a client, the cost of startup development doesn’t change
• Strict adherence to the development deadline and result predictability
• The price remains fixed until the customer has changed the requirements
• Does not require client control, since all the details were spelled out in the planning

Cons

• Preparation takes a lot of time
• Detailed documentation is required before the start of software development begins
• Not suitable for working on large and complex projects
• Partners agree on the necessary changes and indicate them in an additional agreement to the contract
• The execution of additional agreements to the contract may slow down the startup development

Pricing Model - Time and Materials

This pricing model is characterized by more flexible terms and costs. The project cost is formed from the provision of established payments for the time spent on development. That means that the customer pays for the actual working hours of the developers at the rates previously agreed with the IT company. At the same time, the client pays gradually as sprints or tasks are performed.

Pros

• Works for long term tech projects
• Gradual payment for the finished result
• Quick start - no need for lengthy planning and documentation
• Process transparency and contact with the customer throughout the project
• Ability to make changes in the development process

Cons

• Not fixed startup deadlines
• Unable to accurately plan your budget
• Time required to work with the project development team

Pricing Model - FFF — Fixed time, Fix budget, Flex-scope

With the FFF pricing model, everything is simple: the deadlines and budget of the tech startups software development cannot be changed under any conditions, which includes work scope adjustments. What does this give you? The ability to plan a budget before beginning a startup, to know final custom software development cost, and date of release. Who owns knowledge also owns the world. Quite possible. But we can confidently say - who knows the price and release date of a startup - to these ones it's easier to plan their expenses and project launching. An important feature of this pricing model is that under these conditions, the work quality does not suffer.

Working by the FFF model, adhering to the established deadlines and budget, the customer and the development company work together, setting priorities. Imagine that a client ordered the application development for trading with $200 budget. If at some stage the client with their wish list exceeds the budget, the team changes functionality, giving preference to the most important functions. As a result, the budget is not exceeded, and a quality working application is released on time.

Pros

• The ability to get a quality product with a limited budget
• Strict deadlines
• Changes in the scope of work do not affect the development cost
• The contractor and the customer collaborate in the development process

Cons

• Constant customer cooperation with software solution vendor
• The executing company should be flexible in its work, make sure that it does not exceed the budget and plan its work well

Milestone based pricing model

A characteristic of the Milestone based pricing model is that the work development scope is pre-divided into separate parts, or milestones. In most cases milestones are not the same, as it takes a different amount of time and, accordingly, client funds to create different functionalities. So IT company in turn, depending on the importance, completing one milestone proceeds to the next. Thus, in the same way as in the Time and Materials pricing model, the customer pays gradually, with the only difference being that they pay the planned costs for each successfully completed milestone.

Pros

• Software solution customer pays for individual workloads
• The client does not pay one large sum for the entire project development
• The team is motivated to receive a fee for the work, so it performs tasks efficiently
• The client pays for the actual provided functionality
• Low risks, transparent work, and predicted results - since the project is under the client's control

Cons

• There is no fixed price. The development of each milestone requires a different amount of time, so they have different costs
• There is no way to determine the exact release date
• Approximate project budget

Pricing Model - Dedicated Team

Before starting development, the software customer and the IT company discuss the product requirements, workload, and calculate the time needed to complete the project. At the same time, the software development company provides the customer with a dedicated team of necessary IT professionals that meet their requirements and expectations. Each month, the software customer pays for the work of this team. This model is different in that the client controls the entire project development, and the software company helps to solve organizational issues. It is good to use it when the client knows in advance that the requirements will often change.

Pros

• Works for complex long-term projects
• Client significantly saves on infrastructure
• The client fully manages the development team
• Your dedicated team devotes 100% of its working time to your project and deeply understands your product
• The team works on a long-term basis and is interested in quality

Cons

• Dedicated Team pricing model is the most expensive cost wise
• Big expenses and time for managing a development team

Each pricing model is suitable for different projects and under different circumstances. But the right choice of model allows you to get transparent custom software development pricing.

Let’s keep going.

.3 Contract with indicated planning results

One of the most important components of the qualitative formation of a transparent software development pricing is the preparation of a contract between the customer and the vendor. This is a document where the results of planning the development process of the entire software product are indicated. Such a contract is necessary, primarily for the fact that it gives certain guarantees to both parties and eliminates many risks.

So what should be in the contract?

In short, the partners write in it the results of IT consulting, namely:

• all estimated tasks (or sprints, milestones);
• the number of required people in the project team and their specialization;
• technical issues;
• organizational issues;
• the selected pricing model that we talked about in the previous section;
• financial expenses and the cost of the project (if possible according to the project type).

The final cost of the project development, whether it's exact or approximate, can be obtained simply by summing up the estimates and the agreed costs. It depends on the pricing model. All this ensures transparency of custom software development pricing. In this case, the software development solution customer can see how the price is formed or, speaking more simply, what they spend their money on.

One of the options for ensuring price transparency is also a code warranty. It doesn’t just help an IT client go to bed without a sedative. A code warranty means that the final price of the development will not change due to the fault of the vendor. If something happens, you will not need to frantically search for a new service supplier or additionally pay the previous team for troubleshooting and maintenance. They will do it for free. When a company gives such a guarantee, it means that it is doing its job efficiently and knows that no modifications are required.

.4 Experience and reliability of the development team

Planning, strategy, pricing models, a detailed contract between the parties in the custom software development - all this is undoubtedly important, you probably have already managed to verify this. But how can you be sure of transparency pricing without having a trustworthy team behind it?

To implement a successful project, you need a reliable team, a software vendor, which:

• has lengthy experience in software development;
• finishes projects on time;
• gives certain guarantees;
• offers reliable protection of your data;
• provides complete confidentiality of the entire development;
• concludes a contract.

You are ready to entrust your business project to such a team, right? All this indirectly gives the client confidence that the reliable team of the IT company is the one that can take responsibility for the project. Having done their work qualitatively, the team will complete what has been started, right up to the point it will correct the errors at its own expense in the shortest possible time and without noticeable loss to the customer.

To summarize the above, transparent custom software development pricing is real. To provide it for your business you need:

• to carry out the quality project planning;
• choose the right pricing model;
• enter into a contract;
• work with a reliable team.

In the end, transparent pricing is what should and can be provided by a software company, because it’s not just a matter of money. For example, to give maximum confidence in the final result our company provides customers with a lifetime code warranty. We also realize that transparent custom software development pricing is primarily a matter of normal relationships, trust, and the ability to work with the customer in order to create a really cool product together. It’s worth more than money, right?

Let's talk about your project!