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09.03.2022 | 6 min

Custom software development: What factors determine the cost?

How much does the software cost? It depends on the difference between off-shelf or custom software development. Check how the Agile process help to estimate the amount of work in the project.

Custom software development: What factors determine the cost? - 2022 45
Table of Contents
  • Off the shelf vs. custom software - what's the difference?
  • What is worth explaining at the beginning?
  • When we take over a project from another company
  • How does the Agile process help to control costs?
  • Why do other companies specify the exact price of the software?

How much does the software cost? It is one of the most frequently asked questions by Startup owners and companies scaling their business by creating custom software. However, the answer is not apparent, and it will not be a surprise to learn that the price depends on many factors.

Today, from our perspective and experience, we will tell you the difference between custom and standard pricing and what these differences are. You will also see the main advantages of flexible cost estimation.

Off the shelf vs. custom software - what's the difference?

An off-the-shelf software solution (Commercial Off-the-shelf (COTS) software) is readily available in the market. It contains all the necessary functions available for the process in one application. But unfortunately, its limitation is that it cannot be adapted to the specific needs of business users. Such an example of ready-made solutions is Microsoft Office or Adobe.

On the other hand, custom software is a solution prepared specifically for the needs of a particular organization or company. Companies can get digital solutions designed specifically for their needs and processes, manage their operations, and optimize data security with custom software. At Order Group, we specialize in custom software development because business optimization and accuracy have become key factors in sustaining growth.

What is worth explaining at the beginning?

A thorough analysis of project requirements plays a significant role from the beginning of the custom software development process. We don't do standard and repeatable things that we can quickly estimate. We always try to approach the project, defining business requirements, scope, and task needs at the beginning of the process. The point is to match the project to the financial resources and necessary functionality.

We try to approach the project as a partnership for the final product to succeed. That is why we encourage our clients to tell us about their idea for a product because it will often be the primary tool of their work, while we want to turn out to be a guarantor, a group of specialists who will take care of every detail of the project. We are not afraid to tell our clients not to waste their time and money on an application that the market will reject at the very beginning.

What can you do to make it easier for us to estimate costs and help us manage your budget well?

  • Clearly define your goals in advance. Let us know what features you want to include in your software.
  • Provide mockups (if you have them)
  • Give competitors or their software examples and the features you like and want to include.
  • Refine the Backlog so that work can be updated to meet current needs to reduce software development costs

When we take over a project from another company

If you have an existing system that needs to be rebuilt, it is more complex and requires more work. It is necessary to have accurate technical documentation.

Initial work and cost analysis

When faced with this type of project, then need a specific range of hours - from 40-60, so that a senior developer or analyst can thoroughly look into the project and create a report. We define what we think is possible to run, what is done wrong, and can still be "saved." A particular point of introduction establishes the scope of work, but it can not be priced to the proverbial "penny."

An audit is a valuable tool that gives the client information about the project's status.

It is a specific basis for the appropriate development of works and assessing possible development paths for particular stages of project works. Additionally, suppose the client decides to cooperate with another company for some reason. In that case, the audit is such a knowledge base that it is of value to him in developing the project.

Every project has different needs.

Each product has different needs and problems; for example, a product that appeared on the market as MVP requires an appropriate approach for further development.

When we decide to develop some functionality, we are always transparent and advise the client what can be done with it, how to set it in stages, and what can be left.

On the other hand, it is not always easy to accurately estimate the project when integrating with other systems. In such a situation, we try to make some assumptions and project risks; in subsequent iterations, we consider the scale of changes. Then divide the project into modules assessing all the risks, challenges, and difficulties relevant to the valuation.

For example, we may estimate that integrating a given system will take a certain amount of time, but this may prove insufficient over time. Therefore, to provide the client with certainty and transparency of costs, we refer to the previously prepared document specifying the scale of work.

How does the Agile process help to control costs?

We often encounter complex projects in custom software development, where sometimes hundreds of burning issues need to be solved. It is when an Agile approach is best. We understand that the budget is essential, and we make sure that it is not shifted in the scale of the project, but at each stage, we give the customer a choice which functionalities to develop, and we make the decision on the fly.

Transparency

In Scrum methodology, all components, functionalities, and requirements are placed in the so-called Product Backlog. It is a list of all conditions that the developed application should meet. Unlike classic documentation, Backlog is very flexible and can be adapted to the situation.

We can introduce changes, additional elements, and other improvements without going back to the initial planning phase.

With each sprint, the Product Backlog shrinks, and estimates of progress velocity, remaining time, and costs become more accurate. It becomes clearer whether the project is on schedule and whether additional changes can still fit into the budget or must be omitted to reduce costs. Flexibility allows the product to be refined according to the product owner's vision to ensure that the final product meets expectations.

The earlier new functionalities are proposed and entered into the Backlog, the faster we adjust the requirements and estimations.

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You pay for what you get - not for promises

The method based on sprints also helps to be flexible in the financial area. Each sprint can be billed as a separate "product," so the client doesn't have to pay for the whole project at once but gets invoices for each sprint. It gives him a lot of freedom and, at the same time, control over the company budget. It only pays for work done within a specific timeframe, not the total amount for the entire project.

Why do other companies specify the exact price of the software?

By building reproducible and straightforward things, it's easy to do pricing, e.g., you set up a CRM for a company, you use an off-the-shelf solution where you know the entire business process and exact development time to estimate the cost.

Different areas have an impact on costs.

However, custom things from different industries adjusted to different assumptions are more complicated. Our projects have other topics from extremely other areas, such as drone control applications, airport control applications, or complex fintech products—each time, we evaluate which functionality is the most important and determine the estimate with the client. As an experienced partner for custom software development, we are always ready to help if you have questions or concerns.

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