How much does custom software development cost?
December 2019 | 6 minutes
By Jean George, PhD
Determining the cost of custom software development is tricky business. Are we talking desktop, web or mobile? Is it software for a specific hardware device, or perhaps something even more outside the box? And what kind of end-users are we talking about - general public or highly trained personnel? It's far too difficult to explore all the permutations, so in this article we'll just touch on some generalities based on math, rules of thumb, and Open Sky's 20 years of experience in the industry.
The Short Answer
Custom software development is expensive. There is simply no way to side-step the necessary investment with fancy frameworks, nifty mash-ups, artificial intelligence, independent contractors, or overseas wheel houses. Certainly there are the occasional exceptions, like very small mobile apps, simple device drivers, or integration APIs - yet even those are typically sub-projects of a larger work. The upshot is to be realistic.
The Math Answer
The math is fairly straightforward. The average software engineer is a college educated workhorse who's earning anywhere from $75-150K per year depending on their degree, experience, preferred coding language, location, etc. Industry standard labor costs for professional service industries run between a third to a half of sales. So if you take a typical 2000 hour work-year and reverse engineer the math, the hourly rate for software development lands somewhere between $75-225/hour nationwide. So if a project takes as little as a week to complete, you're staring at the cost of an (old) used car. And few things in custom software take just a week.
The Open Sky (long) Answer
Open Sky has over 20 years of experience with projects large and small. And no matter the size, by employing a modified agile methodology with delivery cycles twice a month - we're able to control outcomes and steer projects towards success. In our experience, simple projects can take several cycles with a small development & design team yielding costs in the neighborhood of $25-100K. Intermediate size projects typically require multi-person teams, several months of iteration, and regular contributions from our in-house project management and creative for things like design, look & feel, quality assurance testing, and ease-of-use. These intermediate projects fall in the neighborhood of $100-500K. And our largest and most complex projects involve expanded teams, longer horizons, and costs that exceed $1M. No matter the size, we keep our client's on-track using conservative approaches that leverage the best of open source technologies and agile methods for lower costs AND a superior degree of customization for our client's competitive advantage.
What are the Costs of Software Maintenance?
You designed, built, tested and released a product to production. Now what? How much will it cost to keep things in ship shape? Opinions vary, as maintenance is frequently a mix of repairs (bug fixes), enhancements (new features), and technical debt servicing (legacy code requiring updates). As a general rule of thumb, at Open Sky we use a 15-20% maintenance rate ... meaning if you invested a dollar to build it, expect to pay 15-20 cents per year thereafter to maintain it in good shape. This cost is frequently overlooked and not planned for, to the detriment of orchestrating a successful project.
Custom software development should not be taken lightly. The investment is significant and the risk is high. In the industry some 8 out of 12 custom software projects fail, and do so catastrophically (meaning a total loss). Based on our surveying of prospective clients over the last 20 years, the majority of those catastrophic losses result from hiring inexperienced teams, hoping for silver-bullet frameworks to magically save costs, or from communication failures associated with outsourcing. At Open Sky we keep our client's on-course using our professional in-house, on-shore engineering team yielding certainty of success and superior results.