Custom Software Development Project Estimation Guide

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Key Takeaways

• It’s essential that businesses do a comprehensive research on software development cost to avoid exceeding budget and timeframes.
• Approximate budget calculation, vendor research, and development plan with the project scope evaluation are keys for successful software development outsourcing.
• Custom software development cost and timeline is determined by its type, complexity, and the team’s size and location.
• The common software development assessment techniques include the algorithm method, expert opinion, analogous testing, and three-level estimation.

Estimating software development cost is one of the primary issues to tackle before making your project run smoothly. Why? Because you can’t just pick one of the offered pricing models and click on the “Apply” button.

One-size-fits-all solutions gradually lose relevance since each digital product requires a unique, individual approach. Thus, you can’t tell how much your project will cost without a detailed preliminary investigation.

If you fail to conduct comprehensive research, choose the proper software development cost estimation methodology, and build a viable plan, the outcomes may be critical. According to Forbes, the average IT project overruns its budget by 27%. Even worse, one in six tech projects may go 200% beyond budget and 70% beyond schedule.

We at Acropolium have rich expertise in conducting result-driven investigation phases and helping our clients perform accurate custom development cost calculations. This post will explain why project estimation is essential, what factors to consider, and the most popular techniques to implement.

Why Is Software Development Estimation Important?

First, it’s worth noting that the estimation is not the same as the project budget. Instead, it’s an approximate calculation that helps get an idea of the average cost of software development, timeline, required talents, and scope of work. Meanwhile, the budget is an integral part of the agreement between a product owner and a development team.

It’s vital to remember that the project’s initial estimation and approved budget are not constant. On the contrary, they will likely change throughout the development lifecycle. The estimation occurs at the very beginning of a long and multi-level journey. Any changes in requirements and scope may drastically impact the final cost.

So what’s the importance of cost estimation in software development if it doesn’t provide a specific price tag on your project? Here are several most significant reasons to estimate your project in advance.

• Making approximate calculations. As mentioned above, your project’s budget may change due to many circumstances. However, product owners, investors, and other stakeholders should have a rough idea of expectations.

• Ensuring transparency. Without proper preparations and prior research, it’s not worth diving into the project. The estimation phase will provide more clarity and begin a trusting relationship between you and your dedicated team. Also, it will help distribute the invested funds properly.

• Defining milestones. The project estimation will denote the critical tasks, objectives, and sprints so that you see their impact on your budget. Besides, it helps designate the approximate project timeline and its ratio to the service cost.

• Evaluating the project’s scope. During the cost estimation of a software project, you will get initial information on the tasks’ scope and complexity. Your dev partner should consider these factors when determining what specialists to involve.

Who Is Estimating a Software Development Project?

Cost estimation for software development project is not a direct responsibility of your engineering team. However, evaluating all critical aspects of the upcoming workflow organization requires the involvement of several stakeholders, including tech specialists.

Here are the potential participants of the estimation process with their roles explained.

• A project manager plays a crucial role in project estimation. Later, throughout the workflow, they help control scheduling, meetings, communication, etc. So when calculating the budget, their participation is vital. Project managers communicate with other stakeholders and use their experience to determine whether a requirement is relevant and the project’s objectives can be met. The statistics claim that when an organization involves effective project management, it wastes 13 times less money, while the development process is 2.5 times more successful.

• The development team should provide their thoughts and insights to ensure all tech aspects (features, backend, design, integrations, etc.) are adequately estimated. A tech lead and business analyst may be necessary for more detailed research.

• The product owner makes final decisions and communicates their vision to the development team. When estimating the project, the hired vendor should always consider your opinion.

What Affects the Estimating of a Custom Software Development Project?

Custom software development involves numerous aspects that may affect your project’s cost and timeline. Each of them matters and may become critical for your budget if ignored.

So to estimate software development cost accurately, consider the following factors.

1. Project Type and Size

The first thing that matters is the type of software solutions you build. Digital product development is a broad concept. It includes various projects, from sophisticated, innovative platforms to simple landing pages. Accordingly, depending on your business goals and requirements, the price and timeline will vary tremendously.

Here are several most common types of software development projects.

• Building a product from scratch
• Modernization of a legacy system
• Adding bespoke software features/integrations to a current solution
• Designing a web application
• Building a mobile app, etc.

2. Software Complexity

Even small projects may be challenging. So custom software development costs also depend on your software’s complexity. It’s preliminary about the number of modules, screens, and features to develop. A small project may take about a month, while an advanced one may last more than a year.

Besides, based on your project’s complexity, a project manager will define the talents you need and the number of specialists to involve.

3. Database Migrations

If you’re not a startup developing a brand new solution, you probably have an existing database or at least certain information you want to keep. So when building your software, the development team should migrate this data or integrate the current storage into the new system.

It’s another vital aspect to consider when estimating the cost of your custom software development project. Moving databases from legacy software is a complex process requiring time and resource investments. What’s more, it may result in numerous pitfalls and potential challenges. According to a recent study, only 36% of data migration projects meet planned budgets, and 66% get delivered on time.

4. Team Size and Location

One more crucial factor is your development team. Its size depends on the project’s specifics we’ve mentioned above. However, on most projects, your core team will likely consist of the following professionals:

• Project manager
• Software architect
• Software developers
• UI/UX designers
• QA specialists
• Business analyst

As for the team’s location, onshore options usually have the most expensive hourly rate. So we recommend considering offshore companies whose service is more cost-effective. At the same time, outsourcing specialists are often even more experienced than in-house ones.

5. UI/UX Design

The designing stage should also be in the spotlight when conducting cost estimation for software development. UI/UX designers will play a vital role in your project. They deliver creative and user-centered solutions. Besides, the designers ensure your product’s functionality, interface intuitiveness, and brand identity.

Also, consider the research phase that often occurs before the designing process. Complex projects require an in-depth investigation, user interviews, A/B testing, etc., which takes time and effort.

6. Technical Aspects

Your future project’s tech aspects also significantly impact the cost of software development.

Firstly, it’s crucial to define and list the features your project needs. Their number and complexity are among the most critical factors.

Secondly, consider the mobile app platform you choose. Of course, app development on a single platform or opting for a hybrid approach is less costly than building all possible native solutions from scratch.

Next, don’t forget about the tech stack dilemma. There are numerous technologies, so you must ensure that the chosen one is suitable for your product’s features. Besides, the framework should be future-proof and have a sufficient developers’ community. Otherwise, you may face maintenance and support challenges that negatively affect your budget.

And finally, don’t underestimate third-party integrations. The project’s cost will vary depending on their number and implementation complexity. In addition, integrated apps, social networks, and other systems may require extra effort regarding your product’s security and performance.

Things Ignored When Estimating the Cost of Software Development

When estimating the average software development cost, there are many things to keep in mind. However, custom solutions are unique, so not everything affects the project price and needs close attention.

That’s especially applicable to Agile software development cost estimation, which involves the development team’s flexibility and allows you to shift requirements. Such an approach enables adapting to changed circumstances. So you can adjust the budget and schedule to the current situation.

Thus, you can postpone or ignore estimating some digital production aspects’ costs. These, for example, could be extra “good-to-have” features that are not on your main list. Also, you may not pay much attention to minor staffing issues. When hiring an offshore vendor, you give them full responsibility for additional project and workflow aspects.

What Are the Deviations in Software Development Cost Estimation?

Software development estimation is crucial to making your budget feasible, building a clear roadmap, and defining the key milestones. So it’s essential to pay attention to details, be realistic, and keep consistent documentation. Otherwise, numerous challenges may confuse you and lead to improper software development budget planning.

Here are the most widespread project estimation issues.

1. Lack of documentation. Well-documented functional and non-functional requirements are the basis of quality software estimation. Lack of information in Request for Proposal and other requirements documents may lead to confusion and cause bottlenecks in the workflow.

2. Unflexible requirements. On the other hand, remember that project estimation involves rough calculations since the requirements often change. Many lack flexibility due to their focus on a predefined plan. However, it’s worth being ready to shift along the way, especially if the project is custom and complex.

3. Poor scheduling. Many clients want to reduce the time to market and accelerate the development process. And this is not a mission impossible if planned well. However, your project estimation should be realistic and consider various workflow aspects that may slow the delivery pace.

4. Fixed price. Some clients think it’s good to define the exact budget in advance. Such a model may suit small and non-complex projects that can follow an accurate plan. However, it’s better not to rule out the possibility of shifting or expanding the requirements for more extensive and complicated processes. In that case, you will have to change the budget limits or turn to software development cost per hour.

Software Development Cost Estimation Methods

There are numerous software development cost estimation approaches. Each has its pros and cons, depending on your project’s type and goals. These methods often use the time ratio to approximate the cost required to perform particular tasks.

The following software development estimation techniques are the most common for projects of different sizes and complexity.

Algorithm Method

This software development cost estimation example considers all critical factors of the project’s price. It takes workflow units and evaluates the time and resources needed for each. This method works well in strictly organized projects with predefined tasks and goals. However, it may not suit an Agile workflow organization where unpredicted factors may occur and significantly affect the timeline.

Expert Opinion

This approach relies on the tech specialists’ experience. They can calculate your software cost by comparing it to similar projects they worked with. Such a method may be applicable when calculating custom projects’ prices where many unpredictable factors could play a crucial role. However, this model may lack accuracy and validity based on human judgments and opinions.

Analogous Testing

The core of this software development cost estimation model is historical data collected from previous similar projects. It examines analogous projects’ costs and relies on specific conclusions instead of assumptions. This accurate model gives comprehensive information about potential risks, hidden fees, etc. However, it’s more time-consuming and requires in-depth quantitative research.

Three-level Estimation

This technique focuses on analyzing three critical components of software development price estimation. These are optimistic, pessimistic, and probable costs.

Such an approach allows for improving risk management and considering various possible scenarios. It examines potential delays, bottlenecks, and hidden fees that may occur. For that, the three-level method studies the possible connections between various project aspects and their impact on each other.

Let’s compare the approaches to custom software development price estimation in the table below:

What Is the Optimal Estimate for a Software Project?

So, what is a perfect custom project estimation, and is it even possible to conduct one?

Based on the above, every project is unique, and you cannot calculate software development cost according to an average sample. So you should consider your business goals, requirements, tech specifics, and other essential factors. Thus, it’s a good idea to conduct a comprehensive investigation phase that will provide you with many crucial insights.

However, even the most detailed research doesn’t guarantee error-free calculations. Many unpredictable factors may occur along the way, shift requirements, cause delays, and affect your project’s budget.

Keeping that in mind, let’s state that an optimal project cost estimation is:

• Accurate and realistic
• Research-based
• Well-documented
• Flexible
• Based on the proper estimation methodology

How Acropolium Estimates Software Development Cost

We at Acropolium always conduct software development cost breakdown before the project starts. Our team applies the following scenario for this:

First, we conduct the discovery phase. It requires the involvement of a business analyst and tech lead for comprehensive evaluation. After the client provides proper project specifications, we follow a streamlined scenario. The team consisting of a BA, sales, and tech lead starts estimating the software development prices immediately. The estimation process usually takes four to seven business days.

Here’s how we estimate how much does software development cost:

• Collecting the client’s requirements and project-related documentation
• Preparing for the estimation stage by compiling a list of cases for implementation, required talents and their roles
• Creating a project documentation and estimation based on the approximate duration of the project, required talents and their roles, and budget for software development.
• Preparing a comfortable breakdown of payments by months (if a client’s chosen a subscription model, the monthly expenses for software development are easily split down to a recurring flat fee).

It’s also worth mentioning that the project’s estimation will always be rough since the client’s requirements may change during this period. Or the client may want to continue improving the project after development is finished.

So think of software development as a constant process where you can adjust estimations throughout the project. We at Acropolium act according to proven business processes verified by ISO certification.

So if you need help defining your project’s cost, our experts can help you avoid estimation bottlenecks and perform accurate data-driven custom software development rates calculations.

Pricing Models at Acropolium

How much does custom software development cost with Acropolium? We suggest you learn more about our subscription-based pricing model. It’s a viable solution that will assist your mobile or web development from the beginning to market launch and even further.

With this powerful subscription approach, you get the following:

• The development team of seven people
• 600 work hours per month
• ISO-certified services
• Handled investigation and estimation phases
• Tasks completed according to the priorities you set
• Guarantee of documentation support
• Top-notch IT consulting
• Monthly activity reports
• Risk management capabilities

Our subscription-based model suits both startups and enterprise companies. It allows for significant budget savings, offering monthly payments instead of a custom software development hourly rate. We also care about our reputation, which is why we provide reliable services and long-term partnerships.

Final Thoughts

If you need help calculating the average cost of custom software development, our IT consulting services at Acropolium can come in handy.

For our experts, project estimation is not rocket science. It’s a routine process we regularly perform for our clients. Our professional project managers, business analysts, and tech leads will do their best to make accurate calculations based on comprehensive research.

Get in touch to obtain a detailed consultation on your project’s cost. Our software development company will provide all the necessary information and help you keep your budget safe.

Sources of Information

1. https://www.forbes.com/sites/steveandriole/2020/
2. https://www.forbes.com/sites/moorinsights/2021/