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Software Development Cost Estimation: Brief Guide How To Do It Right

Before diving straight into developing a software, it’s important to estimate the costs involved so that clients know what to expect in terms of budget and timeline. This step helps prevent any surprises or delays down the line.

As a software outsourcing company, one of our top priorities is to estimate costs accurately and ensure client satisfaction.

However, let’s be real, there’s no one-size-fits-all guide that can accurately estimate costs for many different projects out there. It’s a case-by-case basis that requires careful consideration and planning.

On that note, let’s find out the general guidelines, cost affecting factors, and even some hidden costs that sometimes get overlooked. Get your notes ready!


Software Development Estimation Cost Factors

Software Development Estimation Cost Factors

As we mentioned earlier, there’s no one-size-fits-all guide for estimating software development costs. Why? Well, it all comes down to one simple truth: software development is challenging and complex. There are a lot of considerations that can—and have been experienced by us—impact the overall project cost, including:



The type of platform your software will be deployed on will have a huge impact on the overall cost. For example, a simple web-based company profile won’t take as much effort and labor hours as a complex Spotify-like app that needs to work seamlessly on web browsers, Windows, macOS, Android, and iOS



So, you’ve picked your platform. The next factor is to recognize how complex you want your app to be. This is crucial, because it will affect every stage of the project, from development and testing to deployment. 

But how do we define “complex”? Well, we can break it down into three categories:

  • Feature complexity, how many and complex are the features
  • Technology complexity, how many specific/unique technology you want to implement
  • Design complexity, what kind of customized design elements to implements

Let’s say you want to develop an e-commerce website and want to have a delivery system. Generally you have two options:

  1. Use your own delivery driver and system
  2. Use well-known delivery service companies

To achieve number two means you have to integrate your website or app with the delivery service companies, thus increasing the complexity and inevitably the cost.


Team Size

Imagine you have a medium-sized software development project on your hands. But who do you need on your team to make it happen? Well, here’s a rough idea of who you’ll want to bring on board:

Medium Sized Project Software Development Team

The more complex your software is, the longer the list of people and specialists you may need to add. Like how we helped develop a web app for a nation-wide vaccination program here.


Hiring Model

Now that you have a general idea of how many people your project needs, it’s time to hire them. Usually, you can choose (and sometimes combine) from these three hiring options:

  • In-house development

Means having your developers, designer, lead, and other team within the company itself. This is the most common way but can be quite expensive and time-consuming.

  • Freelance

Going the freelance route involves hiring self-employed individuals who work with multiple clients. This option is less expensive, but it can be risky and unreliable for more complex projects.

  • Outsource

This is when you hire a third-party team/company to work on the project. At first, it might seem a bit complicated or risky, but it can actually be more cost efficient and faster.


Each model has their own advantages depending on your requirements. For example, we offer two types of outsourcing methods to suit your needs. 

The first is called Extended Team, where you can hire our developers to join your team and “extend” your team on your project. Preferable if you just need to fill in a few missing roles/expertise.

The second is Fixed Bid, where we take complete responsibility and develop your project according to “fixed” requirements and cost. Chosen by our clients that didn’t have the right people and resources.


How To Estimate Software Development Cost?

How To Estimate Software Development Cost

So, these factors we mentioned earlier will all come into play when estimating your project. Let’s not forget that estimation costs and processes can vary greatly depending on the company or project.

However, our brief guide here should provide you with the general steps of the estimation process, and hopefully you’ll be able to steer clear of any unnecessary cost estimation problems in the future.

    1. Understand the scope of the project: Determine the objectives, requirements, and deliverables of the project.
    2. Define the tasks: Split down the scope into smaller and manageable tasks.
    3. Estimate the effort: Figure out the time and resources needed to complete each task. This includes the number of team members required, their skills, and the tools and technology needed.
    4. Determine the team cost: Calculate the partial cost of the project based on the estimated effort and the hourly rate of each team member.
    5. Account for external factors: Consider any external factors that may affect the cost, such as the availability of resources, market conditions, and unforeseen risks.
    6. Review and adjust: Check the estimate and make adjustments as needed to ensure it aligns with the project scope and budget.
    7. Share the estimate: Present the estimate to stakeholders, including clients, management, and the development team, and make sure everyone is in agreement.


Hidden Costs of Software Development Project

Hidden Costs of Software Development Project

Some of us know that there can be hidden costs in software development that may not be immediately apparent on the project’s initial planning but necessary to complete the project.

To avoid that let’s see how many hidden costs there are and if some of these are new to you.

1. Infrastructure

Infrastructure costs can include the cost of hardware, software licenses, and cloud services. These costs may not be immediately apparent but can add up over time.

2. Technical Debt

Technical debt is the cost of fixing or refactoring code that was developed quickly to meet deadlines but is not maintainable in the long term.

3. Communication

Communication costs can include the cost of meetings, conference calls, and travel expenses for team members working remotely or in different locations.

4. Quality content

While not every type of software needs to have quality content, if the project demands quality articles, copywriting, media, and more, it will affect the overall time and cost. 



Software development projects are complex and challenging, and estimating the cost is even more so. But there’s one tip for you that have read this far: you need to be as detailed as possible from the beginning. The more detail you provide the easier the project is for both you, developers, and everyone involved.

But what if you make it far easier? This is where we can assist you not only with estimating the cost of your software development project, but also with building it using our team of expert developers. 

Our developers have successfully solved our clients’ challenges from countries around the world, including the US, Canada, Singapore, France, Australia, and more. With our help, you can focus on expanding your business every day while we take care of the software development.

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