Thus, reducing the cost of software development is one of the main aspects that play a crucial role in developing technology products.
This article will address the main factors that influence the cost of software development and share some practical tips for reducing and optimizing software engineering budgets.
Before we explore the most critical aspects that affect the final cost of a software development project, it is essential to understand what factors matter in building a digital product.
In general, the cost of software development depends on the specific features that your product should include, its scope and size, delivery time, and much more.
So, the main factors affecting the average cost of software development are:
This aspect addresses the general development environment used to build your application, including the time and labor required, the challenges developers face in the process, and the effort involved. In addition, you should also consider unforeseen circumstances and security issues and note that leveraging disruptive technologies will certainly require higher investments.
Brace yourself to pay more for feature-rich software solutions, as creating a high-quality product requires more time and effort, complex processes, innovation, and rigorous testing.
Suppose you make your product more flexible and compatible with other popular services, applications, and technologies today. In that case, you can take your software to a whole new level and increase its competitiveness in the market. However, integrating blockchain, IoT, supply chain management, CRM, or other solutions will naturally increase software development costs.
Any technology should be wrapped in an attractive design, straightforward navigation, and intuitive interface to attract more users. As such, you will want to create a custom design instead of using standard templates, and provide users with the best experience and the highest level of usability.
To build even the simplest MVP, you will need software developers and designers, QA specialists, testers, project managers, and many other roles on your team. And their level of experience and qualification will also affect the final cost of your software development endeavor.
Now that you know all the major software cost drivers, you can make a thorough software development cost estimation for your future projects. However, before we get started, let’s take a look at some actionable tips on how you can cut those costs!
Cost optimization is an urgent priority for almost every company today. Optimization of software development budgets is no longer an option, but a necessity, as it can significantly save the costs required to produce first-class software products without sacrificing quality or time.
In addition, it can help streamline the application delivery process and ensure that your company uses the most promising approaches to successfully develop and operate the project.
Below, you’ll find a list of recommendations that help drive down your software product development expenses.
One of the most efficient and proven ways to reduce the cost of software development is to leverage the outsourcing model. Why? Software development outsourcing opens up a wide range of different opportunities for companies as they get the chance to:
These are just a few benefits companies can reap from software development outsourcing. According to a recent study by Deloitte, almost 60% of companies prefer this approach due to its cost-effectiveness.
Unlike the traditional hiring model, where you hire and train new employees in-house, having to spend a lot of time, effort, and resources, the outsourcing model involves setting up a dedicated development or a managed team with sufficient experience in the area and the ability to indulge in a project from day one.
In addition, outsourcing is an effective solution for taxing software development costs, as you can look for professional software vendors in countries with much lower tax rates, such as Romania, Bulgaria, or Ukraine.
Let’s compare how much it can potentially cost to build a software solution in the United States versus Romania, one of the leading IT outsourcing hubs in Europe.
Let’s assume you’re a non-tech company that needs to build a custom 360 Feedback platform for your employee performance evaluation. Based on the rinf.tech‘s firsthand experience, such a project will require the following resources:
Technology Stack:
Team roles:
The total project effort will include tentatively 300 person-days: 250 for the implementation stage and 50 for project management.
Now let’s assume the outsourcing project is based on a turnkey project delivery model, with a blended rate for one person-day making €340 for development and implementation and €380 for project management. In this case, the cost breakdown will look as follows:
Development and implementation: 250*340=€85,000
Project Management: 50*380=19,000
Total: €104,000 (excluding the cost of tools, licenses, subscriptions, DevOps, etc.).
If you build the same solution in-house, the cost of your project will be based on the hourly rates of each specialist you hire for your team. Let’s assume your team is based out of North America.
In North America, the average hourly rate for a mid-level software engineer is $80, according to YouTeam. Based on it, one person-day costs $640. As such, the implementation phase alone will cost $160,000 (€151,000), which is already higher than the total cost of the outsourced project.
One of the most common mistakes experienced companies and startups make when working on building their software solutions is to overlook the MVP launch stage and go directly with a full-fledged solution.
MVP helps reduce the time and resources required to fully develop a product while at the same time providing valuable insights into:
In addition, an MVP can show the potential of your future product, speed up the time of the actual development, reduce costs and attract investors.
The use of proper methodology is essential for an efficient software development process. Based on your project’s primary goals and requirements, this practice is the “backbone” of the entire development process, which can affect the cost, time, and resources required to deliver a high-quality software solution.
Today, in most cases, software development teams prefer using the Agile methods of software engineering – an approach that allows for problem detection in the early stages of software development.
A well-defined methodology allows you to provide more accurate estimates, deliver stable systems, keep companies up to date with the latest project news, and ensure that software developers clearly understand the entire development process as a whole and not just the stages for which they are responsible.
Once you select the most beneficial methodology and conduct a thorough software development cost estimate, you will be able to see that this approach is an integral part of any software product delivery.
Software Development Methodology refers to the SDLC (Software Development Life Cycle) development model, which focuses on organizing efficient project development processes from ideation and planning to initial and final software development, testing, and market launch.
At rinf.tech, we work with various software development methodologies, including Lean Development, Scrum, Kanban, Design Thinking, CI/CD, DevSecOps, V-model, and others.
According to the 2020 State of Agile Report, 26% of teams adopting Agile can reduce their software project costs.
An excellent option to achieve capitalized software development costs is to hire a quality assurance professional who can monitor the development process, analyze product performance, and ensure the product is free of bugs or errors.
A well-established QA function provides the following benefits:
Manual and automated testing are critical and help simplify the software development process in terms of time and cost.
At rinf.tech, we offer an ultimate testing automation solution called MATT. Feel free to visit its website to learn more about how you can easily automate your QA and validation processes through robotization
Externalizing software development management services to create new digital products can indeed be more cost-effective than hiring an in-house CTO within your company, especially for startups and non-tech companies that don’t have a CTO’s role per se.
CaaS stands for “CTO as a Service” and is referred to as a third-party consultant or company whose responsibilities are largely the same as those of a traditional full-time CTO.
With extensive experience in scaling the business and managing the technical aspects of a company, most CTOs will share their personal experience with a team that has previously worked with both startups and mature firms.
A CaaS is not much different from a full-time CTO when it comes to their responsibilities in an organization.
In general, both should offer support throughout the software development process and other technical issues, creating a software architecture, formulating a well-defined strategy and budget for its activation, suggesting the right technical stack for your project, optimizing the workflow through automation where possible, and ensuring the highest quality standards.
Despite similar responsibilities in terms of accountability, a significant difference when hiring an external CTO is the team they assemble, particularly the combined seniority of each member and the overall versatility of the entire team.
You collaborate with a synergistic group of experts who have previously worked on many digital products from multiple industries, making their collective knowledge an asset to any startup.
As is often the case with most early-stage startups, the number of team members is quite limited. We believe their founders can significantly benefit from collaborating with external peer-to-peer teams to guide the product development process from idea to market.
In our experience, we have seen founders who ignore any collaboration in the early stages of their business. This common misconception costs startups a lot of money, which otherwise needs to be invested wisely.
The CTO-as-a-Service model means that you will be working with an Agile team that is already used to collaboration and has many years of experience launching, scaling, and even pivoting web and mobile products.
CaaS will help you solve technical limitations and challenges while improving business efficiency by eliminating unnecessary risks and ensuring efficient budget spending.
By keeping up with the latest trends in the industry, the consulting CTO, like the in-house CTO, will also guide your company to stay relevant and consistently deliver value to your customers.
In terms of cost, you will find that, unlike hiring a single professional, CTO-as-a-Service can seem more expensive. We start cooperation with a professional and well-established team of developers, QA engineers, and designers led by an experienced technical leader.
However, in the long run, this will only prove to be a cost-effective solution when considering the results that such a team can bring to your product development in terms of quality and resources expanded.
We recommend that you use OSS wherever possible. Open-source technologies are generally free to use and usually do not require payment of license fees. In addition to exceptional cost-effectiveness, OSS provides flexibility, freedom, security, and accountability compared to proprietary software solutions. OSS also ensures a long service life and is constantly at the forefront of technology.
It is more than possible to optimize the cost of software development and increase project productivity without losing quality: from hiring a dedicated development team and revising project planning processes to outsourcing the entire project to professional software development outsourcing.
By implementing just a few of these practices, you and your organization can see improvements from day one.
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