How Pricing Works in Software Development: Key Factors Explained

With numerous pre-built applications on the market, one might wonder why there’s any need to invest in creating bespoke software.

However, generic software often falls short of meeting specific business needs for several reasons:

• High costs with low return
• Integration issues
• Unique business needs
• Scaling concerns
• Mediocre competitive advantages

If you face these problems with third-party software your company uses, it’s worth considering the development of custom software. Tailored solutions address the specific needs of your business with greater precision. Also, they integrate seamlessly with your current operations, potentially giving you a significant market advantage.

How much does custom development cost

Software development costs are influenced by multiple factors, which makes it difficult to specify an exact price without a detailed understanding of the project’s requirements.

Briefly, the primary elements that impact software development costs include:

• Type of software
• Requirements and technologies used in the product
• Pricing model of the contactor

Software for Mobile platforms

1. Native Apps – more flexible, though costly

Approximate cost of development: $20,000 – $100,000

Native apps are developed specifically for one platform (iOS or Android) using platform-specific programming languages like Swift (iOS) or Kotlin (Android). These offer the best performance and user experience. If you need to launch an app for several mobile platforms, the total cost of mobile app development will be many times higher than for cross-platform apps.

Choose a native app development if your project requires:

• Extensive access to device-specific features;
• A sophisticated user interface that aligns closely with the platform’s native UI;
• • Maximum security and efficiency are needed;
  • Stability is your priority;
  • You want software that is independent of the Internet.Integration with complex system hardware or software.
    

    2. Cross-platform apps – more affordable for small and middle-sized companies

    Approximate costs: $15,000 – $80,000

    Cross-platform apps are developed using frameworks like React Native or Flutter, which allow for a single codebase to be used on both iOS and Android platforms. This can reduce development time and costs but might compromise on performance compared to native apps.

    Consider cross-platform mobile app development if:

    • You have strict budget limits;
    • Your priorities include developing and deploying software more quickly;
    • Peak performance is not your priority.

    Software for computer

    1. Web software – affordable but not suitable for complicated tasks

    Approximate costs: $10,000 – $50,000

    Web applications are accessible via web browsers and do not require downloads or installations. They are easier and cheaper to develop than desktop software and can be made responsive to work on both desktop and mobile devices.

    Choose web software if:

    • You need broad accessibility across multiple devices (PCs, tablets, smartphones) via web browsers like Chrome, Safari, or Firefox;
    • You wait for the software to be easily scalable and accessible from anywhere with internet connectivity;
    • Performance demands are moderate and can be managed within the constraints of browser capabilities.

    If your business requires an elaborate system of custom-made tools and features, web software will probably be too limited due to the Internet dependency.

    2. Desktop Software – expensive solution for demanding industries

    Desktop software is installed on a computer and utilizes the machine’s resources to function. Development is platform-specific (Windows, macOS, Linux) and generally more expensive, especially if supporting multiple platforms.

    Approximate costs: $15,000 – $100,000

    Opt for standalone desktop software if:

  Compared to online applications, desktop software is far more costly. Also, it is more difficult to implement for numerous users since it has rigid operating system requirements.

  Technologies

  The technologies selected and the specific requirements of the customer significantly influence the final price.

  The range of technologies that you can use in software is enormous.

  AI integration, blockchain, robust security measures, AR/VR, encryption protocols, and dozens of other technologies can be implemented in your software to meet your specific needs. The ultimate cost increases with the number of technologies used.

  If you want to purchase web, desktop, or mobile app development, you should analyze what technologies your company needs and what tasks need to be solved with custom software.

  IT pricing models to choose

  The level of spending for each IT project depends on the payment method as well. The key difference of all pricing models is the level of flexibility and risks that both parties of the contract take.

  Generally, there are three main ways to pay for web and mobile app development.

  Fixed price

  Work at a set price entails project evaluation, thorough planning for development, and additional work on agreed-upon terms.

  If any additional workscope is added, the risks are on the contractor. That is why fixed prices for software are generally higher than for more flexible models.

  We recommend this model for:

  • Projects with defined requirements where the scope and specifications are clear from the beginning;
  • Clients with fixed budgets, who cannot exceed a predetermined limit;
  • Short-term projects that require quick delivery.

  For long and complicated projects, consider a T&M or Milestones model.

  

  Time and Material

  Billing under the Time and Material (T&M) model is based on the actual hours worked by the contractor, along with the cost of materials used.

  This model offers the highest level of flexibility, allowing changes at any stage with relative ease. This is ideal for projects where requirements are expected to evolve.

  Since the contractor charges for the actual time and resources expended, the financial risk shifts more toward the client, particularly if the project scope expands.

  We recommend this model for:

  • Projects with evolving requirements. The projects, where the end goals are not set in stone. This allows for iterative testing and changes based on ongoing input.
  • Clients prioritizing flexibility over budget. Suitable for clients who value adaptive planning and the ability to pivot project focus based on evolving needs.
  • Long-term and complex projects. Highly effective for lengthy projects that benefit from continuous developer engagement and iterative progress.

  Milestones payment

  The Milestone-based payment model is commonly used in software development to structure financial terms through the successful completion of predefined project segments or milestones.

  This payment strategy ensures that payments are made only after specific goals are achieved, thus aligning contractor incentives with project milestones.

  This model offers a structured yet flexible approach. While the major goals are set, adjustments within those confines are possible, allowing for revisions and refinements with client approval at each stage.

  We recommend choosing this method for:

  • Complex projects that are best managed in phased segments;
  • Clients who prefer to monitor progress and correlate payments with verified outputs;
  • Projects that require distinct, measurable outcomes at various development stages.

  However, the milestone approach is less suitable for projects requiring flexibility or where outcomes are not clearly defined from the start.

  FFF payment

  The Fixed Time, Fixed Budget, Flex-Scope (FFF) model in software web and mobile app development is a versatile and adaptive pricing structure.

  Both the budget and the completion time are fixed and predetermined. In contrast to conventional fixed models, the FFF model permits scope modifications for the project. Because of its adaptability, the software development process may adjust to fresh perspectives and modifications without impacting the project’s final cost or schedule. The workscope may be reduced if the customer goes over budget.

  Risks are more evenly distributed between the client and the contractor. The client benefits from fixed costs and timelines, while the contractor has the leeway to adjust the scope to meet those constraints effectively.

  Recommended for:

  • Projects with unclear requirements. When projects don’t have enough details at the outset and deadlines and budgets are non-negotiable.
  • Innovative projects. Suitable for projects that benefit from experimental and iterative development processes.
  • Client-contractor collaborations. Works best in scenarios where both parties are willing to engage closely throughout the project.

  FFF is more appropriate for very short or very long projects. The reason is that flexibility in scope can be a hindrance with extremely tight deadlines or overly extended timelines where project goals may become too fluid.

  The table describes the strong and weak points of each pricing model:

  Pricing Model	Pros	Cons
  Fixed Price	Budget certainty Minimal oversight needed Clear deliverables	Rigidity in scope changes Potential for lower quality to meet budgets
  Time and Material (T&M)	High flexibility The client pays for actual work done Adaptable to changing needs	Potential for higher costs Requires close monitoring
  Milestone Pricing	Payments tied to deliverables Motivates timely completion Spreads out payment	Can lead to disputes over deliverables Might rush work to meet milestones
  FFF (Fixed Time, Fixed Budget, Flexible Scope)	Time and cost certainty Scope flexibility Promotes innovation within limits	The scope may dilute if not managed well Not suitable for projects needing specific deliverables from the start

  Additional factors affecting the price

  1. Licenses. Costs for software licenses, third-party services, and operational technologies to implement the software.
  2. Post-launch maintenance. Ongoing expenses to fix bugs, update features, and ensure the software runs smoothly.
  3. Scalability and security features. Investments to make the software scalable to handle more users or data over time and to secure the application from cyber threats.
  4. User training and deployment. Resources required to train end-users and to deploy the software across various environments.
  5. Project management and communication. Costs incurred from project management efforts, meetings, and communication between developers, managers, and stakeholders.

  How to optimize the budget for software development

  Here’s how you can ensure that your investments in web or mobile app development yield the best possible returns while keeping expenditures within bounds:

  Define your goals and demands

  Prioritize and precisely define what you need from the software first. Once the goals are set, analyze how each feature of the software will help achieve these goals.

  Customer and team feedback will be instrumental in establishing clear requirements and justifying each cost.

  Choose a contractor wisely

  Selecting the right contractor is pivotal in managing costs effectively.

  Choose software development companies with portfolio, trustworthy client reviews, and testimonials. This will give you insight into their capability and reliability.

  Also, make sure the contractor has experience and expertise in the technology stack required for your project. Their ability to handle projects similar to yours can significantly influence efficiency and quality. Even if the company is established on the market, its background may not suit the needs of your project.

  Remember that reliable IT contractors provide transparent cost policies and permanently inform the clients during the web or mobile app development.

  Final tips for optimizing costs

  • Don’t choose contractors based solely on price. Opting for a contractor because they offer the lowest quote can be a grave mistake. Balance cost with the quality and the contractor’s ability to deliver on time.
  • Prioritize the key features that cannot be cut back or diminished. This guarantees that crucial features are maintained while also streamlining development.
  • Remember post-launch services. Consider the support and maintenance services the contractor offers after the project is launched. Post-launch services are crucial for resolving any unforeseen bugs and ensuring the software runs smoothly.
  • Negotiate the license fee to stay within your financial capabilities. Usually, the cost may be reduced to a more reasonable amount.
  • Allocate 10–20% of your budget for unforeseen adjustments. The price of custom software is as flexible as its features. Don’t plan for the budget constraint. Instead, adjust to changing circumstances.

  By following these recommendations, you can make the most of your web and mobile app development budget and spend money wisely while still reaching the intended outcomes.

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