Let’s start by defining what we mean by “custom business software.” In this context, we mean internal or customer-facing software that facilitates the operation of a business — by automating processes, providing business intelligence, giving people access to information, or integrating multiple systems. Developing software is a complicated process that requires a valuable set of skills and experience.
Business applications add another layer of complexity, with requirements around:
- security
- uptime
- performance
- regulatory compliance
For mass-market software or SaaS applications, that cost is spread across a large pool of customers. Custom software doesn’t have that luxury — one organization carries the full cost.
However, “expensive” doesn’t always mean “not worth it.” Custom business software can:
- reduce errors
- increase efficiency
- lower labor costs
- give a business a competitive edge
If you’re considering having custom business software developed, here are the factors that most affect what it will cost.
Why some development companies are more expensive than others
The primary reasons some companies charge more than others come down to seven factors:
- Skill level
- Corporate certifications
- Company size
- Company experience and expertise
- Team size
- Estimation quality
- Location, location, location
Skill Level
The skill level of software developers — combined with the scarcity of and demand for their skillset — drives their wages.
Developers with extensive experience, specific education, or certifications command higher wages, and therefore higher rates. The expected upside of those higher rates is an application developed to a higher quality, or at a faster pace, than less skilled developers could deliver.
Corporate Certifications
Business processes and workflows vary widely from organization to organization, but certain certifications and credentials (ISO, for example) signal to a prospective customer that a firm’s processes have been “standardized.” For some organizations, that offers a real level of comfort.
Earning and maintaining these credentials can be pricy and time-consuming, and that effort is often reflected in higher pricing.
Company Size
Larger companies tend to carry more overhead — more robust marketing, accounting, legal, and HR departments, and so on. But they also tend to be more experienced and can be more stable.
Smaller companies can often be more agile and offer lower development pricing, but they may not have the longevity or breadth of experience of a larger firm.
Company Experience and Expertise
Some software development companies specialize in specific types of applications (CRMs, ERPs, ecommerce, etc.) or in certain industries (manufacturing, medical, financial, etc.), and tend to have in-depth knowledge of their markets. That experience may translate into higher rates, with the hope or expectation of better or faster results.
Team Size
Development teams range from large groups of developers, project managers, system architects, and QA technicians to small teams of one or two people wearing many hats.
Larger teams tend to have isolated job roles filled by team members with specific experience or skills. When well organized, this approach can yield quality development at improved speed — but because of the quantity of resources on the project, it may incur higher costs. When not well organized, larger teams can suffer from communication issues and a lack of overall project ownership, which can result in cost overruns.
Smaller teams may face fewer communication or organizational difficulties, which can improve development efficiency and lower costs. On the other hand, smaller teams may lack the breadth of experience or the desired skillset proficiency, and the resulting learning curve can increase both the time and the cost of a project.
Estimation Quality
Firms take different approaches to estimation.
Some quote based on a minimally viable product — a piece of software with only the functionality necessary to be usable — while others estimate a fully functional, robust application. That difference in approach can drastically change the scope, and therefore the estimated cost, of the software. Here’s how we approach estimation at Techlancer: our software development process.
Location, Location, Location
The cost of labor — even high-tech labor like software development — varies greatly around the world. Many software development firms are located in countries where labor is much less expensive, and some US-based firms offshore (or nearshore) their development work to those countries.
Some companies have had great success reducing costs by offshoring their development without any loss in quality or delays. Yet some offshore efforts suffer from communication issues due to language barriers or time-zone discrepancies. Offshore teams are at times unfamiliar with the terminology and user expectations of different countries, and can be difficult to hold accountable for project quality or completion.
The old adage “time is money” applies squarely to software development, because building software is a time-intensive process. When you look at the cost of development, the two main factors at play are (1) how long it takes and (2) how expensive that time is. Which brings us to the next question.
Why software development takes so long
There’s a common misconception that software development is a simple and fast process. The reality is that developing useful, quality software is a complicated, time-consuming, and sometimes tedious task that requires a variety of skillsets.
Here are the aspects that make software development take as long as it does.
Project Scope
What are you developing? What problem are you trying to solve, and how complicated is it? Identifying what you want to do — and how you want to do it — is an important and sometimes time-consuming step.
For example, when you’re looking to develop a new application to replace a legacy software system, you’ll need to:
- Build a full understanding of every function of the old software.
- Consider not only what the legacy system does for its users, but also its impact on non-users (users in other departments, report consumers, and customers).
- Understand all third-party system integrations so that no functionality is lost during the transition.
- Identify and scope out areas for improvement.
Architecture
Once you know what you want your software to do, identifying the best technological approach to building it is critical.
A few high-level decisions need to be made:
- where the application should be hosted
- what language stack should be used
- whether there will be a need for external integrations
For example, developing an application for a few in-house employees on an internal network is very different from building an application for the masses with peak volume during certain hours. Understanding the load the application will carry — and planning an architecture that can handle it — requires effort and know-how.
Data Structure
Most applications are built on data.
Understanding the data you’re dealing with, and structuring it so that:
- users can find what they need efficiently, and
- the data stays well organized,
requires skilled database professionals.
UI/UX (User Interface / User Experience)
Everyone wants software that’s simple to use. Designing software with that quality takes effort and experience.
While most front-end developers can produce intuitive screen designs, some applications demand more advanced UI/UX. For example, there’s a large difference in UI/UX requirements between:
- an application accessed by a small number of users who can be trained, and
- an application with a broad nationwide userbase spanning a wide range of tech skills, where training isn’t an option.
Error Trapping and Validation
Users — especially untrained users — often enter invalid information. That can leave the application unable to process the request, or even cause it to error out.
Well-developed software elegantly alerts the end user to invalid data and explains the problem. It also prevents or handles bad entries to avoid crashes.
We’ve all worked with programs that provide no feedback or information when they crash — they simply do nothing, or close. That’s because the developers didn’t account for, or “handle,” that error. We’ve also experienced applications that explain the problem clearly: “Your credit card expiration date is invalid,” for example.
The difference between those applications is error trapping and handling. Error trapping takes effort, but that effort can turn an error into a user-friendly explanation.
Third-Party System Integrations
Many organizations run multiple mission-critical software applications, and harnessing those systems efficiently sometimes means integrating them. Integrating multiple systems requires navigating the specifics of each application.
Most modern business applications — CRMs like Salesforce or HubSpot, and ERPs like NetSuite or Acumatica — provide APIs (Application Programming Interfaces) that allow other systems to integrate with them. These APIs are applications in themselves, often with detailed, specific instructions on how to authenticate and integrate. Reviewing and understanding that documentation, then developing and testing against it, all takes time and effort.
Data Importing
A forgotten effort in many projects.
Importing data from legacy or other systems is often critical to the deployment of a new program, but it requires:
- fully understanding the data structure of both the old and the new system, and
- mapping the data fields between them.
Many times, importing the data requires a smaller import program or script to be developed.
Regulatory Requirements
Various industries impose different regulatory standards for how data is handled.
Standards like HIPAA (medical), PCI (financial), and DFARS (federal defense) require development done to the highest security standards, and warrant periodic security audits of the application.
QA and Testing
Testing software can be an art, and when done properly it prevents difficulties down the road.
Testing is more than a few clicks to make sure things work when a user does what they’re supposed to. Testing also involves trying to do the things a user should not do.
UAT
Before an application can be put into a production environment, stakeholders must confirm that the program is ready for “prime time.” That happens through a series of tests confirming the application works as expected. Many times, someone from the development team is needed to guide the testers through the process.
Launch
The most successful launches are seldom without hiccups. Having the proper resources available to respond rapidly after launch is extremely beneficial. Support rooms made available for users with sign-in or other issues in the early stages of a launch can ease concerns across the user base and greatly improve the experience — and buy-in — for staff. Application monitoring software can help the dev team identify problems users may not even know are happening, and correct them before they become issues.
Support
Even advanced, trained users have questions or uncover hidden glitches in applications, so having support available is critical to an application’s success. Whether it’s rare invalid data entry causing issues or edge cases that weren’t identified during development, QA, or UAT, issues are likely to arise. Having the resources available to assist, troubleshoot, and resolve them yields better results.
Next steps
The primary steps to evaluate your need for custom software are:
- Confirm you need custom software in the first place (as opposed to off-the-shelf options)
- Identify why you need custom
- Prioritize your needs and preferences
- Understand the approach
Confirm your need for custom software
Evaluate the leading SaaS or licensed off-the-shelf software for your industry or application. Perform a thorough review of the available systems and identify whether they’ll work for you. Many of these systems allow for customization — be sure to consider those customization options when evaluating whether a system can suit your needs.
If something off-the-shelf covers 90+% of what you need, it may be a good option.
Consider integration possibilities, too. If the off-the-shelf options don’t meet that 90+% threshold (or even if they do and you want to fill the remaining 10%), evaluate the potential for custom software that integrates with the SaaS product. Many modern platforms offer robust APIs that let developers interact with them efficiently — which could reduce the overall time and cost of your solution by reducing the amount of custom development required.
If you still find that you need or want custom software, read on.
Identify why you need custom software
Every organization is unique, so the reasons for pursuing custom software are unique too. Some reasons we’ve seen:
- Niche industries not well served by SaaS or licensed software products
- Unique processes or workflows that existing software solutions don’t handle well
- Multiple software systems that perform well for some departments or user groups, but are not integrated
- Competitive advantage
- Businesses that have thrived with custom software that is now becoming outdated
Prioritize your needs and preferences
- Are you willing to dedicate resources to help manage the project, or are you looking for a development firm that can take most of that off your plate?
- Does your application have to comply with specific regulatory guidelines like HIPAA, PCI, or DFARS?
- Would a team with expertise in your field be better suited to your project, or would a fresh set of eyes help differentiate you from the pack?
- Is reducing cost worth potential obstacles with time zones or language barriers?
- Will you need ongoing support or development?
- Would you rather the software be developed fast at higher cost, or at lower cost with slower results?
- Would on-site visits, staff shadowing, or process evaluations aid the development of your solution?
Understand the approach
Understand how the team tackling your project works, and whether it suits your needs and priorities:
- How large will the development team be, and what role will each team member play? Do all the roles seem necessary? Do they add value?
- Understand your estimate and what’s included in it. Is it for an MVP, or for a fully functional application with all desirable features?
- How experienced is your team? Do they have expertise in your field, your regulatory requirements, your application type, and so on?
- What processes will your team work under? How will you communicate? What response level is expected? How will you monitor progress? How will you address concerns or problems?
- How will your application be supported after initial release?
If you decide you need custom software, check out our about page to see if we’re a good fit for you. If you’d like to discuss your project, let’s talk.
Interested in learning more? Check out these articles:
- Custom software can be a competitive advantage for small businesses, but not always
- When to rewrite your software
- Why do I need a data warehouse?
You’ll find these and more in our articles library.