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How Much Does a Custom Software Development Cost

Aug 18, 2023

Estimating the cost of custom software development with offshore software development companies can seem like a complex puzzle. At Belitsoft, we've honed a method that demystifies this process. Our approach is human-centric, eliminating the need for complex calculations, and is grounded in industry best practices. In this article, we'll guide you through our step-by-step journey and the principles that ensure accurate cost estimates.

Contents

How to Calculate Software Development Cost: Our Detailed Estimation Process

Every project brings unique challenges. Relying solely on the Ballpark Estimation often yields rough, risk-prone estimates. While quick, we steer clear of this method. Why? Our aim is to offer you precise estimations, ensuring you can plan your budget effectively and mitigate project risks. You can contact me directly right now to discuss your project.

Step 1: Detailed Requirements Gathering

Clear and well-defined requirements are the cornerstone of accurate project costing.

Typically, we commence with 1 to 3 complimentary meetings. During these interactions our business analyst (BA) works closely with the customer to grasp the idea and its intended product outcome. From this collaborative dialogue, a Proposal for Discovery Phase, along with estimates, is prepared, highlighting its projected duration.

Once the proposal receives approval, we launch the Discovery Phase. Depending on project complexity, this phase usually spans between 40 to 160 hours. Drawing from our vast experience, this timeframe ensures a thorough yet efficient process of gathering.

The main goal during this stage is to define the project's scope in detail. The outcome of this effort is that our Business Analyst crafts Vision and Scope document, which sets the stage for accurate cost estimation.

what is vision and scope document
Example of a Vision and Scope document

Following this, the Work Breakdown Structure (WBS) is created— a clear, structured table that serves as the blueprint for project cost estimation.

what is vision and scope document
An exemplar WBS table derived from the Vision and Scope

Step 2: In-Depth Cost Estimation by Senior Specialists

Upon gaining a comprehensive understanding of the product vision during the discovery phase, we transition to the cost estimation step led by a specialized team. This team functions like a SWAT unit, comprising senior-level experts.

The core of such a SWAT team is a back-end developer with system architect experience and a front-end developer. Depending on the project's nuances, we may also involve a UX/UI designer, project manager, and business analyst.

With the groundwork laid by the business analyst during the discovery phase, where the BA aids in risk mitigation, our SWAT team refines and finalizes the hours needed for each feature or piece of functionality. Their calculations draw from extensive experience with projects of similar complexity and scope.

Though our methodology finds its origins in the three-point estimation from the Project Management Body of Knowledge (PMBOK guide), it’s been enhanced over nearly two decades of practical experience.

We strive for a consistent 20% margin between optimistic and pessimistic cost projections. When risks are higher, this gap may expand.

In such cases, we pair the optimistic value with a risk percentage, and the pessimistic value becomes their product. Whenever risks exceed our 20% target, we pinpoint the cause and suggest ways to mitigate it.

Throughout this process, the project manager communicates with the client, spotlighting risks and presenting alternative trajectories. This collaborative approach ensures that clients remain informed and can make pivotal decisions with clarity.

The example of a cost estimation feature-by-feature made by a front-end developer on the bases of the WBS
For clarity, here's a sample cost estimation by a front-end developer based on the WBS

This meticulous approach to cost estimation extends to all specialists involved in the project.

Step 3: Personal Client Demo

To present the cost estimation results, Belitsoft team organizes a video call or a face-to-face meeting, depending on your location and preferences.

This direct interaction lets us elucidate the reasoning behind every figure and discuss all associated risks. It also allows you to verify the expertise of our team and assess their grasp of your project. You're placed in the driver's seat from this point onwards.

We prioritize clarity over complexity. Instead of inundating clients with intricate formulas, we ensure the entire cost estimation process is transparent and accessible.

During the demo, we provide a consolidated table detailing rates and the final cost estimation.

We incorporate an 'Agile coefficient,' set at 20%. This coefficient accounts for sprint planning, daily meetings, reporting, presenting demos, and incorporating your feedback. This approach guarantees you remain informed and actively involved, preventing any blind spots regarding the project's progress.

The example of a final cost estimation table with the hours, developers' rates, three-point estimation, and Agile coefficient
The example of a final cost estimation table that includes hours, developers' rates, three-point estimation, and Agile coefficient

If our cost projection seems steep, we usually recommend a phased development approach.

The MVP Strategy

The initiation with a Minimum Viable Product (MVP) is a beneficial method for startups and businesses.

We help prioritize MVP features so that in a few months, you have a functional product to present to investors and gather initial user feedback. This approach not only aids in cost management but also provides valuable insights for further development. Learn more about MVP software development in our detailed post, where we explore feature selection and other essential considerations.

Risk Management

Our primary focus on risk management ensures final project cost aligns with initial optimistic estimates. This commitment reflects our dedication to transparency and trust.

A Practical Scenario

For instance, if tasked with developing a registration form with SMS-based two-factor authentication (2FA) and the client suggests an unfamiliar service provider with limited documentation, this raises potential risks. To address these, we propose:

  1. Switching to a more cost-effective email-based 2FA, generally more economical than its SMS counterpart.
  2. Using Twilio, a platform we're well-acquainted with, which offers comprehensive documentation.

Both options are geared towards minimizing risks and delivering value.

What You Receive at the Conclusion

  1. Comprehensive Documentation. Vision and Scope, as well as Work Breakdown Structure (WBS) documents, meticulously crafted in line with international best practices.
  2. Clear Estimations. A detailed breakdown of hours and corresponding USD rates for the project, coupled with a projected development timeline.
  3. Strategic Recommendations. Insights on segmenting the project into phases (MVP, 1.0, 2.0, etc.) for optimal execution.
  4. Technical Guidance. Expert advice on the ideal tech stack tailored to your project's unique demands.
  5. Team Composition. Proposals regarding the optimal size, scope, and roles of the delivery team for efficient project completion.
  6. Risk Management. Identification of potential risks, accompanied by actionable strategies to mitigate them. This ensures your budget and timeline remain consistent with initial projections.

Our method ensures that its cost estimation will be both accurate and human-centric. Contact me to discuss your project.

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List of Successful SaaS Companies in USA
Market research before custom software development of a SaaS product starts with getting the list of successful SaaS companies already operated in the US market. When did they found? What is the industry they operate in, their offer for customers, and the business idea behind the app? What tech stack do they use? What are details of their journey to million-dollars in annual revenue? How much funding did they get? The best software outsourcing companies have to create their services based on a thorough research.
Dzmitry Garbar • 3 min read
Million-Dollar SaaS Companies, Which Have No… Offices
Million-Dollar SaaS Companies, Which Have No… Offices
Companies that hire remote (distributed, virtual, dispersed, or dedicated) workers and do it well seem to have a huge leg up on the competition. Let’s learn how these successful SaaS companies use global talents to increase software quality and reduce the cost of rent and office supplies: Basecamp, Buffer, Chargify, Convertkit, Ghost(pro), Groove, Hubstaff, Invision, Olark, and Zapier. As the company where you can find a remote PHP developer, we believe that you could utilize their experience and expertise to build your own full remote SaaS company.
Dzmitry Garbar • 7 min read
How to Develop a Video Streaming App like Netflix
How to Develop a Video Streaming App like Netflix
With 70% of mobile traffic generated by video content in 2020, streaming apps are conquering the digital space. Dreaming of giving the world an app that would become the next Netflix? Read this article to learn more about the technical as well as user sides of the venture!
Dmitry Kravtsov • 7 min read
The Biggest Myths Some Software Developers Believe
The Biggest Myths Some Software Developers Believe
What are some popular myths in software development? Why are they myths, and how did they become popular? Some of these are myths because they were once true, other because they are convenient distortions in order to promote an agenda, and some because they are naive over-simplifications. Do you agree with these opinions?
Dzmitry Garbar • 4 min read
Node.js vs Go
Node.js vs Go
Ryan Dahl, 36-years old brilliant programmer, is the creator of Node.js, JavaScript runtime built on Chrome’s V8 JavaScript engine. He showed us how to do I/O right way and also taught us how to build software using pure async programming model. Currently, he is a software engineer at Google Brain working on deep learBrowserifyning research projects. His focus is mostly on image-to-image transformations like colorization and super-resolution. He has contributed to several open source projects including HTTP Parser, libuv. In his recent interview (2017), Ryan Dahl has told when it's better to use Node.js and why he uses Go for custom software development.
Dzmitry Garbar • 6 min read
Software Engineering Deadlines: Benefits and Disadvantages
Software Engineering Deadlines: Benefits and Disadvantages
I found myself thinking that existing schedules in software development can give negative effect. Nevertheless more people still insist that schedules play a positive role. I think it’s necessary to apply it with care (just like any other «Silver bullet» for software development). I’ve tried to analyze how schedules can ruin the project and how it’s possible to improve future results.
Dzmitry Garbar • 4 min read
PHP 7 review: Scalar Type Declarations and Return Type Declarations
PHP 7 review: Scalar Type Declarations and Return Type Declarations
PHP 7 introduced new features: scalar type declarations and return type declarations. In this post we will show how these features makes the maintenance of large pieces of code significantly easier by multiple developers and writing more robust tests. For the owner of the large PHP-based application it means more quality with less money spent in a long-term perspective for their custom software development.
Dzmitry Garbar • 3 min read
PHP 7 review: Performance And Security
PHP 7 review: Performance And Security
PHP is widely used for custom software development. Usage statistics indicate that PHP accounts for over 80 percent of all websites, topping 240 million sites according to the Netcraft web server survey (2013), here is another survey with the same results. PHP 7 (2015) is the most important revolution for PHP since the release of PHP 5 in 2004. The speed of PHP 7 and security improvements alone make upgrading to PHP 7 worthwhile. In this post, we will discuss these improvements in more details.
Dzmitry Garbar • 7 min read
How to Design a Healthcare App
How to Design a Healthcare App
mHealth is becoming a popular option in the world today where there is a widespread gadget usage. People are frequently thinking about healthy lifestyles and ways to improve their well-being. As a result, they download dozens of healthcare apps to be motivated and track physical and mental conditions. Fortunately, software providers do have much to offer for both Android and iOS users. Do you want to create a competitive mHealth product? Have no idea what color scheme to pick for attracting more users? Looking for original design solutions? Check out this blog post to find a "best fit" design approaches in healthcare mobile development.
Alex Shestel • 8 min read
Project Management Approach in Belitsoft
Project Management Approach in Belitsoft
The project management approach of Belitsoft Company aims at solving customers’ tasks in the fastest and most transparent manner while simultaneously improving the project by being adaptable due to the use of flexible techniques, as well as a pro-active position.
Dmitry Baraishuk • 3 min read

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