A CTO’s Guide to Custom Software Development Rates

Custom software development today is an advanced field where a patchwork of functionalities can be brought together to create pretty much anything you want. If you can dream it, developers can create it. But what are the custom software development rates?

In this guide for CTOs looking for custom software development services, we look at the essential aspects of the custom software development process to help you make an informed decision on pricing. Our findings are based on industry research to help cut through the fog and clarify the process.

The industry is diverse and comprises developers with different ideas on pricing models, market forces that change every now and then, and a thousand other variables that make knowing the price tag upfront a little tricky.

While no one can claim to help you nail down a solid figure you can budget for, we can help you get a general estimate, bringing your vision more into focus.

Custom software development refers to the process by which bespoke software is created, deployed, and maintained for a specific organization, user, or set of functions. Its counterpart, commercial or off-the-shelf software, is where you get a broad set of functions aimed at users that require no product customizations.

As the name implies, you create the software to serve your specific functions without the limitations that come with commercial software. Under this umbrella of development are such services as:

• Consulting
• Design
• Development
• Testing
• Deployment
• Maintenance and support

The field is not limited to just these functions, but they comprise the core of custom software development and factor into respective software development rates.

To understand how custom software development prices work, we’re grouping them into categories, the first of which is by type of engagement. In this segment, we’ll look at what influences the rates when you opt for software consulting, team extension, a dedicated software development team, or individual software contractors.

Software consultant hourly rates

In our definition of software consultancy, we’re looking at consulting on a tech advisory basis, usually during the early stages of the process. Software consultants’ rates vary depending on the consultants’ experience, location, demand, reputation, skills, and more.

At EPAM Startups & SMBs, we provide consulting for startups and SMBs. We welcome you to check it out and get in touch for a ballpark price for your project.

In our research, we looked at the average cost of custom software development worldwide based on data from Clutch.co, one of the biggest aggregators of custom software development companies out there.

Team extension rates

Team extension refers to augmenting your development team with experts to fill in any knowledge or technical gaps without hiring them in-house. This model benefits those looking to scale teams flexibly, have complete control over a project, and get the exact skills they need when they need them.

The rates vary based on the number of professionals hired, their experience, programming languages, type of skill, location, market fluctuations, and other factors.

It’s worth adding that the figures above are only indicative of average hourly rates reported by providers and don’t take into account the total sum of engagement, which is calculated individually in each case.

At EPAM Startups & SMBs, we provide access to team extension services, giving you the exact skill set needed to create your software or support your ongoing product engineering and digital transformation processes.

Dedicated software development team rates

The cost of hiring a software development company varies from place to place and, depending on your needs, can be as low as $10,000 for a full project to as high as $500,000. It’s worth noting that dedicated software development team rates can vary wildly from one team to the next based on the same factors affecting anyone working in the industry as software engineers.

It’s also worth noting a few key things about IT outsourcing costs:

• It’s cheaper than hiring in-house, given that you don’t have to pay for recruitment, taxes, benefits, overhead costs, office space, training, etc.
• The rates are often flexible and negotiable, with room to negotiate more favorable terms.
• Consider more than just rates when hiring a team, including reliability, culture fit, quality, and communication.

Individual software contractor rates

Hiring individual software contractors follows much the same lines of reasoning and software development cost estimation as team extension services. The same factors affecting prices apply here and will influence the rates.

According to ZipRecruiter, software contract rates in the United States see hourly wages as high as $80 and as low as $14 per hour. Most software developer contractor wages at the time of writing range between $36 to $59.

However, hiring a freelancer has its cons, including lack of accountability, low commitment to the team or project, high turnover, not having ownership over the work done, having limited control over the work schedule, quality and plagiarism issues, and more.

Custom software development rates can vary from one software solution to the next, as they have different requirements and levels of complexity. We detail the factors critical for estimating development costs to guide you and provide a high-level breakdown of rates by role and country.

Minimum viable product (MVP) development costs

A minimum viable product (MVP) is a software product's most basic functional version that includes only essential features. This is intended to be a proof of concept and a tool to get feedback before polishing or continuing development.

The cost of MVP development can depend on factors such as:

1. Features and functionality: The software complexity and number of features included in the MVP will impact the development effort and, subsequently, the cost. It’s essential to prioritize the core features that provide the most value to users.
2. UI/UX design: The level of design customization and the need for a seamless user experience can influence the development cost. Balancing aesthetics with usability is crucial to attract and retain users.
3. Platforms and devices: If the MVP needs to be developed for multiple platforms (e.g. web, mobile), the project cost may increase accordingly. Additionally, catering to various devices, screen sizes, and resolutions can impact the development effort and cost.
4. Integrations: The need to integrate the MVP with third-party services or APIs can affect the pricing. Consider the requirements for data exchange, authentication, or other external system integrations.
5. Development team expertise: The skills and experience of the development team will influence the cost. Highly specialized or experienced developers may charge higher rates but can also deliver a higher-quality product.

It's crucial to work closely with the development team to define the scope of the MVP and establish a budget that aligns with your goals and resources.

Web application development costs

The costs of web development can vary based on the complexity and specific requirements of the project. The following factors often determine software contractor rates:

1. UX/UI design: Customizing web design and ensuring an intuitive and user-friendly interface can influence the cost. The level of design complexity, animations, and interactions can impact the development effort.
2. Functionality and features: The number and complexity of features needed for the web software application can affect the cost. Consider features such as user authentication, data management, third-party integrations, and underlying content management systems.
3. Scalability and performance: If the web application is expected to handle many users or high volumes of data, it may require additional infrastructure and optimization, increasing the cost.
4. Content and data migration: If the project involves migrating content or data from existing systems to the new web application, additional effort may be required, impacting the cost.
5. Maintenance and support: Consider ongoing maintenance and support costs, including bug fixes, updates, and potential feature enhancements.

For specific web development projects, such as SaaS app development, additional factors such as multi-tenancy, subscription management, and billing systems may influence the cost.

Mobile app development costs

The costs of mobile app development can vary based on several factors unique to the mobile ecosystem. Consider the following factors when estimating the cost of your mobile application:

1. Platforms: Developing for iOS, Android, or both platforms will impact the development effort and cost. Each platform has its own specific requirements and development frameworks.
2. Native vs. cross-platform development: Native app development, which involves building separate apps for each platform, tends to be more expensive than cross-platform development using frameworks like React Native or Flutter. Cross-platform development can reduce development time and cost while providing a native-level experience.
3. Features and complexity: The number of features, the complexity of interactions, and integration with device capabilities (e.g. camera, GPS) will influence the development effort and cost.
4. UI/UX design: Creating a visually appealing user interface requires design expertise and can impact costs. Customizing the app's design, animations, and transitions may require additional effort.
5. Backend development and APIs: If the app requires server-side development or integration with external services or APIs, it may increase the development effort and cost.
6. Testing and quality assurance: Rigorous testing and quality assurance are crucial for delivering a polished, bug-free app. It's essential to allocate resources and budget for thorough testing during development.

App store submission, ongoing maintenance, and updates can also influence mobile app development costs. Consulting with mobile app development professionals will help determine accurate cost estimates tailored to your specific app requirements.

The following comparison table is based on the Accelerance 2023 Global Software Outsourcing Trends and Rates Guide, which you can use as guidance to calculate the approximate price of IT services based on your required team composition and project size.

1. Project scope: The project's complexity, size, and required features directly affect the development effort and cost.
2. Technical requirements: Integration with external systems, scalability, performance, security, and compliance can impact costs.
3. Creative design and user experience (UX): Customization, visual elements, animations, and interactions can add to the development effort and overall cost.
4. Development team expertise: The skills and experience of the development team can influence the cost.
5. Platform and device compatibility: Developing apps for multiple platforms or devices may increase the development effort and cost.
6. Integration with third-party systems: Integrating the software with external systems, APIs, or databases may impact costs.
7. Testing and quality assurance: Allocating resources for comprehensive testing is crucial for robust software product development.
8. Maintenance and support: Budgeting for post-development activities ensures the longevity of the software.
9. Embedded security: The need for robust cybersecurity measures and compliance with industry standards may increase the development effort and cost.
10. Cloud infrastructure: Utilizing cloud-based infrastructure can impact the cost, considering factors such as storage, data transfer, and scalability.
11. Vendor location: The geographic location of the software development vendor can influence the cost due to variations in labor rates and market conditions.