The Cost of Custom Software

In this blog post, we will look at custom software costs from different angles. Learn what affects custom software costs and whether it will pay off for your business.

How much does good custom software cost?

Developing custom software can bring many benefits to an organization and its stakeholders. However, the decision, of whether to opt for standard software or custom software, depends on various factors. One crucial very important factor is the cost consideration.

While standard software is generally more cost-effective in terms of procurement, custom software can better meet a company’s specific requirements, resulting in savings. This article examines the costs of custom software compared to standard software, as well as the factors that influence these costs.

In addition, tips are given for budgeting custom software costs, and project requirements are explained that should be considered before cost calculation. Finally, we will look at what makes investing in custom software so worthwhile.

The cost of custom software compared to that of standard software

Standard software cost

Generally, purchasing standard software is more cost-effective than developing a custom solution. Standard software is usually already available on the market and can be purchased at a lower price.

Standard software can ideally be used without additional customization, which leads to a reduction in time and costs of implementation. In addition, standard software providers have typically undergone extensive testing and provide documentation and training.

This type of software is typically developed for a broad audience and therefore not tailored to the specific needs of any organization. When using standard software, compromises often have to be made in terms of functionality and processes, to adapt the software to your organization’s needs.

Custom software cost

In contrast, with custom software development, you have full control over the development and maintenance of your software. You can choose to have development and maintenance done in-house or hire an external developer to implement the software specifically for your organization.

However, the developers must understand your organization’s requirements in detail and design and implement the software accordingly. This can lead to higher costs, particularly if the software is very complex and must meet very specific requirements.

Once this hurdle is overcome, however, you have software that is precisely tailored to your needs. This means that your workflows are mapped without detours and that users can achieve their goals faster.

The cost comparison

In summary, we can say:

Standard software = savings in the acquisition phase

Custom software = savings in the operational phase

Overall, the decision to develop custom software may lead to higher costs but also to greater efficiency, productivity, and long-term savings.

Which factors influence the cost of custom software development?

There are several factors that can influence the cost of custom software development. Some important factors include:

The complexity of the software: The more complex the software, the more time and resources are required to develop it. Complex software often requires specialized developers, which can add additional costs.

The requirements: Requirements have a major impact on costs. The more requirements there are, the more time and resources are needed to develop the software.

The technology stack: The choice of technology stack can also affect costs. Some technologies are more expensive than others, and it may be more difficult to find developers who are familiar with certain technologies. Development time also depends on the choice of the technology stack. On the other hand, a good technology stack can ensure efficiency and stability in operation.

Testing and validation processes: A thorough testing and validation phase is important to ensure that the software functions without errors. However, this can also increase costs.

Documentation and training: A smaller but very important part is the creation of comprehensive documentation, which should include development documentation, operations documentation, and end-user documentation. The training of your IT staff for operations as well as end-users is equally vital.

Ongoing development: Software “lives” and needs to be maintained, especially if there are interfaces to other systems and the application is of critical (security) importance. This means that updates need to be developed and distributed. These ongoing costs should be taken into account.

How does the individual software development process affect costs?

The individual software development process can have a significant impact on costs. A structured development process can help reduce costs by ensuring that the software is delivered on time and within budget. However, an unstructured process can lead to delays and higher costs.

Communication between developers and the customer is an important component of the software development process. Clear and open communication can help ensure that the customer’s requirements are fully understood and that the software is developed accordingly. Poor communication can lead to misunderstandings and additional development work that can increase costs.

To minimize delays and miscommunication, the process should be agile and transparent for all stakeholders.

How the cost of custom software is calculated?

The cost of developing custom software can be calculated using various methods. Some developers charge a fixed price, while others work on an hourly basis.

With a fixed price, however, developers must ensure that they understand all of the client’s requirements precisely and that the price covers all necessary work. With hourly billing, the client can better control costs but may have difficulty keeping track of the overall budget.

In our projects, we divide requirements into the categories of easy, medium, and difficult. This allows us to estimate the effort, and therefore the costs, based on these criteria.

Tips for budgeting individual software costs

To ensure that the individual software is developed within budget, you should consider the following points:

Get everyone to the table: When defining requirements, all stakeholders should be involved, e.g. in a suitable workshop. This ensures that everyone involved has been heard and can identify with the new software.

Define clear requirements: The clearer the requirements are defined, the better the developers can estimate the scope of the work and calculate the costs accordingly. It helps to separate the requirements cleanly, e.g. into user stories. The developers can then sort the requirements by complexity and difficulty, as described in the previous section.

Prioritize the requirements: If there are multiple requirements, they should be sorted by priority. This way, developers can ensure that the most important requirements are addressed first and that the budget is used accordingly. This activity is also part of the requirement workshop.

Consider using agile methods: As already mentioned, agile methods such as Scrum can help control costs by dividing development into short, iterative cycles. They are also transparent; usually, the ongoing results of development are presented to stakeholders after each iteration. Stakeholder feedback is thus regularly collected and can immediately influence further development. After each iteration, the development team can also re-evaluate their efforts based on the previous iteration.

Plan for additional project costs: It is important to budget for additional costs for unforeseen work or changes, to ensure that the project can be completed within its budget.

Plan for further development: With standard software, you only need to worry about installing updates during operation. With individual software, you are also responsible for its continued development.

Project requirements to consider before cost estimation

Before calculating the costs of individual software, customers should also consider the following project requirements:

Integration with other systems: If the planned software needs to be integrated into an existing system, developers must implement appropriate interfaces. The additional costs for this integration must be taken into account.

Data migration: If existing data needs to be transferred to the new software, additional costs for data migration may arise. The possibility of a rollback should also be considered.

Training and support: Training and support can also incur additional costs and should be included in the cost estimation. For training, multipliers in the organization can be helpful and cost-effective. In terms of support, existing support structures should be utilized. It helps if your support structure has already been standardized according to ITIL.

Why investing in custom software can save you money in the long run?

Although the costs of developing custom software may be higher than for standard software, the investment can save you money in the long run. Custom software can be tailored to the specific needs of an organization, thus leading to higher efficiency and productivity. 

In addition, customized solutions can contribute to higher levels of user and customer satisfaction, which can translate into higher revenues in the long term. Custom software also offers more flexibility and scalability, as it can be adapted to changing requirements at any time. In contrast, standard software is not as flexible and may need expensive extensions or upgrades to meet new requirements.

Additionally, custom software can increase data security, as it can be tailored to the specific security needs of the organization. Standard software may have security vulnerabilities that can be exploited by attackers. In addition, one has to wait for the necessary security patches from the manufacturer, without being able to take action oneself.

Finally, custom software can also protect an organization’s intellectual property. Since custom software is developed only for a specific organization, it is less likely to be copied or stolen by competitors.

Conclusion

The cost of developing customized software may be higher than that of standard software, but a tailor-made solution offers many advantages that can save money in the long run. To achieve this, clear requirements must be defined, priorities set, and an agile approach used to ensure that the project is completed within budget.

Investing in customized software can lead to higher efficiency, flexibility, data security, and intellectual property, and should therefore be considered a long-term investment. It is important to carefully consider what type of software is best suited for your organization and what long-term goals and needs must be met. A comprehensive cost-benefit analysis can help make the right decision.