In today’s time where the competition in each field has increased, every business that has or is planning to have an online platform prefers custom software. The reason behind it is that custom software is flexible, scalable, and offers a personalized experience. But businesses are always worried about the custom software development costs. This might be because custom software is mainly created only for specific business needs with the use of the latest technologies like Artificial Intelligence, AR/VR, the Internet of Things, and Machine Learning. Besides, custom software is different and its execution can be a prime concern for many businesses. To know more about custom software development and its cost, let’s go through this blog.


1. What is Custom Build Software?

Custom build software- it is a process of developing a tailor-made application as per the business needs that simplifies the development process and offers lucrative benefits.  

Most of the businesses may have had a plethora of questions revolving around developing a custom software application and none of them had a definite answer yet. Let’s start with some of the obvious questions that keep appearing in our minds when thinking about developing a custom software solution. 

  • What is the basic cost of custom software development?
  • Can I create my own custom software application?
  • How can I create my own custom software?
  • What are the methods of payment in custom software development?
  • Is it good to choose outsourcing custom software development?
  • Is software depreciated or expensive?
  • How much does custom software development cost in India?

This list might get endless with overwhelming questions but this blog is meant to answer all your questions and give you a concrete solution on the software development pricing, software development costing estimations, payment models, and similar granular details. Let’s start.

2. Average Cost Of Software Development

Generally, every custom software development firm will say that the software development prices depend on the type of project and project complexity. The reason behind it is, that there are many different factors that determine the custom software cost. The software development company will have to walk through the project requirements with the client and then they can give the software costing estimation. It is obvious that a simple application that doesn’t require much except a little user interaction or backend processing will cost less. Besides, a complex app that needs heavy interaction, financial transactions, and more will be expensive. 

The selection of the tech stack also plays an important role in the cost of the entire development process. The ballpark range of software development costs is between $50k to $250k. 

3. Factors that Affect Software Development Cost

Undoubtedly, when you develop custom software there can be countless factors that are fundamentally involved in software development for any specific business or enterprise. If you have to develop a multi-feature application then there need to be multiple resources involved and hence the cost will be as per the features and development.

3.1 The Functionality of the Software and User

The functionalities or features that need to be induced in the application decide the cost of the software. With the additional functionalities and larger user base, the price of development may increase depending on the number of modules, device compatibility, and screens. Adding more functionality to your application will increase your custom development cost. That will require more developers from the service provider for additional features.

3.2 Complexity

Another essential factor that plays a major role in development cost is the complexity of the software project. The main aspect is the logic or the method that is used to develop software and web applications. Suppose the application needs to be tweaked or there are some quirky steps to be taken to develop the software then the custom software development team or the outsourcing team may charge extra depending on the complexity of the desired project. So, if the business goes out of the way to develop unique and innovative products, the cost may increase in such cases.

As per the development needs, businesses can have the complexity of features, there can be design complexity, technology concerns, and architectural or database integration concerns.

3.3 Technology Platform for Development

During the process of developing technology, challenges are the barriers that happen to occur during development. The method or technology used can be old or the features might work well on one technology rather than others. For instance, integrating a database using SQLite is convenient and real-time while if you use any other database connector then it may not work as seamlessly as this one. Basically, the right choice of technology is much better when working on any platform from Windows to Linux to Mac. If the system getting developed is cross-platform, the processes will reuse the code and there won’t be any need for development teams for different platforms. 

3.4 Integration- Internal & External

Integration with internal applications and third-party applications is an important consideration and can affect the price of the development. Since you are just developing the application, you might not know how this would interact with other hardware or software that are going to work together.

For example, if you’re a retail or eCommerce business, then POS software is a significant point of consideration and if you are an eCommerce business then without convenient payment gateways, the app development may not sound complete. Similarly for the banking business payment gateways are vital. So, it is essential to integrate with third-party and internal apps.

3.5 Design Complexity

With the aim of developing a user-centric, interactive, feature-rich, and compact application, there can be many hurdles faced by the software development company or software developers. These complexities can be solved by strong and in-depth front-end capabilities. This plays an important factor in cost estimations.

3.6 Migration and Maintenance

Migration is all about custom scripts that can be removed, dusted off, and retrieved from your old system so that they can work into your new system. Technology keeps evolving with time and when you want to develop an application that needs to be updated with time, it might cost a little extra. If your developed application is non-upgradeable or migration is not possible then it could result in spending some extra dollars from your pocket.

3.7 Software Development Timeline

The development progress of the projected software must coincide with the planned timeline to market the product on time for the users. As per the immediate requirement of the application, the cost may vary for businesses but that will give instant profitability since you are developing an app that users demand.

3.8 In-house Team vs Outsourced Project

Now, this is the most debatable point, as most of the users may first choose to develop products in-house, and then later if they fail they might outsource. Speaking from a neutral perspective, if we look at this from a cost perspective, Software Outsourcing can save costs while developing it in-house can be skeptical in terms of application failure and cost invested in time, infrastructure, and employment of the skilled workforce.

3.9 Development Approach

From selecting a framework to following a specific approach for the software development process, the project plan includes everything. This helps in analyzing the project’s execution strategy and budget. Basically, after the project’s structure is finalized, the development approach must be decided and executed. It must be reliable, fast, and error-free. For this, many software development companies prefer the Agile method as it comes with an iterative process. Agile can help in addressing all the doubts or queries from the stakeholders after the creation of each module which makes the development process easier and the final product comes out as expected. 

4. Different Payment Models of Custom Software Development

All the trustworthy technology pioneers have discovered a set way to engage with businesses. Enterprises have broken the relationship models into three groups based on financial factors and necessary circumstances.

4.1 Fixed cost

The fixed price model goes according to the name which involves addressing the needs, scale, deadlines, and expenses of the project all at scratch. This strategy will work like a magic wand if you have a blueprint for your market since a fixed price model works on the basics of initial preparation, estimate, and analysis.

4.2 Dedicated Team

Most companies choose a dedicated team type of payment method to partner with software outsourcing businesses for their medium and/or large-scale tasks of varying sizes. The main reason is the flexibility and convenience that it offers to the clients for their software development programs.

4.3 Time and Material Model

The time and material outsourcing model is easy, where organizations just have to pay according to the time spent and the material used in the production process. This style of the model makes it possible for you to pay every month according to the use of materials and time spent.

5. How is Cost Estimation Done For Software Development Projects?

Since we have talked about the cost factor so much in the blog, it’s now time to understand how this cost is decided. How do development companies and software developers decide a price for a product? You can plan according to technology, margin, project, and other essential factors. There are five types of estimations:

5.1 Bottom-Up Estimating

If you have a huge project, you can first split down the project into smaller assignments. Then scheduling smaller sprints of larger projects is considered a framework for job breakdowns. The latter is important not only for the calculation of time and expense but for many other activities of project management. You will get the overall cost of the project by adding the hourly rate and summing up those granular time estimates. Bottom-up estimation is one of the common practices.

5.2 Top-Down Estimating

When there is a fixed budget for a project, top-down estimation is typically used. A budget based on historical data about similar projects or input from experts can be provided by top-level management. The estimation process in this case is the determination of the scope of the project that fits the budget specified. This explains in other words, what you can do with the money you have.

5.3 Analogous

This is a simpler way of measurement which depends on the previously completed tasks of the same project and making an estimation regarding the same.

5.4 Parametric

Parametric Estimation is a process that enables the total work expense to be calculated based on scaling the features of other tasks from well-known programs.

5.5 Three-Point Estimating

This method is based on a triangular estimation method where the values are profitable estimates, Loss-based negative estimates, and random estimates. If we were to take it by equation then it would be:

E= (P+N+ES) / 3

P- Positive estimate

N- Negative estimate and

ES- A random assumption based on the market price


6. How Much Does Custom Software Cost in India?

The Indian IT Services and Business market to reach US$14.2 Billion by December 2020; predicts IDC India Reports- System Integrators and leading in growth.

The cost estimation in India compared to other countries is extremely economical and that is the sole reason why the Indian market is skyrocketing. As per the reports from Time Doctor, the top countries preferred based on the cost factor for outsourcing are,

  1. India
  2. Mexico
  3. Malaysia
  4. Philippines
  5. Bulgaria
  6. Brazil
  7. Ukraine

The cost in India ranges from $14000 annually while it is $94000 when compared to the price in the USA. The talented and diligent resources of India are unquestionable. Certain unavoidable benefits apart from cost benefits that the Indian Outsourcing market offers are,

  • Talented workforce new-edge IT companies
  • Humongous software size
  • 24*7 Customer support
  • Supportive government and rules
  • Reliable and trustworthy established companies

7. Final Words

Cost questions have been the most disputable search and in recent times it has been observed the prevalence of this type of question is just increasing. So, to clear this hustle of evaluating the cost factor, we decide to do elaborative research and give some insightful information on how the cost factor impacts custom software development. Hope this blog brings light to all your questions and you can have a ballpark cost estimation of the software development process and can make the right decision.

Itesh Sharma

Itesh Sharma is core member of Sales Department at TatvaSoft. He has got more than 6 years of experience in handling the task related to Customer Management and Project Management. Apart from his profession he also has keen interest in sharing the insight on different methodologies of software development.


  • Leave a message...

    1. Urja

      I think this article explained very well about custom software and different factors that affect the cost of software. But I think the size of software also plays a major role in the cost of any software product. There are some non-technical factors that could also affect the cost of an app or software.

    2. Ajru Copperman

      As far as I know, geographical location may also impact the cost of developing software. Some regions like India and China where you can get software built for a much lower rate without compromising the quality as compared to the USA and UK.