How can you estimate software development cost?
April 13th, 2021
The ability to provide detailed software development cost estimation is a very important feature for any project, doesn't matter whether it is a huge software system or a simple website. Incorrect estimation may lead to future issues and conflicts between the client and the development team. In this article, we will tell you about the 2 most popular types of software development contracts, show you some advice on how to successfully estimate software development cost, and complete the project in estimated scope.
The ability to provide detailed software development cost estimation is a very important feature for any project, doesn’t matter whether it is a huge software system or a simple website. Incorrect estimation may lead to future issues and conflicts between the client and the development team. In this article, we will tell you about the 2 most popular types of software development contracts, show you some advice on how to successfully estimate software development cost, and complete the project in estimated scope.
Software development cost – different ways to estimate
There are multiple factors, which may depend on your decision of choosing the type of cooperation with your development team. Modern projects are conducted in 2 models: Fixed-Price and Time & Materials model. Here are details, which will help you to choose one model and create better estimations:
- Estimate scope of the project features and its ideas – if you are 100% sure about all the features that you want to see in your project, you can choose the Fixed-Price model. But usually, this is not the case for the client, because it is very hard to estimate the whole development process, especially for big projects. There usually is a need to add or remove some new features in later stages of project development. It is recommended to use Time & Materials model for such a scenario because it is acceptable to add new features and changes in this type of cooperation.
- Estimate flexibility – let the development team know, whether there exists a possibility of developing the project a little longer and more expensive if it is needed for the quality of a final product. Sometimes it is absolutely unacceptable, usually because of a strictly limited budget.
- Share final product ownership – in such a scenario you are safe to provide as many details about the product for better development, as needed. This strongly boosts quality, speed of development, and in-team cooperation quality.
- Prepare scenarios both for ideal scope and acceptable one – there are many details in software development, which may prolong your project or increase its budget. Divide all your features into “must be in the final product” and “would be nice to have a final product”. This will help the development team to better prioritize their tasks and to know the borders of “acceptable” scope, which can not be crossed.
- Consult with the development team about your new features – adding a feature, which seems to you as very simple, may not be so easy to implement technically. The client may ask for something, as he thinks simple, and then later be shocked by the fact that this feature increased scope and budget by 10%. Discuss your ideas with developers to better estimate and decide, whether you actually need to implement some of your ideas.
Pros and cons in time & materials costings
Time & Materials is a model of software development cost estimation in which the customer pays only for the hours worked on the project and materials if there are any – hardware (rarely) and software, without which it is impossible to develop the product.
Advantages of time & materials model:
- Easy adding/changing of project requirements and features – you pay for hours worked, without any limitations, which means you can add as many new features at any time, as your budget allows.
- Price negotiations are simpler to handle – it is hard to estimate the price of a full project, but easier to estimate a price per hour and price of needed materials.
- Good for big projects – if you are planning a big long project, time & materials model will work the best for you, because it is easy to forget about something in the planning stage. With this model, you can add those features later when you prepare all details and requirements.
Disadvantages of time & materials model:
- It may be stressful and time-consuming to track time and materials – if you want to be sure that you are paying for what is actually being developed, you would need to track the work and materials used. This issue can be solved by hiring an experienced project manager.
- There is no motivation for developers to finish earlier than planned – software developers may finish some tasks earlier if they want to, but there is no motivation for them to do that because you pay for the time which was planned for the task, not the actual time. An experienced project manager can also solve such a problem.
- Easy adding of new features may lead to overbudgeting – clients may add many new unplanned features but not notice that it is increasing the budget rapidly. All new features should be discussed with a project manager, who will estimate the costs of your new ideas for you.
Pros and cons in fixed price costings
Fixed-price model is suitable for smaller projects with precise requirement definitions. With this type of contract, the customer and development team find a constant price for the full project before starting the development phase.
Advantages of fixed-price model:
- Predictable estimations – budget and some of the deadlines will be clarified before starting the development, which will let you build plans around your product release.
- No need to track time and costs – you, as a client, don’t need to control the development team, because prices and deadlines will be stated in the contract, and your development team will do their best not to cross them even without your supervision.
Advantages of fixed-price model:
- No flexibility – a very big disadvantage, which makes this type of contract less and less popular in modern software development cost estimations. If there will be some feature, need for which rises in mid-development phase (or you just forgot to state it earlier), you won’t be able to add it to development scope easily.
- Unpredictable issues and problems – if your project is not ultra-simple, there always will be a probability of some issues arising in the development phase, which were impossible to predict when planning the price. This may lead to some misunderstanding or even conflicts with an offshore development team.
Cost of developing software offshore
There are a lot of factors that may affect the price of the development, such as the technical complexity of your app idea, length of the project, location of mobile app development outsourcing, etc. Currently, the typical rates offered for developers by software houses in Central and Eastern Europe range from 6 USD to 50 USD per hour. Taking into account the software house margin, the typical rates for the customers can vary significantly and lie between 20 and 100 USD.
Software development cost estimation in BWC.Technology
BWC.Technology is experienced in estimating software development costs. Our company can help you to estimate costs for your project and help you to choose a contract model which fits your project idea the most. We can also help you with:
- saving on internal resources
- isolating from complex technical topics
- saving time on team and process definition
- saving time and focus on preparing detailed requirements
- saving time on testing
We work with proven technology partners to establish dedicated development teams, agile working practices and deliver digital product increments. BWC.Technology is experienced to comply with elevated quality standards, having worked for large clients on multinational projects. Our team will guide you through the process of transforming your idea into a working digital product.