What does custom software actually cost?
Series: Cost of Custom Software
You have a concrete idea for an individual online platform and are faced with the decision of how to implement it? Custom software is developed according to your wishes and needs - unlike standard software, which can be modified but never achieves the same flexibility. If you are still not sure what custom software actually is and whether it is the right approach for your project, you can find further explanations in our article on custom software.
Have you already decided on custom software? Then you certainly have questions about the costs. We explain what you need to know to keep financial control. In the first part of our mini-series on the topic of custom software costs, we look at how costs actually arise.
Table of Contents:
The cost of implementing a software project depends largely on the following factors:
- What is the scope of your project? How complex is it?
- What quality requirements do you have? Do you only need a prototype for a proof of concept or a scalable solution for (end) customers?
- How competent is your IT partner in developing an efficient solution with you?
- What (implementation) tools does your IT partner use? And more importantly: how well do they master them?
You can influence some of these factors yourself and significantly control the costs with your decisions. Does it have to be done very quickly? Do you need certain special modules, or should the price be as low as possible?
In addition to these points, it is important to take into account any existing concepts. Is it a start-from-scratch solution, do you just want to connect an existing solution, or do you want to transform an old system? If a software or code base already exists, projects often cost less.
The later operation will also regularly incur costs, but as a rule the expenses for the implementation of the software outweigh these. Of course, this all depends on your specific project. However, there are a few figures that can help you with orientation.
As a basis for the calculation, the effort for the implementation is usually used in so-called person-days. This is the duration in working days that a single person would need to implement a work package. To give you an idea: In Germany, a person-day in software development currently usually costs between 800 and 1,300 euros - depending on the technology used, experience level and region.
Over the various phases of project implementation, these person-days add up. But which phases are there, and what needs to be considered in these phases? Roughly speaking, a distinction is made between a preliminary phase for scoping and conception, implementation, operation and further development.
1. Scoping and conception
The scoping and conception phase serves primarily to deepen the common understanding of the tasks to be solved. This happens in workshops and / or sprints, i.e. time blocks of a few days to weeks, during which the team works on specific subtasks.
Together, goals are agreed upon and responsibilities are defined. Concepts are often written and designs created. But prototypes can also be developed. In this phase, planned processes should be questioned, and possible solutions weighed up. Here, it is important to consider the technical perspective in addition to your professional point of view and to find good compromises.
A crucial point in this project phase is often the question of how much conception is necessary in advance and which topics can be clarified more efficiently during the later implementation phase. This depends largely on how clearly the solution is already outlined and which questions are still open. For most larger projects, however, it is worth scheduling a few weeks at this stage in order to make important directional decisions.
This phase can be billed according to hours worked (also called "time & material"). Since the size of the work packages is still manageable here, however, a package price can often be agreed.
#Our Advice: Studies show that one of the main reasons for escalating project costs is inadequate scoping ("What do we do when and what do we not do"). Often this scoping is already part of the pre-contractual discussions. When choosing your IT partner, we therefore recommend that you pay attention to how well they are able to support you methodically and act as a sparring partner in terms of content.
There is no point in beating around the bush: If an online platform is a crucial part of your business model, with which you want to stand out from the competition, then the development requires a considerable investment. Professional, completely newly developed custom projects rarely start at less than 50,000 euros. If you first need a prototype, partial solutions (e.g. only a backend) or if the IT implementation partner brings along prefabricated modules, it is also possible to work with lower budgets.
Why is that? The budget limits the amount of working time that can go into your project. With fewer resources, it is almost impossible to develop something that stands out noticeably from standard products. But that is exactly the advantage of custom software - you determine the range of functions yourself and can build things the way you need them. If your budget is tighter, you should consider whether standard software (such as CMS solutions or ready-to-use shops) is a suitable alternative.
If, on the other hand, you need a more complex tool, the investment costs will increase accordingly. As an example: Internally used organisational software or B2B-focused solutions usually start at around 100,000 euros. Rarely, very comprehensive solutions can go into the seven-figure range. There are certain factors that can strongly influence the final price of your software, for example interfaces, glossy UIs and large numbers of users. We will address these cost drivers in a later article.
#Our Advice: You will always find someone who offers it 'cheaper'. Questions you should ask yourself, however, are in the case of freelancers, "Is it ensured that your platform can be further developed in the event of a staff shortage?". Or in the case of offshoring and nearshoring, "How well do your service providers understand your requirements and how much support effort does this cause you?".
#Our Advice: Solid software requires diligence. Agreements, analyses and tests require a certain amount of time. Be critical here: If the offer sounds too good, there could be hidden costs or other disadvantages. Therefore, set clearly defined interim goals and critically check the progress. If there are clear negative deviations in the early stages of the project, you should decide to exit sooner rather than later. Otherwise, in case of doubt, it will be even more expensive. Ask your gut feeling: Do you feel in good hands with your IT partner, even if there are discrepancies (regarding bugs, deadlines, efforts, etc.)?
3. Operation (application management & support)
Once your software has been implemented and is ready for use, regular costs are usually incurred for its operation. These are usually billed on a monthly basis and recorded in a corresponding contract. The following section explains how the costs are typically made up.
Hosting (Server Provision & Administration)
Online software runs on servers, the operation of which incurs costs. Individual software requires its own environment and must therefore be individually "hosted", i.e. provided. This can be done either in a professional data centre or "in the cloud" - i.e. on distributed server structures of e.g. Amazon, Google or Microsoft. What makes the most sense for your project and what advantages and disadvantages the individual options offer would go beyond the scope of this article. If you have any questions, we will of course be happy to advise you.
Just as diverse as the options are the associated costs. A hosting solution for 1 million end customers naturally requires different resources than a B2B application that has significantly fewer users but more specific requirements.
Support ensures that someone is available to deal with your technical questions or problems.
A distinction is made between first, second and third level support. First level support deals with direct enquiries from users. Second-level support steps in to deal with issues that could not be resolved at the first level. Deep technical analyses and the correction of errors are then handled by third-level support. Many of our customers and partners handle first and second level support themselves and only contact us for third level requests.
Support agreements often include fixed hourly quotas based on a reduced developer hourly rate. Depending on needs and personal requirements (such as availability or response times), very individual arrangements can be made here.
Application Management (Updates, Monitoring, Backups)
Everyone knows it from home - computers and software need care to run safely and stably. In application management, experts take care of three things:
- Your web application should always be provided with the latest (security) updates,
- monitoring the status of your application and intervening before problems arise for the users, and
- backups are created according to predefined routines, so that in exceptional cases it is possible to restore the application quickly.
In the area of maintenance, the costs are also strongly dependent on your solution and your wishes. By maintenance, we mean updating tools and libraries, optimising your software and maintaining your databases. In any case, it is advisable to plan a small regular amount for these topics, because they ensure that your system runs stably and performantly in the long term.
Licence costs for third-party systems
If your IT partner uses software components such as databases, libraries, etc. that are not open source (i.e. can be used free of charge), you should include cost items for their licences. This also applies to services that are integrated into your system and may incur monthly usage- or turnover-dependent costs.
And what does it all cost?
The actual costs depend on the requirements of your project. For a B2B system or an internal tool with a manageable number of users that only needs support during normal office hours, you can expect to pay around €800 to €2,000 per month for hosting, application management and a small support package.
If, on the other hand, you are planning a globally deployed B2C system with numerous users and 24-hour support, the costs for servers and a support team will logically be much higher. Talk openly about your plans and make arrangements that can grow with your needs and expected user numbers.
4. Further development
One of the main advantages of customised software over standard software is its adaptability. It is the basis for reacting quickly to changing customer needs or for further developing one's own business model.
It is therefore rather normal that new ideas and change requests arise in the course of a platform project, and that these are to be implemented promptly.
This often happens in the form of small on-demand follow-up projects. They are implemented either with fixed price or time-and-material billing. Because the topics are often more clearly defined, fixed prices are easier to implement than at the beginning of your project. Are you wondering what this means in depth? You can find out more about the different types of pricing in the next article on the costs of custom software.
The price of your software is influenced by the required scope and the tools used, by your quality requirements and your chosen IT partner.
Different cost positions arise during the different phases of the process. The advantage of custom software is that you can focus on the areas that seem most important to you and that make up your platform.
There are different payment models. You can read more about fixed-price models and time-and-material in our second blog article.
Ultimately, the investment costs for custom software are not exactly low - but that doesn't necessarily make it more expensive than standard software. Especially in the long run, custom software can pay off. We have already shed light on why this is so in our comparison between custom software and standard software.
How do we do that with the wunschlösung?
We asked ourselves how to make the development of custom software more efficient. To save resources and at the same time ensure the quality of our products, we have therefore developed special code generators. This software simplifies the writing of code and provides us with a stable basis on which we can then build together. This gives us more time for what is really important - the implementation of your ideas and wishes.
For some frequently needed functions, we have also developed ready-to-use modules that we can use for your project. We will check and discuss this with you before the project starts.
Sounds interesting, and you want to know more about how the costs would behave in your specific application? Then simply get in touch with us! It's quick and easy via our contact form.
More of this series: Cost of Custom Software
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