Learn what affects software development cost in 2025 and get tips to estimate your budget, reduce expenses, and choose the right development team model.
Estimating software development cost is a key concern for businesses of all sizes. In 2024, the average custom software development cost ranges from $25,000 to $150,000, while complex systems can go beyond $500,000. Many factors impact the cost of software development, including the type of software, platform, UX/UI level, and the development team you choose. Whether you go with in-house, freelance, or offshore teams, each model affects your total budget.
In this guide, we’ll look at what affects custom software development pricing. We’ll break down costs by project types. We'll also share tips to cut software engineering costs and still get great results.
Factors Influencing Software Development Cost
The cost of software development can change a lot. It can be as low as a few thousand dollars or reach several hundred thousand. This depends on the project's scope, technology, and requirements. Knowing the key factors below will help you estimate your budget better. This will also aid your planning decisions. Some factors that affect software development cost include
1. Software Type
The type of software you’re planning to build has a big impact on your development costs. Different types of software come with different price tags depending on how complex they are and how much work is involved.
Custom Software Development: This means creating software from the ground up. It requires more time and resources. As a result, it is often the most expensive option.
Software Modernization: This means updating old systems with new technologies. It is faster than starting over, but complexity still impacts cost.
Software Integration: This means adding new modules likeCRM or ERP to your current system. While faster than rebuilding,CRM and ERP integration may still raise costs due to backend and API work.
Web vs. Mobile Development: Web apps are generally cheaper. In contrast, mobile apps, especially for both iOS and Android, require more time and budget.
🏷️ Search for more types of software to define which really suits your products!
2. Software Platform
The platform you choose directly impacts your software development cost and required effort:
Single Platform (Web or Mobile): Lower cost and faster delivery.
Cross-Platform Development: Developing for web and mobile (iOS, Android) requires more testing and optimization, increasing cost.
Native Development: Building separate apps for iOS and Android gives you better performance. But since each platform needs its own codebase, it usually costs more.
3. UX/UI Design Level
User Interface (UI) and User Experience (UX) design influence usability and product success, but also the budget:
Basic Design: Clean layout with minimal customization, lower cost.
Custom UX/UI: Unique interactions, animations, user flows, and visual identity can significantly increase cost.
Responsive Design: Designing for desktop, tablet, and mobile adds complexity.
Responsive UI/UX design (cre: Pentaclay)
4. Outsourcing Team
Your development team's structure, location, and pricing model greatly affect software development costs. Choosing the right IT outsourcing model can balance budget, speed, and quality.
Team Structures
In-House Teams: Provide full control and alignment with business goals. However, they come with higher costs for salaries, benefits, and infrastructure.
Freelancers: A budget-friendly option for small jobs. They are flexible and affordable. However, they aren't great for large or long-term projects because of lower accountability.
Onshore Outsourcing: Teams in the same country, such as the US or UK, make communication easy. They share the same time zone, but their hourly rates are often higher.
Nearshore Outsourcing: Nearby countries, like Eastern Europe for Western European clients, provide a great balance of cost and convenience.
Offshore Outsourcing: Countries like Vietnam or India provide the best cost efficiency. Offshore teams provide quality work at lower costs. This makes them great for startups and businesses in the US and Europe.
Outsourcing Pricing Models
Model
Asia (Vietnam/India)
Eastern Europe
North America
Fixed-Price
$25–$50/hr
$40–$70/hr
$100–$150/hr
Hourly-Rate
$20–$45/hr
$35–$60/hr
$90–$130/hr
Dedicated Team
$3,000–$7,000/month/dev
$5,000–$9,000/month
$12,000+/month
Each outsourcing software development services model serves different needs. Fixed-price works well for defined scopes. Hourly rate suits evolving specs. A dedicated team is best for long-term collaboration and scaling.
5. Development Implementation
Development implementation is how your project takes shape — from the very first step to the final product.
Technology: Deciding between open-source tools and paid platforms doesn’t just affect how your software works — it also affects how much you’ll spend building it.
API Integration: If your app needs to work with other systems like payment gateways, CRMs, or ERPs, you’ll need to plan for more technical work — and more cost.
Security: Building software that handles sensitive information? You’ll need to meet strict standards like GDPR, HIPAA, or PCI. That means extra time, effort, and budget.
Testing & QA: The more devices and scenarios you test, the more time and resources you’ll need. But if you skip testing, users may face bugs and frustrations — and you’ll pay for it later with more fixes and technical debt.
Average Software Cost Breakdown
It depends. There’s no one-size-fits-all answer. The cost to build software can range from $25,000 for a simple app to $250,000 or more for something complex. Big enterprise systems? They can even hit $500,000+.
A lot of things affect the price: what the software does, how complex it is, where your team’s based, and which tools you’re using.
For web and mobile applications, the development time, and thus cost is largely determined by complexity:
1. Simple Applications
These apps are straightforward. They do a few key things and support only a couple of user types. They’re perfect for small businesses or startups that need a digital tool fast—without breaking the bank.
Development time: 500 – 700 hours
Estimated cost: $22,500 – $31,500 (based on $45/hour)
Use case: Basic business tools, static websites, or internal dashboards
2. Medium Complexity Applications
These solutions come with more features, integrations, and tailored workflows. They suit companies that need scalable apps to serve real users.
Development time: 700 – 1,200 hours
Estimated cost: $31,500 – $54,000
Use case: E-commerce apps, CRM tools, booking systems
3. Complex Enterprise Applications
These are high-end systems designed for multiple processes, large datasets, and strict compliance. They often serve many users and require careful technical planning. This planning significantly impacts the cost of custom software development.
Development time: 1,200+ hours
Estimated cost: $54,000+
Use case: SaaS platforms, multi-role systems, real-time data apps, secure healthcare platforms
Below is a quick look at typical app types with approximate development hours and costs:
App Type
Platform
Time (Hours)
Cost (USD)
Basic Marketplace
Web
1168
$52,560
iOS
862
$38,790
Android
847
$38,115
Basic eCommerce
Web
1200
$54,000
App like Spotify
iOS
868
$39,060
Booking App (like Airbnb)
Web
1350
$60,750
Note: These are only average estimates based on offshore rates (~$45/hour). The final software development cost may change depending on your team’s location and project needs.
To get an accurate quote, you should clearly define:
To get an accurate quote, clearly define:
Your industry (healthcare, logistics, education, etc.)
The more details you give, the better and clearer your cost estimate will be.
Common Software Development Team Model
Choosing the right team model is an important step. It affects your project’s budget, speed, and quality. Below are four popular options businesses usually consider:
In-house Developers
When you build an in-house team, you’re not just hiring developers, you’re bringing them into your company’s day-to-day. They sit with you, join your meetings, and grow alongside your product. One big advantage? Things move fast. Need to change a feature or get feedback on an idea? You can just tap someone on the shoulder and talk it through.
They don’t just write code over time. They learn about your business and your goals. They grasp the "why" behind every decision. This level of alignment is powerful. You can’t achieve it overnight with external teams.
But it comes with a price. Full-time employees mean full-time costs, salaries, taxes, benefits, software licenses, paid time off, and more. You’re also paying even when things slow down and the team isn’t fully busy. And don’t forget about hiring. Finding the right people takes time and money, in fact, it can cost up to 20–25% of a developer’s first-year salary just to bring them on board (source).
Freelance Developers
Freelancers are people you hire for one-off jobs or short-term work. They’re not on your payroll full-time, you bring them in when you need something done, and once it’s finished, they move on.
Freelancers can be super helpful when you’ve got a tight budget or just need something done quickly. Maybe it’s a logo, a quick landing page, or fixing a bug that’s blocking your release. You post a job, get a few replies, and someone could be working on it by tonight. It’s fast, simple, and you only pay for the job, no long-term strings attached.
Of course, it’s not always perfect. Some freelancers are great, they deliver on time and really care about the work. But others disappear halfway through or miss deadlines without notice. And since they’re not part of your team, they don’t always “get” your product or how you like things done. Sometimes it works out. Sometimes it doesn’t. That’s just part of the deal.
Onshore Development Team
When you work with an onshore team, you’re basically working with people who live where you live. Same time zone, same language, no weird delays, no explaining things twice. You can send a quick message, jump on a call, and keep things moving without much friction.
There’s also a sense of security that comes with it. Your contracts are under local law, your IP is safer, and you don’t have to worry about things getting lost in translation, literally or culturally. You’re just on the same wavelength.
Of course, it’s not perfect. It usually costs more, sometimes a lot more. And depending on your location, you might not have as many great developers to choose from. Plus, unless you’re hiring an agency to handle everything, you’ll likely still be managing timelines, feedback, and quality yourself.
An offshore development team means your developers are in another country, usually somewhere with lower labor costs. That’s the biggest reason people go this route: it can save you a lot of money. In some cases, you’re looking at 60–70% less than hiring locally.
But it’s not just about cost. Going offshore opens up access to a huge global talent pool. You can find specialists in everything, UI/UX, backend, QA, DevOps, even business analysts. And if you work with a solid offshore company, they often handle everything from start to finish, not just code, but the whole product lifecycle under one roof. That kind of all-in-one setup can be a huge relief when you don’t want to manage a bunch of moving parts yourself.
Still, it’s not without challenges. Time zone differences can slow things down. You can’t always get instant replies, and sometimes, things get lost in translation. That means project management has to be tighter, more structured. You’ll also want to lock down contracts, NDAs, and make sure your data and IP are well protected from day one.
If you plan to hire an outsourcing software development firm, especially in tech hubs like Vietnam, make sure to choose a partner that’s experienced and transparent. A great software development outsourcing company will deliver both quality and cost-efficiency without compromising on security.
Tips to Optimize Software Development Time and Cost
One major reason for rising software development costs is unclear or changing project goals. When the dev team doesn’t fully understand what the software should do, they may waste time, rework features, and increase the software engineering cost.
1. Define Clear Requirements Early
One major reason for rising software development costs is unclear or changing project goals. When the team's unclear goals are a big reason software projects go over budget. When developers don’t know exactly what to build, they often waste time or redo work, driving up costs.
Hold requirement workshops with all stakeholders and developers to agree on the project scope.
Use wireframes or mockups to show how the software should look and work.
Defining clear requirements from the start helps avoid confusion, keeps the software development budget under control, and reduces costly changes later.
2. Collaborate with a Trusted Outsourcing Software Development Partner
Outsourcing gets a bad rap sometimes, but the truth is that it can save you a lot of time, money, and stress. In fact, working with a solid development partner can cut costs by 40–60% compared to building an in-house team.
But here’s the thing: saving money is just part of the story. The real value is having the right people on your side.
A trusted software outsourcing agency doesn’t just give you “bodies to write code.” They bring a whole system with them, processes that work, people who’ve done this before, and a structure that helps you move faster without things falling apart. That kind of experience is hard to build on your own, especially if you’re not a tech company at heart.
Here’s why this works:
You get access to experienced devs without spending months hiring, onboarding, or figuring out payroll and HR.
They’ve got frameworks and workflows that speed things up, especially if they’re running agile properly.
Pricing and timelines are more predictable, thanks to clear scopes and service agreements.
And when your project changes (because let’s be honest, it will), they can scale the team up or down without a meltdown.
3. Develop an MVP (Minimum Viable Product)
To reduce software development cost, you should start with an MVP instead of building a full product. MVP development includes only the most essential features. It helps lower risk, speed up delivery, and test your idea with real users. This lean approach keeps your software development budget under control while setting a strong foundation for future updates.
Why MVP is a smart move:
Minimize software risks by focusing only on essential features first.
Get early feedback from real users to guide future improvements.
Reduce time-to-market and start generating value faster.
Improve your chances of securing investor interest with a working prototype.
By launching an MVP, you save time and cost while setting the foundation for a more refined product roadmap.
How Golden Owl Solutions Makes an Estimation for Your Software Cost
At Golden Owl Solutions, we follow a structured, transparent process to help clients estimate their software development cost accurately. Our goal is to understand your needs, offer the best-fit solution, and give you a reliable budget plan before development begins.
Free Consultation Meeting
Our process begins with a free consultation session. In this call, we ask about your project idea, business goals, and key features. We also listen to your needs and offer early guidance. This step helps estimate the custom software development cost from the start.
What you get:
A clear view of your business and technical requirements.
Expert input on project feasibility and common risks.
Advice on tech stack, team size, and project timeline.
We help you understand how much custom software development cost may be. We also explain how your software development budget can change depending on scope. This session shows how the software outsourcing business model can save cost and time.
Solution Proposal
After the consultation, we prepare a custom software proposal based on your input. This document outlines the full scope of work. It also includes tech choices, team roles, and delivery timelines. Each section is aligned with your software development budget.
A feature list with a clear software development cost breakdown.
A suggested MVP to reduce the cost of software development.
A phase-by-phase roadmap for design, coding, testing, and release.
This helps you understand how much custom software development cost can vary. It also explains the software development pricing model. You will see how the software outsourcing business model supports faster delivery.
Quotation
Once the proposal is approved, we create a detailed quotation. This includes the estimated hours, rates, and total development cost based on project size, complexity, and selected engagement model (e.g., fixed-price, time & materials).
Quotation includes:
Breakdown of cost per feature or module
Estimation of development time and team roles involved
Software development cost is not a fixed number, it depends on many factors like the type of software, level of complexity, design quality, team structure, and technology choices. Whether you're building a simple web app or a complex enterprise system, understanding these software development cost drivers early helps you plan smarter and avoid surprises.
By choosing the right development team, setting clear goals, and focusing on essentials like MVP and scalability, you can optimize both time and software development cost. If you're looking for a reliable partner to guide you through the software development journey, Golden Owl Solutions offers expert consultation and full-cycle development support tailored to your business needs.
FAQs
1. How much does custom software development cost? The custom software development cost can range from $25,000 to $250,000 or more, depending on your project.
2. What affects the cost of software development? Factors include project complexity, tech stack, UI/UX, and your software outsourcing business model.
3. What is a typical software development cost breakdown? It includes planning, design, coding, testing, deployment, and support. This software development cost breakdown varies per project.
4. How do I reduce the cost of developing software? Build an MVP, use reusable components, and choose offshore teams for lower software engineering cost.
5. What pricing model should I choose? Pick a software development pricing model based on project size and timeline, fixed-price for short-term, time-based for complex needs.
