How Much Should You Budget for Software Development in 2021?

how much to budget for software development in 2021

Let’s face it, for many companies, the COVID-19 pandemic obliterated revenue streams and, in turn, budgets. Business and technology leaders had to adopt a conservative approach to their budgets. So it’s no surprise that in 2020, IT spend was down by 7.3% worldwide.

However, with potential vaccines showing some positive signs and with the world quite used to the “new normal,” Gartner expects technology budgets to recover much faster than the overall economy. 

Yet, this doesn’t mean that we should start burning through piles of cash. Especially when it comes to software development, we should take an in-depth look at all the different factors and make informed decisions because of all the complexities involved. 


Factors Affecting the Cost of Software Development

From our extensive experience, we see the following have a massive impact on software development costs:

  • Project complexity
  • Project uncertainty
  • UI/UX design complexity
  • Supported platforms (and technology stacks)
  • Software integrations
  • Data migration
  • The software development team
  • The location of programmers
  • Technical debt
  • Ongoing maintenance

There are undoubtedly other factors that influence the final cost of your development project. But the above is at the heart of your project expenses. 

Project Complexity

In software development, complexities equal costs. The number of features you want to have, code intricacies, development time, and more, impact the project’s final cost. 

The functionality of your software will also dictate the architecture design (which are sometimes complex). Some features also require different technologies (and that adds to development charges).

Here are some time estimations for the development of standard features:

  • Login: 30 to 40 hours
  • Edit account/profile: 40 to 60 hours
  • Payments: 60 to 80 hours
  • Push notifications: 25 to 40 hours
  • Search: 15 to 20 hours

If you want to integrate features like real-time analytics with multiple permission levels and access to various resources, get ready to pay a lot more for it. 

In the same vein, if you use cutting-edge technologies like blockchain or deep learning, the skillsets required won’t come cheap. However, while you can choose to do away with some features to reduce costs, don’t do the same with security.

Read HERE about how to mitigate cybersecurity threats. 

Project Uncertainty

You also have to factor in project uncertainty. During an agile development cycle, there’s always a possibility of making significant changes based on user feedback, competitor releases, and technology trends. You need to budget for this and make sure you have enough resources to adapt when necessary.

UI/UX Design Complexity

The number of functions and features in the software dictate UI/UK design expenses. For example, animations, buttons, and transition screens will take a chunk out of your budget. 

Custom designs are crucial to stand out in a crowded marketplace and add to the UX, so make sure to allocate enough money. It’s important to note that the best design is often born out of multiple feedback/redesign loops, and your UI/UX design budget should accommodate it.

Supported Platforms (and Technology Stacks)

If it’s a platform-agnostic desktop application, it’ll demand a lot more work. If you want your product to work on mobile (Android and iOS), web-based services (with their own set of nuances), expect costs to skyrocket. 

The decisions made at this juncture determine your technology stack. Sometimes you’ll only need one API. Other times more. For example, some apps are coded in one language at the front end and in another at the backend (and you need to get it to work together seamlessly, and that’s never easy!). 

Software Integrations

Third-party integrations help cut costs. For example, if you can integrate a payment solution or some business intelligence technology, you can avoid spending time and money building it yourself.

However, while some integrations (like PayPal) are easy, others are challenging. If your third-party partner uses legacy technology, it’ll be much harder to make everything work for you.

Data Migration

During the planning phase, decide on your data storage protocols. This is because any changes made midway will demand data reshaping to better fit the final destination. 

For example, you have to do the following:

  • Determine translation rules
  • Prepare custom scripts
  • Perform tests and make adjustments

The above just scratches the surface. There’s a lot more work involved depending on the type of software and cloud platform.

Find some tips on saving money on your cloud budget HERE.

The Development Team

Software engineers don’t come cheap. Even project managers burn massive holes in enterprise budgets. The number of developers (and QA testers) working on your project has the most significant impact on your development budget.

However, the type of development team also matters. There’s a high-cost difference between a dedicated in-house team and an extended team. On-premise teams also come with operational overheads and HR costs. 

The Location of Programmers

The geographical location of your coders matters because of the cost of living in different countries. There’s a significant wage difference for (let’s say) a PHP developer in London and a professional with identical expertise in Kyiv. 

In short, if you build your software with a team of developers in Western Europe (whether remote or on-premise), you’ll have to pay a lot more.

Find some tips on building a robust extended team HERE.

Technical Debt

Whenever code isn’t clean or written following best practices, you have technical debt that accumulates. These bugs demand more time to fix and threaten your time to market (and any potential competitive advantage). In this scenario, it pays to prepare to fail

Although it’ll slow down the process a little, strive to eliminate or reduce technical debt from the first iteration. In our opinion, this is the best place to start when it comes to keeping software development costs down. 

Ongoing Maintenance

The job’s not done once the product is live. Instead, it’s a continuously evolving undertaking with bug fixes, tweaks, the addition of new features, performance improvements, and more. If you plan for this ahead of time, you don’t risk app abandonment later on.   

So how much should you budget for software development in 2021? 

The short answer is, “it depends.” 

It depends on the factors listed above and an additional set of variables like pricing models, industry verticals, types of programming languages, etc.

However, to get a ball park figure of how much you should be potentially budgeting, it’s enough to consider two factors:

  • Your project complexity and scope, and
  • Cost of your software development resources

Let’s say you have estimated that your project will take 500 hours to complete and you need a team of three resources: a senior developer (who’ll also act as a team lead), a mid-level front-end developer, and a mid-level backend developer.

If you’re based in London and choose to build your solution in-house with your local resources, you should anticipate the following costs:

  • Senior developer’s hourly rate is £45
  • Frontend developer’s rate is £30
  • Backend developer’s rate is £35

Let’s assume that out of 500 hours required to execute your project, the senior developer’s commitment will need 200 hours, while frontend and backend developers will need 150 hours each.

Let’s crunch some numbers now:

  • Senior developer’s time – £45*200 = £9,000
  • Frontend developer’s time – £30*150 = £4,500
  • Backend developer’s time – £30*150 = £4,500

Your developers’ total time will cost you £18,000. Don’t forget to include the cost of tools, licensing fees, and additional compensation for your team (e.g. bonuses, social packages, etc). As such, the cost of your small project can skyrocket to £30,000 and more.

However, if you choose to outsource your software development to a specialist third-party in a lower-cost yet resource-rich location like Ukraine, you’ll be able to reduce your overall budget by 30-50%. See how:

  • Senior developer’s hourly rate is $30
  • Frontend developer’s rate is $20
  • Backend developer’s rate is $20

Let’s do some rough estimates:

  • Senior developer’s time – $30*200 = $6,000
  • Frontend developer’s time – $20*150 = $3,000
  • Backend developer’s time – $20*150 = $3,000

The total cost of your team involved in this particular project is $12,000 (£9,000).

Unlike the UK, developers in Ukraine are used to getting paid gross on a monthly basis, i.e. social tax and benefits are already included in their salary. All you’ll have to add on top is the cost of tools and licenses if any.

Approximate time and cost of development of different types of applications

Type of software Platform Est. time, hrs App. cost, $
Basic marketplace app Web 1,100 55,000 – 65,000
  iOS/Android 840/880 42,000 – 43,000
Basic eCommerce app Web 800 35,600 – 45,000
Uber-like app iOS/Android 1,500 66,000 – 120,000
Streaming app (e.g., Deezer) Web 1,000 42,000 – 45,000
  iOS/Android 820/850 41,000 – 44,000
Booking app (e.g. AirBnB) Web 1,300 62,000 – 70,000
  iOS/Android 920/950 45,000 – 47,000
These are very rough estimations. If you need some guidance this budgeting season, we can help. Schedule a commitment-free call now.


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