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Custom Solutions
Software Development

Price Estimation for Software Development Project

02 May 2022 by Sara Wahba

Custom software development is the process of developing or designing a tailored software program according to a client's needs and requirements. Custom programs are designed to make businesses more profitable and achieve significant and successful growth.

The cost of custom software development depends on different factors. It is hard to find two similar software projects regarding features or price.

In fact, the "software" term itself is such a broad term that we will never know how much does software development cost precisely until we know the explicit requirements of your software.

The standard cost of custom software development ranges from 5,000 US dollars to millions of US dollars. Its price varies depending on the client's requirements and needs.

You may find a discrepancy in the price range, Do Not Panic! It is only because, as we explained above, no two programs are alike except that they are built with similar components and modules.

A range of factors contributes to the complexity of project costs. It is possible to determine the cost of custom software development directly after analyzing all the details and requirements of the customer.

Determining the cost of custom software development requires research, good planning and professional budget management. So now the question remains, How to Estimate Custom Software Development Costs for Your Projects?

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Custom Software: Explicitly developed for some particular organizations

Custom software differs significantly from off-the-shelf software. Custom software has superior scalability compared to commercially available software. The tailored software is specifically designed to meet the companies' needs. For example, a company may need custom software that helps it with the payroll or managing bank accounts. Another company may need software for managing resources. See IT Consulting services for IT Startups. Each custom software has its own unique and customized requirements. The custom software development process includes; Phases of customer requirements analysis, coding, testing, and deployment. Organizations should consider the following factors when making decisions:

  • Product design suitable for the market
  • Define software features
  • Deployment platforms
  • Budget and development planning 
  • Develop a solid Execution plan

Some companies may skip all the first factors and jump to budget and develop an Execution plan, but many factors must be considered before the implementation plan:

Analogy-Based Estimation

The cost of a custom software project is estimated after its features are determined by the customer based on previous similar projects called "analogy projects." Analogy Projects are compared to the current project, and the project's potential cost is estimated. The project estimate can be reasonably accurate if a good comparison is found. Project similarity is determined based on complexity, project size, expected deadline, and location. In addition to taking into account the money market inflation, daily changing exchange rates, etc. Double the size of the project doesn't mean double the cost all the time. However, it is crucial to keep in mind that if a project's expected scope, capacity, or performance is twice that of similar analogy projects, the estimation should be "expanded."

Bottom-up Estimation

The enormous task of a "custom software project" should be divided into several smaller tasks and subtasks. Each task and sub-task will be evaluated separately so that it is easy to evaluate the project from the bottom to the top entirely.  In this way, each task's time, effort, and cost can be estimated separately. As a result, the project budget estimation becomes easier. This method may take longer in the evaluation process; however, it is more accurate due to the detailed evaluation of all project components.

The Three-Point Estimation

In the three-point method, three points are presented as follows;  "Best Case," "Worst Case," and "Most Likely" scenario. These three points are estimated according to the details contained in each of them.  After this estimation process of the custom software development cost, the average budget will come out to the client or at least the client may have reached a general expectation of the price range. The three-point method is distinguished because it reduces the possibility of falling into the trap of over-budgeting. In addition, to ensure a high level of accuracy in estimating the budget, communication with other parties and comparing the budget estimate with other estimates can occur.

Parametric Estimation

Most people may not be convinced by verbal talking without proof; however, they believe numbers never lie. The Parametric Estimation method includes three stages. In this method, a statistical or mathematical technique is used in parametric estimation:

  • The first stage: In this step, the development factors for the project are determined to include; Business or functional needs, non-functional needs, project complexity, and technology used.
  • The second stage: It is the stage of collecting information from analogy projects about the amount of effort required to finish estimating each step of the work on the custom software development project and then linking it to the rest of the stages to reach the total estimate.
  • The third stage: In this stage, the cost is estimated using an empirical link between the concerned elements and the total project stages.

All of these three stages are done with the scalability component in mind.

Project Management Estimating Software

One of these same software can estimate the cost of a custom software development project. Many custom software is designed for project management evaluation, simulation software, custom statistical software tools, cost estimating software, and spreadsheets. This type of estimation can be efficient and valuable if the customer wants to compare the cost estimate.


Companies use various software to help them run smoothly and manage specialized tasks. However, it is essential to understand what custom software means before moving forward. Accurate cost estimation is key to a successful software development project. Knowing how much does custom software cost can be a complex process. At some point, you may think that custom programs are expensive. Still, if you inspect the benefits of using custom programs, you will find that the cost is minimal amounts compared to the financial success that will accrue to you from using those customized programs. You can use Kapsys services to obtain the best quality for custom software development and software solutions.