How much does software development cost in 2024?
Developing new software or upgrading your current system can be an exciting move. Digital presence is especially important these days when 70% of top companies rely on their software to differentiate themselves. But most leaders rightly wonder — how much does software development cost?
The stakes feel high when choosing between an in-house team, outsourcing, staff augmentation, or a hybrid approach. The question also arises: Should I pay hourly fees or opt for a fixed bid? And rates fluctuate a lot based on project complexity, industry, developer locations, and more.
It’s a lot to weigh. So, what do realistic budgets look like in 2024?
In this article, we demystify the 2024 software development cost. We examine average project rates in various fields and regions. Let’s jump in and first explore the main factors influencing the custom software cost.
Key metrics to analyze
Budgets vary widely when it comes to developing software in 2024. From pre-made and custom code to hiring models and software development team structure, many factors shape the cost of development. Let’s break down the main considerations.
Starting off: Pre-made software or custom development?
The first question to ask is if you need pre-made or custom software. Pre-made software means less development time, but this option limits customizations. Building from scratch allows for complete uniqueness but requires more upfront investment.
Pre-made software
If you choose off-the-shelf, you’ll select from existing software options on the market. Some examples in the web development space include Shopify and BigCommerce, which provide ready-made templates and toolsets. The benefit? You skip the custom build process.
Still, since pre-made solutions are designed generically, they rarely match specific business requirements without add-ons and additional coding. Extra integrations increase software development costs, reducing the expected ROI.
Custom development
Custom development means your software is built to order. Yes, it likely costs more at first. However, custom systems allow for specialized features, branding, and configurability when needs are too complex for pre-made solutions. This way, you can boost your organizational performance and achieve ROI that overshadows the initial cost of software development.
Hybrid approach
When developing software, companies also lend somewhere in the middle. Starting with an existing platform or templates that cover common core functions helps speed up development. Features like content management, user roles, and basic workspaces may already be out of the box.
Then, they may add custom interfaces, proprietary data integrations, and niche features. However, it’s necessary to choose wisely what should stay generic and what demands customization.
Hiring models: In-house, outsourced, or staff augmentation?
Once you decide on pre-made or custom systems, the next variable is the hiring model. Do you hire in-house, outsource to a software development provider, or staff augment?
In-house
With in-house developers, you create a whole product team under one roof. This allows for tight collaboration and oversight, plus instantly available support and maintenance after launch. Downsides? It’s a major software development budget line — you must fund recruiting, salaries, vacations, management, and tech needs. Also, scaling teams up or down with workload fluctuations proves tricky.
Outsourcing
On the opposite end, outsourcing hands off software creation completely to an outside agency. They supply talent and take over project management. Third-party teams scale up or down more flexibly to match needs and budgets.
However, you should carefully vet providers to ensure reliable cooperation and high-quality deliverables.
Staff augmentation
The middle option — team augmentation — supplements your internal team with contract developers. This hiring model lets you access specialized skills without high commitment. Here, you only pay for skills when immediately needed
The drawback? You remain in the driver’s seat for project management. Integrating external developers still requires training and, thus, extra budgets.
Pricing models: Fixed-price, time and materials, subscription-based, or hybrid approach?
Beyond a hiring approach, you should pick the right pricing model. Let’s explore the most popular options.
Fixed-price model
In the fixed-price model, you pay an agreed amount upfront for the delivery of the finished products. The win for you? You eliminate financial surprises down the line by knowing the exact software development cost, even if the build time exceeds the initial specifications.
However, a fixed-price model is unsuitable for agile development. A fixed budget requires an early-established rigid project scope, leaving no space for changing priorities. Also, product quality may suffer when contractors have to cut corners to meet software development budget quotes.
Time and materials
Time and materials pricing means you pay for the hours logged. Providers charge rates based on roles in software development, whether designers, developers, or quality assurance experts. You can avoid paying fixed sums early on, even as needs shift.
Potential risks do exist, however. Without defining maximum development expenses, the final cost of development may exceed your expectations. Selecting proven providers helps mitigate these pitfalls.
Subscription-based model
With this model, you pay a predictable fee monthly or yearly to “reserve” access to an agency’s full services. The main benefit is that it provides cost predictability. You know how much you will pay each month. The fixed fee also means additional features won’t necessarily increase software development costs for you.
However, be careful about the project scope and budget ratio. If project needs decrease substantially, you may end up overpaying for unused services each month.
The hybrid approach
Some companies use mixed models. For example, paying regular monthly fees for main staff plus extra contractors paid by hour or project. This approach keeps the core team, while extra work can scale up or down.
No universal model exists — choose based on your methodology in software product development, the number of changing priorities, the need for long-term cooperation, and, of course, your budget. Hybrid approaches help balance the trade-offs in most pricing models.
Development team dynamics: Experience, roles, and tools
Along with pricing models, the team structure impacts the software development cost. A team well versed in niche tech costs more but likely moves quicker.
Feature needs also impact the cost — if you develop a sophisticated user interface, you’ll need to invest more in front-end developers.
The technology used also contributes to pricing. Standard stacks keep software development costs reasonable. But niche or cutting-edge frameworks may drive rates up. Much less developer talent means higher rates.
Legacy tech has the same challenges. Fewer experts mean paying a lot for their “old-school” skills. Difficulty maintaining and scaling complex legacy systems drives up costs, too.
Overall, if you focus on what best serves your organizational needs, not just “the buzz feature everyone implements,” you can be sure to match your development expenses with desirable outcomes. Digital transformation experts like COAX can help you here.
Software development cost averages
When we talk about the “average” custom software development cost, we’re looking at typical budgets for software development projects based on multiple cooperations.
Let’s break down averages across project sizes, industries, operational systems, and countries so you can compare potential investments to real-world budgets. Of course, your needs may differ, but these ranges provide an insight into what many pay when developing software.
Project complexity: Small to enterprise solutions
When it comes to software project size, let’s keep it simple — small, medium, and enterprise.
Small development projects refer to basic apps with minimal features. They’re designed to address a singular need.
Medium-sized projects are more advanced, with functionality in aspects like data integration, security, design customization, and many other features. Then there are the huge enterprise projects — platforms running massive global operations behind the scenes.
Here’s what this gradation translates to in terms of budget:
The number of features and design complexity drive software project complexity exponentially. What’s more, the more intricate the frontend becomes, the bigger the backend systems must be to sustain performance.
Plus, functionality dependent on external platforms via APIs further increases complexity. Let’s say you integrate payment processing or shipping rate calculators. Now, there are more connections to build, more systems to sync with, and more services that can break, impacting the rest. And that quickly elevates overall project costs across engineering, QA testing, ongoing maintenance, and more.
At the same time, you should know how to focus on essentials for your business and avoid “feature creep.” Otherwise, you could have overloaded, clumsy software that’s no longer concentrated on the key business tasks. Not to mention overspending and missing launch dates.
Experienced providers know how to find that middle ground between “too many” and “too few features.” They also know how to integrate all layers seamlessly and, ultimately, make your software function flawlessly.
Differences across industries
Pricing also varies by industry, depending on the specialized integrations and capabilities needed. Here are some examples of average budgets per industry:
The figures above represent costs for extensive, full-fledged software platforms tailored for each vertical. What does this mean?
For a travel booking solution, the budget would allow for the creation of a full reservation system that lets users search for hotels, flights, rental cars, etc. It may include interactive trip planning, real-time amenity checks and upgrades, and other advanced features.
An ecommerce platform in that price range typically supports complete product catalogs, inventory control, sales across multiple channels (web, mobile, etc.), and smooth performance even during peak traffic like Black Friday.
Finance and healthcare software are more expensive because of the strict government rules they must follow. In fact, 60% of fintech companies reported paying at least $250,000 in fines for not following regulations. One-third paid over $500,000 in fines for not being compliant.
Requirements like Know Your Customer aim to prevent illegal activities and hefty fines but make basic features like account registration much more complicated to develop.
Healthcare platforms face similar challenges in meeting privacy rules under the Health Insurance Portability and Accountability Act (HIPAA) regulations. Healthcare organizations handle sensitive patient data, including medical history and prescriptions. Maintaining this data privacy and security is paramount.
For developers, building HIPAA-compliant software means rigorous attention to security across the entire technology stack and infrastructure. We help healthcare organizations balance regulatory standards with keeping solutions affordable to build and maintain over time.
Mobile app development (iOS, Android, cross-platform)
The mobile software development cost depends on whether you’re developing for Android, iOS, or across platforms. Here’s an average budget for middle-size app development projects:
iOS apps typically cost slightly more due to a few factors:
- More revenue opportunities. Apple’s App Store had revenue of about $21.2 billion in the third quarter of 2022, while the Google Play app store revenue was only around $10.4 billion. This trend allows businesses to allocate bigger budgets and teams to iOS app versions, increasing the demand for mobile app developers in this niche and, thus, costs.
- Adhering to Human Interface Guidelines (HIG). Apple has strict rules for the user interface and experience. While Android has design standards, too, Android developers face fewer limitations. So, iOS developers have to spend more time and effort following HIG, which increases the app’s cost.
The main benefit of cross-platform development revolves around shared code reuse across iOS and Android, eliminating duplicative development. For apps with basic features not heavily reliant on mobile OS integration, a single React Native or Flutter codebase can significantly reduce software development costs.
However, bridging the differences between iOS and Android may require custom components, a parallel software development workflow, and tricky performance optimization. In some situations, native development may be faster, cleaner, and more cost-effective in the long run.
Regional price variations
Finally, where your partners reside also impacts the software development cost. Here are some average hourly rates for developers across common countries based on data from Payscale, Glassdoor, and SalaryExpert:
Looking further, GoodFirms’ App Development Cost and Time Survey provides a helpful price breakdown based on project complexity across different regions:
A simple app provides just basic features and an admin dashboard. Users can create an account and log in, edit their profiles, upload data, and browse. Simultaneously, the back-end access enables an administrator to adjust the content displayed and use tools for user management, ticketing, and feedback systems.
A complex app comes with more functionality, including integrations with social media, payment gateways, device synchronizations, access to mobile device features, and more.
The advanced app functionality typically embeds multi-language support and augmented reality, while back-end operations are empowered by ML algorithms.
When weighing outsourcing options, Ukraine and the South East offer some of the most cost-effective app development rates. Asian countries can mean big cultural gaps for US clients, though. Software development in Ukraine offers similar pricing but often better cultural alignment to the USA market.
Alongside competitive rates and cultural alignment, Eastern European countries offer Western outsourcers the benefit of real-time collaboration.
Within Ukraine, COAX, a custom software development agency, exemplifies the strengths of the region.
How COAX can help you
At COAX, we specialize in full-cycle software development services in the web and mobile landscape for industries like travel, ecommerce, fintech, healthcare, and beyond. Our agency offers flexibility in staffing approaches. We can assemble a dedicated team customized to your technical and industry needs. Or we can provide contractors to augment your existing staff.
For custom website development services, our team creates robust front-end experiences using frameworks like React.js and Webflow. Our back-end expertise includes Node.js, Python, Django, and more. We develop secure, scalable solutions hosted in the cloud.
For mobile, we build iOS and Android apps using native languages or cross-platform solutions via React Native. We handle the full mobile software lifecycle, from UX audit to UI design, development, testing, and launch.
When estimating the custom software development cost, we break down the requirements into clear milestones to provide realistic timelines and budget estimates. As work progresses, you have full transparency into hours logged, scope adherence, and any emerging risks that may impact initial projections.
Whether you have a concept you want to bring to life or a renewal of an existing system, we’re ready to partner with you for success!
Matching your budget with your goals
The wide range we saw — from $25,000 for simple projects to $400,000 for a complex, custom healthcare platform — shows how much scope there is in the market. Every business has different needs and budgets. The trick is figuring out what fits you.
So, the key to any business is aligning your resources with your goals and vice versa. Whether you choose an offshore team or augment your in-house staff, what matters is getting the product you need while keeping the cost of development reasonable.
A direct consultation with an agency will allow you to determine the precise cost of your project. Tell us more about your idea — your industry, requirements, budgets, and work done so far. Our precise estimations draw on years of experience building custom solutions for clients across various sectors.