What does custom software cost? A transparent overview.
What does it cost to have custom software built? Common cost ranges and when custom software pays off compared to a subscription.
What does custom software cost? The honest answer: somewhere between a small car and a family home. In this post I show you what it depends on, which cost ranges are common and when building your own pays off compared to a subscription.
Why Custom Software?
Standard software is often the right choice. Custom software pays off when
- a core process of your company isn't covered by any standard solution,
- licence costs keep rising with every additional user,
- your software has to talk to in-house systems that have no ready-made interface.
Factors Influencing the Costs of Custom Software
1. Scope of Functions and Complexity
Scope is the biggest cost factor. An application for managing customer data costs a fraction of an ERP system that connects several departments and pulls together data from different sources.
2. Technologies and Platforms
Every additional platform adds cost. A web application that runs in the browser on any device is usually cheaper than separate apps for Android and iOS.
3. Development Time and Hourly Rates
Projects are billed either at a fixed price or on a time-and-materials basis.
Fixed price means scope and cost are agreed in advance, so you can budget reliably. For large projects, though, the total effort is hard to estimate at the start. That's why we split large projects into packages (milestones), each with its own fixed price. Every step stays predictable, and whatever becomes clear along the way goes into the next package.
Time and materials is more flexible: changes don't need a new contract. The trade-off is that the final cost is only known at the end. It suits projects whose requirements only become clear as the work progresses.
Software agencies and service providers with experienced teams in German-speaking countries typically charge 120 to 200 euros per hour.
4. Integration into Existing Systems
Every interface to an existing system has to be built, tested and then maintained. The same goes for migrating data from legacy software.
5. Design and User Experience (UX/UI)
Software nobody likes to use doesn't get used. Good design and testing with real users take time but save on training and support later. Our design and development work go hand in hand, and we bring in designers from our network when a project needs them.
6. Operation, Maintenance, and Further Development
The most underestimated factor. A web application needs servers or cloud infrastructure, updates, backups and monitoring, plus bug fixes and adjustments to new requirements. As a rule of thumb, budget around 15–20% of the original development cost per year.
Sample Cost Ranges for Custom Software
Rough market values for orientation:
- Small app or simple web application: 5,000–20,000 euros
- Medium-sized business solution (e.g. CRM or ERP): 20,000–150,000 euros
- Complex enterprise software (e.g. with extensive data integration and special security requirements): 150,000–500,000 euros and more
Is Custom Software Worth the Investment?
That depends on what the alternative costs. Standard software usually comes with a monthly fee per user, year after year. A custom build costs more up front; after that, only operation and maintenance remain. Beyond a certain number of users and years, the two curves cross.
A Simplified Calculation Example
Custom Software
400 hours at 120 euros come to 48,000 euros in development costs. Operation and maintenance add 15% per year, i.e. 7,200 euros annually. Over four years that's 76,800 euros.
Standard Software Subscription
29 euros per user per month, with 40 users over 48 months, comes to 55,680 euros.
What It Means
With 40 users, the subscription is cheaper over four years. In this example the custom build pays off from around 55 users, or from around 48 over five years. And that's only the price: if standard software doesn't cover your process at all, you're asking a different question.
Conclusion
Three things drive the cost of custom software more than anything else: scope, the number of interfaces and ongoing operations. Whether it pays off depends on the alternative's licence costs over the years and on whether a standard solution covers your process at all.
A reliable figure for your project doesn't come from a table but from a clearly defined scope. That's exactly what the Discovery Sprint is for.
Got a similar project in mind?
In a free initial call we look at your situation and tell you what's realistic and what the next step looks like.
// about the author
Alexander J. Gassner, MSc
Founder and managing director of agsolutions, with more than 15 years in software development (MSc Software Engineering, FH Hagenberg). Builds and runs business-critical software from requirements to operations: Kotlin, Spring Boot and React in the code, Kubernetes, Pulumi and GitOps in operations, as an Exoscale Certified Solution Architect.
