What does software development cost?

Thousands of ideas for innovative services and products arise in the Netherlands every day. Whether that is the new Tikkie or Adyen, software development often plays an important role. This implies that the costs of software development also play an important role. Developing an MVP is in most cases the most cost-effective way to develop a new product. But what will the development of a minimal viable product cost?

Construction of software development costs .

You must ask yourself what the development of software costs over the total desired lifespan or TCO (total cost of ownership). Total Cost of Ownership can be defined as the sum of all costs associated with developing, owning, and maintaining a digital product. This includes both direct and indirect costs.

Direct costs of software development:

Direct costs of software development are the most well-known costs and directly attributable to building and deploying your product. But also to the software licenses that are required and any third-party services (Stripe, LiveChat, and Google Services), hosting, and database costs.

  • The development of your product during different iterative phases
  • Designing your product’s UX through several iterative phases
  • Software design & development through several iterative phases
  • Support based on your SLA
  • Hosting & database costs
  • 3rd party services

Factors that affect the direct costs of software development:

  1. Hourly rates – These vary for Dutch software developers between 80 and 150 euros per hour depending on quality and seniority. For nearshoring (Eastern Europe) rates of 40-70 euros per hour apply and for offshoring (India and the rest of Asia) you should think of rates of 20-40 euros per hour. 
  2. Developer Speed . software developers with real top developers can develop by a factor of 10 faster than those with less gifted developers. This also has to do with experience and the deployment of specialists instead of generalists/”jack of all trades”.
  3. First-time right – Is the right thing developed in one go or is time wasted on features that are ultimately not used. A good IT company can help you to develop the right thing the first time.
  4. Lean development / limiting waste – Lean development (in combination with Agile development) ensures that you develop your product in small steps based on customer feedback. This has been proven to be the fastest and most cost effective way of product development. 
  5. Sustainability technology and architecture – Do not opt ​​for too exotic / hip technologies; the chance that in a few years they will no longer be supported or that no developers can be found is considerable. 
  6. Use of Open Source components – Components with a large developer community that save a lot of time in development so that only the distinctiveness needs to be developed.
  7. Vendor Lock-in – What future costs will you incur if you want to switch software developers?

All these factors affect the price/TCO. In summary, it means that you are best off with an experienced team of real top developers who develop software according to a Lean and Agile methodology. They opt for a future-proof architecture and technology. They use open source components to minimize the standard work. All this on the condition that you do not suffer from vendor lock-in.

The indirect costs of software projects. 

Indirect costs include all other costs related to the development of your product but not directly attributable to the actual technical realization, including implementation, maintenance and training. 

  • Filling in new roles in your team or re-filling roles.
  • Compliance and Legal costs.
  • Lost productivity during transitional periods.

Cost of software development: fixed price and Agile development .

Build a product that delivers immediate value to your customers for a minimal investment!

The Fixed Price model only works for relatively small projects with clearly defined requirements that do not change anyway. In most cases and utopia. A conflict of interest between you as a customer and the IT company can easily arise. And that is the last thing you want if you want to work together towards a professional end result.

Fortunately, there is Agile…An Agile model, on the other hand, is the best choice for projects with changing requirements. And make no mistake, as you learn from your customers and/or users, requirements can change faster than you probably think. An agile team of software developers delivers results in short sprints so that you always have insight and can easily adjust the direction if necessary. This Agile approach leads to faster and better results.

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