The True Cost of Custom Software

March 4, 2019 | By Firefield CEO and Founder, Adam McGowan

At Firefield we talk about building software that creates real, measurable benefits. But reaping those benefits — to grow, protect, or spark change in your business — costs money.

When talking with business leaders about the technology they want to introduce, I’ve seen two pitfalls people run into when trying to understand the cost of custom software.

One pitfall is underestimating the true costs to the entire company over time. The other pitfall is scoping a project that’s bigger than what needs be built. This can induce needless sticker shock since a “right-sized” solution could still be well within reach.

Both of these missteps can hamper growth and hide great opportunities in plain sight. Ultimately, I think we can address these misconceptions while looking at how much custom software costs, what expenses determine that cost, and how much custom software you actually need.

How much does custom software cost?

It depends. That’s not a satisfying answer, but the truth is the cost ranges hugely depending on what your business needs and the path you take to get there.

It’s like someone asking how much it costs to build a house.

That answer depends on many factors. Size, location, architectural complexity, who you hire, and choice of materials are just a few. But I would argue that we are starting with the wrong question.

What matters most is the cost to own that home. What about taxes? Insurance? Maintenance? Repairs after a storm? The stress of a longer commute?

It’s no different with software. The cost of writing some code is like the check you wrote to the construction crew who literally built your home. There’s a lot more to the story after that.

For software, here’s a sense of the enormous range I’m talking about. Building basic tools for testing, performing simple tasks, or connecting to existing software might start in the tens of thousands of dollars. On the high end, our Firefield team has built complex enterprise-grade platforms costing into the 7 figures.

I know that is a crazy range. The cost depends on many factors, which can make getting an accurate quote (or even a ballpark figure) seem like a daunting process.

Before we look at why the cost of custom software ranges so widely, I want to make a quick note.

You should not be afraid to get a quote

You could easily get scared thinking all software costs millions of dollars, but I want to assure you that embracing technology may be easier and more affordable than you think. Don’t fall into assuming that technology is out of reach for your business.

It is a misconception that custom software always costs an arm and a leg.

Yes, it absolutely takes time and money. But at Firefield, we know technology is still within reach for small businesses without bottomless pockets. We look at finding solutions that are feasible for our clients and their situation. That includes thinking creatively about both off-the-shelf and custom software options. (More about our ideas on that below.)

We’re passionate about leveling the playing field and advising established brands on competing in a new environment. We believe technology can grow, protect, or spark change in your business.

But you can’t calculate return on investment (ROI) until you get a quote. And you can’t get a quote until you start talking with technology partners.

All that said, let’s look at the expenses we address when we’re helping clients get a true quote on custom software.

What expenses determine the true cost of custom software?  

Let’s break down the key factors that determine the true cost of custom software.

This is a big topic, but I’ll give you a quick summary.

  1. Pure software development costs: This includes designing, building, and turning on your new software. This is usually your first and most obvious estimate.
  2. Additional human costs: Time is money. Members of your team will take on roles in planning, reviewing, approving development progress, and managing the launch of a project. Although you aren’t writing code yourself, software projects should still be very hands-on, and that time can really add up.
  3. Ongoing costs: Your new software needs to be hosted, meaning you will need to rent, share, or purchase servers. These hardware expenses get lumped together as “infrastructure” costs. Software also requires monitoring, maintenance, and periodic updates to address new security concerns or technological advances. Your new tool may also require third-party services to perform tasks like sending emails, delivering texts, processing payments, etc. which can add up.
  4. Switching costs: Launching new software is not as easy as flipping a switch. There is always a human cost for training your users on new software. There can also be a technical cost of switching, especially if you’re replacing an existing tool. This could involve paying for both tools for a time while you migrate users and transfer data.
  5. Opportunity costs: This is the hardest and most abstract. Investing time and money in one software project may prevent you from putting that time and money into other projects in the future – software or otherwise.

We’ve dug into these costs more in an earlier post, by breaking down the five types of expenses you have to expect when buying custom software.

All that said, I have seen people get custom software built for as little as $10,000. This might be a simple widget, like an internal calculator. You can’t expect to run your business on something of that scale, but some small low-cost tools can still provide value. One word of warning though: don’t confuse “low-cost” with “cheap”. Cheap software keeps cost down by cutting corners, and that can lead to glitchy results that can become extremely expensive and put your business at risk.

As a non-technical decision-maker, it can be extremely challenging to understand the options and these costs. Poor choices can waste your time and money.

How much custom software do you actually need?

I see three parts to answering how much software you should build, which is the largest factor when you consider cost.

First, your business goals should be front and center when you consider which features you really need. Second, you’ll want to engineer just enough tech to meet your goals. Third, you’ll want to make sure your tech partner is committed to both supporting your business goals and building only the necessary tools.

With just a few questions, a high-quality tech partner could get you very close to understanding if a fully custom solution is a fit. Would something smaller or less bespoke work better? We think of blending these off-the-shelf tools and custom add-ons as “hybrid” software development.

This blended model may involve exploring creative opportunities to integrate with tools your business already uses — think of Quickbooks Online, Salesforce, Hubspot, or commonly used industry software like Enterprise Resource Planning.

Many great dev shops build what you ask them too — and really well. However, for the non-technical company, having a technology partner who understands how software would create value for your specific business is a tremendous advantage. Frankly, I think you should make it a requirement that such partners help you find sufficient ROI from your technology.

We do develop custom software, but our “special sauce” is our business-centric, empathetic consulting.

For our clients, this consulting work is what determines if projects should or shouldn’t be built, will or will not deliver value, and most importantly, can or cannot fit within your budget.

It is challenging to understand all those costs, options, and opportunities on your own. But that’s why you call in experts to ask questions, make assessments, and uncover the true costs you’re facing. It all starts with your visionary leadership, looking for ways to grow and future-proof the business.

To recap all that: The cost depends. It really does vary. It is complicated but with help, you can break down the costs and make decisions that lead to success.

Email me and let’s start a conversation about the cost of custom software and growth opportunities for your business.

– Adam, Firefield CEO