The true cost of custom software: What to budget and why

"How much does custom software cost?"

It's the most common question we get. And it's the hardest to answer — not because we're being evasive, but because the honest answer is "it depends."

But "it depends" isn't helpful when you're trying to budget. So let's get specific. Here's what custom software actually costs, what drives those costs, and how to think about the investment.

Why pricing is confusing

Custom software pricing is all over the map. You can get quotes for the "same" project ranging from $20,000 to $500,000. How is that possible?

Different definitions of "done"

Some quotes include discovery, design, development, testing, deployment, and training. Others include development only — everything else is extra.

Different quality standards

Some firms write code that works today. Others write code that's maintainable, secure, scalable, and documented. The second takes longer and costs more.

Different team compositions

A senior architect and a junior developer have different rates. A US-based team and an offshore team have different rates. The output quality varies accordingly.

Different business models

Some firms underbid to win the project, then profit on change orders. Others price realistically upfront. The low quote often costs more in the end.

What drives the cost

Before we talk numbers, let's understand what you're paying for:

Complexity

Not all software is equally hard to build.

Lower complexity:

• CRUD applications (Create, Read, Update, Delete)
• Single-user tools
• Simple workflows
• Standard data structures
• No integrations

Higher complexity:

• Complex business logic
• Multi-user with roles and permissions
• Workflow automation
• Custom algorithms
• Multiple system integrations

A simple data entry tool is very different from an intelligent pricing engine. Complexity drives hours; hours drive cost.

Integration

Does the new software need to connect to existing systems?

Simple integration:

• Standard APIs
• Well-documented systems
• Modern platforms

Challenging integration:

• Legacy systems without APIs
• Undocumented data structures
• Multiple systems with different formats

Integration can represent 20-40% of a project's effort, sometimes more if the existing systems are difficult.

Design requirements

How polished does the user experience need to be?

Functional design:

• Works correctly
• Basic usability
• Minimal custom styling

Premium design:

• Custom UI/UX design
• Brand-aligned aesthetics
• Optimized user flows
• Responsive across devices

Premium design adds significant value but also significant cost.

Timeline

Do you need it fast?

Normal timelines allow for efficient resource allocation. Compressed timelines require more parallel work, more coordination, and often more people — all of which cost more.

The "we need it yesterday" premium can be 30-50% on top of normal pricing.

Ongoing needs

What happens after launch?

One-time delivery:

• You take over maintenance
• No ongoing relationship

Ongoing support:

• Bug fixes and updates
• Feature additions
• Hosting and monitoring
• Continuous improvement

Most real-world software needs ongoing support. Budget for it upfront.

Realistic price ranges

Here are typical ranges for different project types. These assume US-based or nearshore development with a reputable firm.

Important caveats:

• These are initial development costs, not total cost of ownership
• Actual costs depend on specific requirements
• The low end assumes minimal complexity; the high end assumes significant complexity
• Offshore development can cost 40-60% less but comes with trade-offs

Hidden costs to budget for

The development quote is just one piece. Here's what else you'll pay for:

Discovery and design

Understanding what to build before building it. Budget 10-15% of development cost, or $10K-$30K for a typical project.

Why it matters: Skipping discovery leads to building the wrong thing. Fixing it later costs much more than getting it right upfront.

Testing and quality assurance

Ensuring the software works correctly. Budget 15-25% of development cost.

Why it matters: Untested software has bugs. Bugs in production are expensive and damage user trust.

Deployment and infrastructure

Getting the software running in production. First-year hosting typically $5K-$25K depending on scale and complexity.

Why it matters: The software doesn't deliver value sitting on a developer's laptop. Deployment is part of the project.

Training and documentation

Teaching users how to work with the new system. Budget $5K-$20K depending on user count and complexity.

Why it matters: Untrained users don't adopt the system. Poor adoption means poor ROI.

Ongoing maintenance

Keeping the software running and current. Budget 15-20% of initial development cost per year.

Why it matters: Software isn't "done" at launch. It needs updates, fixes, security patches, and improvements.

Future enhancements

Extending the software as needs evolve. Varies by roadmap.

Why it matters: First version is rarely the final version. Build ongoing development into your long-term budget.

The "cheap" trap

Low prices are tempting. But cheap development often costs more in the long run.

Offshore bargains

The $15/hour rate sounds great until you factor in:

• Communication overhead (timezone, language, context)
• Rework due to misunderstandings
• Project management burden on your team
• Quality issues that need fixing later

A project quoted at $40K offshore often ends up costing $80K+ when you add internal time and rework. And you still might not have what you needed.

Junior teams

Less experienced developers are cheaper. But they:

• Take longer
• Make more mistakes
• Don't anticipate problems
• Create technical debt

You can pay senior rates now or pay for rework later. Senior expertise is almost always the better investment.

Fixed-price traps

A very low fixed price often means:

• Scope will be cut to fit the budget
• Change orders will add up fast
• Quality will be compromised
• The vendor is planning to learn at your expense

If a quote is dramatically lower than others, ask why. The answer usually isn't "we're that much more efficient."

How to budget smartly

Start with the problem, not the solution

Don't say "We need a $100K system." Say "We're losing $75K/year to this problem. What would it cost to solve it?"

The investment should be justified by the value created, not driven by an arbitrary budget.

Phase the investment

You don't have to build everything at once.

Phase 1: Core functionality, prove the concept, start getting value. Maybe 40% of total vision.

Phase 2: Extend based on learnings from Phase 1. Maybe 35% of total vision.

Phase 3: Polish and optimization. Maybe 25% of total vision.

This approach reduces risk and lets you adjust based on real-world feedback.

Budget for reality

Add contingency for:

• Requirements that turn out to be more complex than expected
• Integrations that are harder than they looked
• Scope additions that turn out to be necessary

A 20% contingency buffer is prudent. Using it isn't failure — it's realistic planning.

Consider total cost of ownership

Your budget should include:

• Discovery and design
• Development
• Testing and deployment
• Training
• Year 1 hosting and maintenance
• Contingency

The development line item is typically 50-60% of the first-year total.

Getting accurate quotes

To get quotes you can compare:

Be specific about requirements

"We need inventory management" gets vague quotes. "We need to track 500 SKUs across 3 warehouses with reorder alerts and integration to QuickBooks" gets useful quotes.

Ask what's included

Get clarity on:

• Discovery and design
• Development
• Testing and QA
• Deployment
• Training and documentation
• Post-launch support

If it's not in the quote, it's not included.

Understand the team

Ask:

• Who will work on the project?
• What's their experience level?
• Where are they located?
• How is the team structured?

Ask about the process

Ask:

• How do you handle scope changes?
• How do you communicate progress?
• What happens if we're not satisfied?

Good answers signal a mature process.

Check references

Talk to past clients about:

• Was the project on budget?
• Was communication good?
• How did they handle problems?
• Would you hire them again?

The ROI conversation

Ultimately, the question isn't "How much does it cost?" It's "Is the investment worth it?"

To answer that:

Quantify the problem:

• Hours wasted on manual processes
• Errors and their downstream costs
• Opportunities missed
• Customer experience impact

Estimate the benefit:

• Time saved annually
• Errors eliminated
• Revenue enabled
• Capacity unlocked

Calculate payback:

• If the software costs $150K and saves $75K/year, payback is 2 years
• If it costs $150K and enables $200K in new revenue, payback is under 1 year

Good custom software pays for itself. The math should be compelling before you proceed.

Our approach

We believe in transparency. That means:

• Realistic quotes based on actual effort
• Clear breakdown of what's included
• Honest assessment of complexity and risk
• No surprises hidden in change orders
• Outcome focus: we want your investment to pay off

If you're evaluating a custom software investment and want a clear-eyed perspective, we're happy to talk. Even if you don't work with us, you'll leave the conversation with a better understanding of what you're looking at.

The right investment at the right price delivers value for years. The wrong investment at any price is waste. We'd rather help you make the right decision than sell you something you shouldn't buy.

Entvas Editorial Team

Helping businesses make informed decisions