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How Much Does Software Development Cost with an Agency?

September 14, 2018

Jordan Schneider

written by

For agencies in the digital era, pricing software development projects is one of the most complex parts of the job.

On one hand, it’s completely logical for potential buyers to want exact pricing.

Budgets are often finite and cost/benefit is a critical consideration in any business initiative.

Related: Should You Hire a Designer or Work With a UX Agency? Here’s How to Decide.

On the other hand, there are several realities that we all must accept with regard to estimations:

1: Every project is different, and there will always be new problems to solve — some of which may not be apparent until the work has started.

2: The inherent complexity of building software means there are a myriad of considerations that can increase the time it takes to construct an application — even one that seems trivial.

So, what is an acceptable way forward? The answer is an in-depth estimation process.

 

The Art of Estimation

To be clear, estimations are, by definition, guesses — though the best of those will be carefully researched, heavily informed guesses.

For some projects, an agency may only need to have a handful of conversations with your stakeholders, for others we may need to consider a more in-depth Sprint Zero.

But good estimations don’t appear from nowhere. Both you and the agency have certain responsibilities in the process to ensure the final result is accurate.

Client Responsibilities

If you have a budget or budget range defined, share it. Budgeting is, of course, easier said than done. If you have no earthly idea what a realistic budget is and you’re looking for the agency to help you understand that, then this is obviously moot.

However, if you’re aware of a budget constraint, you should draw lines in the sand for the agency as early as you can. Defining what's possible monetarily will help the vendor's estimation team back into a solution that is affordable for you. Maybe instead of a fully custom-built solution, you're looking at a combination of built parts vs bought parts. It may not have all the bells and whistles, but it will work! Worst case scenario, it can help the agency recuse itself early and save you both a good amount of time.

Agency Responsibilities

Reputable agencies have a battle-tested estimation process. Otherwise, they would have a hard time keeping their clients happy, because the price of projects would be in constant flux.

Typically, the estimation process will consist of a high-level deconstruction of your application into smaller parts by a business analyst. Then the BA, alongside a senior architect, will estimate the hours the team needs to build out each component.

As a rule, the larger the application is, the foggier this process becomes, and the less an experienced agency will be willing to estimate with certainty up front. They may take the approach of estimating the first release only (which may only be a quarter of the application), then wait until the end to estimate the next release.

 

What to Expect From an Estimate

I’ve outlined the decorum that every seasoned agency will follow to arrive at an estimate, but really what we're aiming for with this article is to give you a ballpark of what it can cost to work with one of those agencies.

The best we can offer there is data from projects we’ve done with clients in the past, organized into different sizes and prices. Hopefully this provides a reference point for budget.

To note, this data is from applications and products only. Marketing websites are not included.

Design-Only Projects

Because UX is our bread and butter at DePalma, we often start with design-only projects when working with new clients.

It’s less expensive, and it’s a nice way to get to know one another as we build a working relationship. As a matter of fact, many of our clients come to us simply to engage our UX team, and do not require any development help at all.

You can take a closer look at our UX Design process here.

To provide an idea of budget range for design-only projects, here’s a quick look at a couple from our past:

  • Our smallest design project was a small mobile application that we charged just under $5k for.
  • Our largest design project involved redesigning a very complicated and large enterprise application on mobile and web for a niche industry. The user research alone took over a month to complete. The client spent over $200k with us.

Software Development Projects

When clients need help implementing the design and taking the application live, we’re more than happy to provide development services.

Here’s some historical data on those budgets:

  1. Our largest frontend project to date cost $850k.
  2. Our smallest frontend project to date was $10k.
  3. The largest fullstack project we’ve completed to date cost $2.5mm.
  4. The smallest fullstack project came in at $80k.

How's that for variance? Now that we’ve set these very wide goal posts, I’ll organize our estimations into small, medium, and large categories.

Hopefully, this taxonomy will clarify how we often group resources based on estimation size. Most of our projects fall in the medium category.

Small Projects

Applications designed for one device with fewer than 25 screens usually fall into this category. The application most likely does not have much concern for security or user permissions.

Here’s an estimate for how much each team will cost for a small project:

  1. UX design team — $5k to $15k
  2. Frontend dev team — $10k to $30k
  3. Fullstack dev team — $15k to $55k

Medium Projects

This tier encompasses projects with designs for multiple devices with fewer than 60 screens. So maybe you're building a native mobile application and a web application as well, and you need different experiences for Admins vs. Managers vs. Employees. 

Estimates range from:

  1. UX design team — $15k to $45k
  2. Frontend dev team — $30k to $75k
  3. Fullstack dev team — $60k to $150k

Large Projects

We classify large projects as applications that need designs for multiple devices, multiple user types and permissions, stringent security needs & more complicated or nuanced features.

Complex edge cases also fall into this category.

Our estimates range from:

  1. UX design team — $50k to $175k
  2. Frontend dev team — $100k to $300k
  3. Fullstack dev team — $200k to $1mm

***

It’s important to remember that estimates are (or should be) conservative. Smart agencies will hedge their bets and try to set realistic expectations.

At DePalma, this was part of the strategy that helped us complete every project on budget so far in 2018 — some we even finished at a significantly lower cost.

If you have sticker shock right now, don’t worry. There are significantly cheaper options available to you — such as finding a freelancer on a network like Upwork, or trying your hand with an offshore team.

Obviously both of those options will require a lot more management. Like most things in life, you get what you pay for, so prioritizing price above everything else could have an effect on the speed and quality of work you receive. But that’s something you’ll have to assess for yourself.

 

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