Good question. And one that we hear all the time. If you are someone who has been shopping for a Custom website, a custom app, or some custom ERP solution, you may have experienced sticker shock once or twice (or more).

So then, why is it? Why is Software Development so expensive? And why is it so challenging to find a solution that costs only a few thousand dollars? Is it a matter of looking in the wrong places?

Let’s explore the world of Software development to make better sense of the predicament of the cost.

Software Development is Hard

The nature of coding, or building Custom Software, is inherently complex. Turning brackets and slashes into working software is no easy feat. While it may take only a couple of years to become a junior level developer, it can take ten or more years to become an expert in a given technology stack, and many never reach that level – regardless of time!

Due to the complicated nuances intrinsic to coding, there is ample opportunity to get something wrong. It is when this ‘getting something wrong’ goes unchecked that a project runs thousands of dollars over budget, months over deadline, and leaves the customer feeling dissatisfied. More often than not, companies that have employed custom development services have their fair share of horror stories. In most cases, customers received something that didn’t address the problems they were actually intending to fix.

In this vein, managing director at Foundry Group and Boulder startup legend Brad Feld shares an all-too-familiar story from his time running his own software consultancy. Feld’s company’s motto–and this is true–“We Suck Less.”

Granted, technology and technological processes have drastically improved since 1992. Even so, the proverbial custom software horror story is not relegated to the early 90’s. Many of the challenges in running software development projects remain the same: dealing with the unknowns, constantly evolving skill sets, managing personalities and egos, and so on. There are a few frameworks that development teams employ to mitigate these risks. Perhaps the most widely used framework is scrum, which we at Commerce Kitchen use.

The reason why so many development shops (or dev shops as you’ll hear them called) stick to these frameworks is simple: in software development, you won’t know what the pitfalls are until you run–or fall–into them; project challenges are emergent. If a carpenter is crafting a cabinet and she has built dozens of cabinets before, she will know exactly where the ‘tricky parts’ come into play and she will skillfully navigate those challenges. In software, if a developer is building a high-security web application and she has built dozens of highly secure web apps before, she will not necessarily know where the ‘tricky parts’ come into play. Why? Because technology and software components are constantly changing. And because software development involves complex systems that cannot be understood completely in advance of beginning work. The realities of how to solve complex problems emerge as the work unfolds.

You Get What You Pay For (Kind Of)

As it holds true with most all services, it holds especially true for software development: you get what you pay for. If you want to offshore your project to lock in that $40 per hour service, you’ll likely be unhappy with the results. However, this does not mean the $400 per hour service will necessarily provide the best results, or the results that you need. Examples in other service industries probably come to mind, like any contracting or consulting.

As in most cases, the more skilled the provider of a particular service, the higher the cost for the service. The consumer, in a sense, is paying for the education and experience of a service professional. Greater education and more experience typically translates into a higher quality product and a speedier delivery. This is certainly the case in the world of software development. Dev shops will acquire talent and (usually) base their pricing off of the education and experience of said talent. When a highly-functioning team of skilled developers exists, it does not happen by accident. Attracting and retaining talented developers takes energy and a lot of money due to the fact that there is a greater demand for developers than there is supply.

These economic forces have played a role in the trend of commoditization in software development. Today, there are ranks of entrepreneurs acquiring teams of developers in India, Eastern Europe and the South Pacific, in order to bill projects at $40 per hour. What’s the quality of the product delivered from these teams? Unpredictable. Now, just because a dev team is based in one of these places doesn’t automatically mean they won’t deliver a good result. However, there is a real challenge in the product ownership dynamic. Managing a team halfway around the world that works during opposite hours within an entirely different cultural paradigm creates enormous hurdles. Rarely do customers receive a finished product or solution that gives them what they really need.

Unequivocally, we see many of these offshored projects fail. The moral of the story is to be cautious if you are deciding to go the cheap route. What may seem as cost-saving in the moment could actually cost you much, much more down the road. Best case scenario: you pay less in cash and pay more in time and energy micromanaging the project. Worst case scenario: the final deliverable wasn’t the solution you needed and you have to rebuild the project from scratch. Both scenarios play out far too frequently.

Go Big or Go Home, Right?

While the risks of going the cheap route are clear, the best recourse isn’t necessarily to pay for premium service. Large development shops with massive brand recognition won’t necessarily deliver the value you are expecting or need, despite the $300 and $400 per hour rates. These firms have commonly reached a critical mass where they need to “feed the beast.” They can employ over 50 highly-skilled developers (read: expensive), and they require a steady stream of revenue in order to keep the ship afloat. Will the final product be good? Probably; it may even be great. Did you as the customer need spend that kind of money to deliver the right solution? Maybe. Maybe not.

As you’ve assumed by now, there is a happy medium between the offshore option and the premium recourse. There are great dev teams that can deliver what you need in the $125-$200 per hour range. The key is finding a group of people that you trust fully understand your business, and understand your unique goals and how they will be reached by leveraging technology. Do some research, ask around the community, and have a good sense of what you are trying to accomplish with that custom website,  custom app, or custom ERP solution.

Now What?

The hope here was to provide a little more insight into the world of custom software development, and why it costs what it does across the spectrum. Deciding to actually make the technological investment is another matter. But more on that later.

In sum:

• Software developers are highly skilled, highly valuable, and great ones are hard to come by. This is what you pay for.
• Custom software development is very complex work and the challenging nuances intrinsic to development will endure.
• Be careful if you decide to offshore your project. There is always a trade-off to going cheap.
• The biggest name doesn’t necessarily mean the best result. Know the value of your investment before you buy a premium service.
• Find a team you trust and that you feel understands your business.

Good luck out there!

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