Cost structure of a software development company

Web Development — custom web-based software development. Each of these types of projects typically has a different team makeup and requires a different amount of development effort. Understanding the type of project is the first step in developing a cost estimate. This information will be used in combination with the size of the project and the project team to determine the final estimate.

The next step is to determine the size of a project. Size is a bit of a gut call. Generally, project sizes fall into the following categories:. Typically, things like tweaks to the user interface or bug fixes that are well defined with a known cause.

Interaction with the client is limited, i. Typically, we are dealing with a single source of data. Projects such as a small mobile application or a web interface to an existing inventory system would fall into this category. The external requirements for interaction with a client are more robust than small projects. This might include a few design sessions, weekly check-ins, and milestone sign-offs.

Large projects may require integration with multiple systems, have a database component, and address security and logging features. An underlying framework and a module-based design are common, taking into consideration scalability and maintainability. A multi-party application that works across numerous platforms iOS, Android, Web would fall into this category.

The external requirements for interaction with the client are very robust, i. Daily calls and interactions with technical team members followed by weekly status calls with higher-level management are standard.

Enterprise-level projects are almost exclusively built upon an underlying framework. They have much more rigorous security, logging, and error handling. Data integrity and security are paramount to these business-critical applications. Though not exclusive to this category, support systems are built to be resilient and able to handle concurrent faults in the underlying infrastructure before having a user impact.

A mobile app like Uber would be an example. The external requirements for interaction with the client involve fully-integrated client and IT teams. Now that project types and sizes are defined, they can be combined to put together the following possible timeframes:. Sales and Delivery can now give a quick estimate to clients regarding how long a project will take.

Once the project is defined in terms of type and size, the next factor to be determined is the team size. However, that does not mean that every role equates to one team resource.

Some resources can fulfill more than one role. For example, In a small project, a Developer may also fill the role of Tester. For larger, complex projects — team resources usually fulfill only one role to effectively move the project forward.

Rough estimates of team sizes may include the following structural roles:. Unfortunately, it is not that easy. As mentioned earlier, some resources may play more than 1 role on a project. They may be needed to confirm coding is meeting design requirements, or be available to tweak the design, but full-time is no longer necessary.

A project team should work like a well-rehearsed production. Done well, necessary resources come on and off the project with no noticeable lapses in productivity. Now applying the cost of a team with the project time estimates from the chart above, we can finally come to a project cost. If the estimated cost is reasonable to everyone, then a more detailed quote can be generated, followed by a full project plan outlining the actual costs and milestones.

To put this all into context we put together the following list of representative projects:. Resolution of a known issue in existing software that we are maintaining. This assumes that the cause of the issue is known, and the issue affects a minimal number of objects. Often the first step for many startups, these projects tend to focus more on the look and feel of a new application and the possibility of achieving the desired outcome, more than providing functionality.

Standalone application for iOS and Android. Now you know the steps and factors that go into reaching a cost estimate for software development. By catalytic learning, I mean that while sales and marketing still have the tactical role of closing everyday business, they also have strategic role of structuring the purchase process, identifying roadblocks and eliminating them through product-based and Web-based automation.

For example, if a customer is forced to pick up a phone or send an e-mail to talk to a person in order to try, buy, deploy, integrate or maintain your product, then your business is not truly on-demand will be bleeding cash from the higher labor costs. I will also propose that a company is better off starting with this cost structure from the get-go and resisting the urge to chase revenue by adding excessive direct labor resources to the sales and marketing process.

Doing so merely undermines the culture required to build a successful on demand business. Save my name, email, and website in this browser for the next time I comment. House Cleaning Services.

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When small companies need a new mobile application to reach their customers, a fresh new website, or some custom software to support their business, they often turn to freelance software developers. Rather than fund an in-house software team, companies can use independent software firms to build custom software to meet their exact needs when they need it.