Custom Software Development Pricing Models Explained 

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Custom software development is one of the most important investments a company can make. 

A custom-developed application will provide your company with an edge that helps you stay competitive in today’s market by increasing efficiency, streamlining processes, and potentially leading to a higher business valuation when you decide to sell your company down the road.

There are many different custom software pricing models, but each one comes with its own set of challenges and benefits.

Understanding the custom pricing models will help you determine which option best suits your needs.

Let’s take a look at some of the different pricing models and what they entail.

Fixed pricing for custom software development

Fixed pricing for custom software development is one of the most commonly used pricing models. With this model, the custom software developer estimates the cost for development by calculating the time and materials needed, and then offering a fixed price to complete the custom project. 

Advantages and disadvantages

One advantage of fixed pricing is that all of the specs and deliverables are clearly defined upfront. This way, everyone involved knows exactly what is being built and when a request falls outside of the documented scope. Fixed pricing is also risk-free, because both parties know exactly how much it will cost upfront.

Unfortunately, certainty often comes at a higher price. Developers may charge more for fixed price projects to account for the risk they’re taking in offering a set price. You may also end up spending more if the project is completed sooner than anticipated or the cost of materials is less than originally planned for. It can also be difficult to request changes or additions with fixed price projects.

Time and materials model for custom software development

The time and materials pricing model is another common option. In this model, the developer will offer a price based on the time and materials required to complete development, with an hourly rate or fixed project pricing. 

Advantages and disadvantages

This custom model provides many of the same benefits as the fixed priced custom solutions, along with the ability for developers to receive feedback from clients during the process.

The downside of this model is that it’s risky. It doesn’t provide any protection for the client if the project takes longer than the developer estimated, which can lead to unexpected price increases down the line. It also offers little flexibility, since you won’t know how much it will cost until it’s over.

In-house custom software development pricing

In-house custom software development is an alternative to the other custom solutions that exist. In this model, your organization hires a team and pays for them on either an hourly or project basis as they work through software design and implementation. 

Advantages and disadvantages

The upside of this custom solution is that you get the project done without the risks that come with a fixed price. The downside is that in-house custom software developers are not always guaranteed to be as skilled or experienced as a company that develops software all day every day. They may also require more supervision, which can mean higher costs for your organization in the long-run.

When you hire Bizzuka for your next custom software project, we’ll work with you to create the payment plan that’s best for you. We offer both fixed and time & materials pricing options for your convenience. Schedule a free workflow consultation with us today, and we’ll help you evaluate your business processes to see if a custom software application is the right move for you!