Cost of New Product Development: Estimation and Examples

How much does it cost to develop a product? Looking for ways to optimize expenses and find the most efficient approach? Development costs vary based on multiple factors and are typically determined during the discovery phase. This phase is led by a team that may include a Project Manager, Business Analyst, Software Architect, and Designer, with the exact team composition depending on the project’s complexity and scale.

This article will break down the key factors influencing product development costs, common challenges businesses face, and insights from our successful project to give you a clearer idea of what to expect when developing your product.

TL;DR: Explore cost factors and ways to optimize the budget for product development

• Factors that impact software development costs.
• Challenges, our solutions, cost factors, team composition, and key project components of the law firm Laurus case.
• Smart strategies to cut development costs without compromising quality.

Factors influencing software development costs

How much does it cost to make a product? This question involves several factors that can enhance the accuracy of your estimate.

Here’s a breakdown of these factors and how they impact your overall expenses:

Software type, complexity, and project scope

The type and complexity of your software are the foremost determinants of development costs. The platform you choose – no matter if it's iOS, Android, cross-platform mobile, web, or desktop - plays a significant role. Targeting multiple platforms can increase costs, but opting for a cross-platform app is generally more cost-effective than developing separate native applications.

Complexity further affects pricing. For instance, an ecommerce platform with features like payment processing costs much more than a simple to-do list app due to additional design and testing time. A basic mobile app designed for a small user base will be significantly cheaper than one built to support millions of users.

To manage expenses, consider starting with a Minimum Viable Product (MVP) that focuses on the most essential features. This way, you can validate your idea and gather user feedback before investing in more complex functionalities.

Team size and experience

The size, experience, and location of your development team all impact your budget. A larger team can speed up development but comes at a higher cost, while a smaller team may be more cost-effective but extend timelines. Additionally, where your team is based can significantly influence overall expenses.

Cooperation model

The cooperation model you choose can significantly affect your product development costs as well. Here are the key options:

• Dedicated development team This model provides a flexible, fully engaged team of skilled developers, ideal for long-term projects.
• Time and materials This option allows you to manage your project scope independently, paying only for the hours worked as your requirements evolve.
• Fixed price The fixed price model offers upfront budgeting for projects with precise requirements, making financial planning easier.
• Outstaffing Hire specialists to join your team without the onboarding hassle. Our agency fully handles staffing, saving you from unexpected costs.

Tech stack selection

Your tech stack – the combination of technologies used to build your software – directly impacts development speed and cost. Choosing the right tools can optimize workflows and improve efficiency. For instance, using React.js or TypeScript for web development enables faster, more scalable applications that handle high traffic without compromising performance. Additionally, the development time and costs can be reduced by using technologies that are well-supported and familiar.

Maintenance and updates

Maintenance and updates are essential for your software’s longevity and success, often accounting for over 50% of the total cost of ownership throughout its lifecycle. Regular updates are crucial to keep your product functional and secure, as they help address bugs and vulnerabilities that can arise over time.

Moreover, staying up to date with the latest features and improvements enhances user experience and keeps your software competitive in a rapidly changing market. It’s not just about fixing issues; it’s about evolving with users' needs and preferences.

Laurus case: Product development cost estimation

Let’s take a closer look at the Laurus case, exploring the challenges they encountered, the solutions we implemented, the dedicated team that made it all happen, the functional components that drove the project, and the costs that influenced its development. Using this case example, we will illustrate how various factors impact the overall development costs, providing valuable insights for your project planning and budgeting.

About our client

Laurus is a law firm with a strong reputation for delivering high-quality legal services. Established in 2004 and headquartered in London, the firm specializes in property and conveyancing law, family law, and estate planning. With multiple branches across the country, Laurus provides expert guidance on property transactions, asset protection, and legal matters for individuals and businesses.

Challenges our client had

The client struggled with inefficient and time-consuming processes for collecting and transferring information across branches. Data was mainly gathered through emails and phone calls, leading to delays and increased costs. The manual workflow also resulted in excessive communication, repetitive tasks, and high operational expenses. Moreover, the outdated, manual system hindered the need for a secure and fast process to guide clients through legal matters.

Solutions we offered

After analyzing the client's challenges and internal workflow, we decided to develop a cloud-based platform featuring two user-friendly applications and a shared API. The development was divided into two main stages.

In the first stage, our goal was to create a dashboard to streamline real estate deal management, enable secure document sharing, and simplify payment processing. This would replace the manual paper-based system, reduce costs, improve access to essential data, and shorten transaction time.

In the second stage, we introduced a user-friendly account and document management system to improve user experience. The platform allows access to account information, password modification, and the upload of various document types, all while managing unique identifiers and downloading multiple files at once. Our shared document feature enhances collaboration, while the user-friendly login page ensures easy access and simple password resets.

What factors affect the cost of digital product development?

The software development process started with a technical assessment, followed by wireframing and prototyping, design, development, testing, and launch. Here, we highlight the key factors that influenced the project budget:

Feature and component development. We initially built a flexible foundation that could be modified to meet specific needs, ensuring the reusability of components. This approach is essential for product development, as reusable components facilitate future scaling and modifications.

Design customization. The database elements were developed with a custom design to enhance performance and deliver value. Investing in customization is worthwhile, as it unlocks essential functionality, streamlines workflows for employees, and enables future scalability.

Two-step verification system. We implemented a two-step verification system based on existing services to enhance sign-in security. After completing the first step, users can proceed to the second level for identity verification. This precaution is essential in many industries, especially in real estate and law, where web security risks are prevalent.

The team involved in the project. While working on the Laurus project, we gathered a team with diverse expertise to ensure its success. Here’s a brief overview of the key roles involved:

• The project manager is a specialist who oversees sprint planning and manages risks, conflicts, and changes to keep the project on track.
• A DevOps is an engineer who handles system administration, cloud technologies, and security, ensuring system resilience.
• The quality assurance engineer who finds and fixes bugs before launch, driving quality improvements throughout development.
• Frontend developers are engineers who create user interfaces for web applications. In this particular project, we used Node.js.
• A backend developer is an engineer who manages server-side development, including databases and backend functionalities.
• A web designer creates visually captivating and user-friendly interfaces, ensuring an engaging and intuitive user experience.
• A team/tech consultant is an engineer who sets the programming direction, technologies, and libraries and ensures the team adheres to the development strategy.

Key components of the project. Based on the client's initial request and the approved development plan, our project focused on building three main components:

• Admin portal
• Client portal
• Administration, management, and support

Developing these components required frontend and backend programming to ensure an agile and customized solution. Below is a breakdown of key features and the time spent implementing them:

Admin Portal:

Client Portal:

Administration, Management & Support:

Summary:

This overview highlights the significant stages of our digital product development process, giving insight into how long it takes to implement specific features.

Ways to reduce product development expenses

Here are some practical strategies to help you cut digital product development costs while maintaining quality and efficiency throughout the development process.

Clarify goals and requirements

Start by creating a detailed document that outlines your goals, requirements, and the functional capabilities of your product. This Software Requirements Specification (SRS) is crucial for both in-house and outsourced development. It helps prevent misunderstandings, builds a clear project roadmap, and improves communication between customers and developers. With clear requirements, you can forecast work duration and costs more accurately, keeping your budget in check.

Emphasize effective project planning

Effective project management is key to avoiding costly mistakes. Poor planning can lead to software that doesn’t address your business needs and result in budget overruns. In fact, inadequate project planning is responsible for a significant percentage of project failures. A skilled project manager can help define the project scope and navigate potential risks, leading to a successful outcome.

Create cross-functional teams

Building a team with diverse skills allows your staff to handle various aspects of the project without relying heavily on external resources. A well-rounded team typically includes developers, designers, testers, and business analysts, along with members from marketing or customer service. This collaboration fosters innovation and efficiency, ultimately reducing development costs.

Adopt an Agile approach

Consider using the Agile methodology to enable further development without overstepping the predetermined budget. In contrast to Waterfall or similar models, Agile maximizes flexibility and improves the scope of change management, which decreases the available budget. By adopting these processes, adjustment to spending can be managed effectively, lowering the resources spent in the long term while improving the end output.

Consider open-source options

Open-source software (OSS) can significantly lower development costs. It’s free to use, customizable, and often comes with reusable code that simplifies development. Tools like LibreOffice for word processing and WordPress for website development and management offer extensive features at no cost. Open-source software is also associated with large active online communities that maintain and update the software and improve its usability, which makes it secure for many companies.

However, not all open-source solutions will align with your specific needs. Consider factors like scalability, support, and integration with your existing tech stack before making a decision.

Staff augmentation

One way to optimize costs without compromising quality is through staff augmentation. This approach allows you to scale your team with skilled professionals as needed, reducing long-term hiring expenses while ensuring your project stays on track. Thus, the question of choosing the right vendor becomes most relevant. Compare the salaries of software engineers, their experience, and expertise to select the best team to meet your needs and budget.

Maintain open communication

From the outset, communicate your budget, business needs, and requirements clearly. This transparency ensures that project managers understand the constraints and can maintain quality while staying within budget. Good communication is essential for project success – many projects fail due to a lack of stakeholder engagement. Keeping everyone informed helps align resources and expectations.

Reuse existing technologies and components

Use your current infrastructure and technology to save time and money during development. Reusing existing components saves you from starting all over, so you can focus on developing better functionality and features rather than setting foundations anew.

Regularly check license usage

Regularly auditing your software licenses can help you identify and eliminate unused or underutilized licenses, saving you money. By reallocating or cutting unnecessary licenses, you can optimize your software costs. Usage analytics tools can reveal which software is valuable to your business, allowing you to adjust your licensing strategy accordingly.

Wrapping up

When it comes to product development, careful budgeting is key to achieving both quality and efficiency. By placing excellent project planning foremost, being transparent and communicative, and adopting newer techniques like Agile and staff augmentation, you are able to fine-tune your budget for digital product development without diluting quality. Additional cost-cutting measures may also be gained by researching open-source offerings and reviewing your software licenses regularly.

At DigitalSuits, we offer comprehensive prototype cost estimations and product design cost estimates to help you grasp the financial aspects of your project, enabling informed decision-making and efficient resource allocation throughout the development process.

If you need consulting or advice to make decisions that align with your business strategy – eventually making the development process easier and ensuring a successful product launch – feel free to reach out to us. Our specialists will help you discover the most effective ways for cost optimization and project success.