For many startups and companies, in order to release a software product, they need to develop it first. For this purpose, most founders or business leaders put together a team of software developers to help with the development tasks. And here the question arises – what are the costs of hiring developers? Depending on who you ask, the numbers are often different and sometimes vary significantly.
According to Clutch.co, most developers charge between $25-$50 per hour (for offshore markets) and $50-$150 per hour or more (for developed countries). The market has also seen the average cost of a typical software development project ranging from $5,000 to upward of $50,000.
The cost of hiring a developer varies and depends on several factors, including experience, location, and skills. Project requirements, complexity, collaboration methods, and other factors also affect the rate you pay for the developers. So before starting your software development project, you should look at a number of factors, beyond the hourly rate of a developer.
At Trustify Technology, we understand that startups or newly established businesses have limited budgets and founders want to know how much they should invest before they build any software product. In this article, we will share:
- Factors affecting software developer costs;
- Average rates software developers charge;
- Hidden costs of hiring software developers you need to know;
- And how to estimate the cost of developing a software solution;
How much does it cost to hire a software developer
As mentioned above, the cost of hiring a developer may vary drastically because the cost is directly influenced by a variety of factors, as follow:
Experience Level
It’s a fact that hiring experienced software developer will cost you more than a junior one who has just entered the IT workforce. For example, an entry-level developer in the United States charges only $25 per hour, but senior developers can charge up to $71 per hour (as per Payscale.com). Mid-level experience software developers in the US can earn an average of $49 per hour.
Even though you have to pay more to hire an experienced developer, you also benefit more from their expertise and experience. During project development, software developers who have been in the business for years can help you avoid common technical issues and resolve them quickly. For example, a senior developer only needs to spend a few hours fixing a software defect, while it may take days for a novice developer to do the same.
In addition to work experience, developers’ experience working on similar projects is also important. For instance, if you want to build a fintech software application, candidates who have developed similar solutions and have sufficient knowledge of the fintech industry may ask for a higher rate. They know that their experience in the industry will significantly reduce development time.
Region
Depending on the location of the developer, the costs of hiring software developers can vary significantly. Developers working in developed countries charge higher fees than developers working in more affordable countries. For example, the average salary of a front-end developer in the United States is approximately $110,000 per year, but the same position in Vietnam earns around $21,379 per year.
For a better comparison, below are the average salaries of front-end developers in different countries.
Furthermore, other aspects such as language barriers, cultural adjustments, and time zones also directly influence the final decision of hiring software developers. If a developer does not know your language, there can be serious communication issues affecting the project outcomes. Likewise, it is difficult to achieve common goals if both parties have different work ethics.
Platform
The cost of hiring a developer varies significantly based on the technology stack needed to create your software solution. For instance, developing a web application requires specialized frameworks, programming languages, and tools tailored to your project’s specific requirements. For dynamic single-page applications, we may utilize ReactJS, Node.js, and MongoDB, while for enterprise solutions, we rely on Angular, .NET Core, and SQL Server to ensure scalability and performance.
Alternatively, for e-commerce platforms or content-heavy websites, we can use Django with Python or Ruby on Rails, both of which are great for development speed and scalability.
The complexity and type of web application you are building, whether it is a single-page application, a PWA, or an enterprise business solution, also influence the skills required and ultimately, the hiring cost. Additionally, the availability of developers who are well-versed in specialized technology can vary by region, which further impacts the price.
How do developers calculate their rates
Software development companies or developers have their own preferred methods for billing their clients. Some are more flexible, while others help you estimate how much you’re going to need to spend.
Hourly Rates
Many freelance developers charge by the hour. They charge for time spent designing, coding, testing, or completing software development related tasks. According to Upwork, most freelance developers on the platform earn between $18 and $39 per hour.
The advantage of this billing method is that you can modify your project requirements as the project progresses. However, the final value cannot be accurately estimated until the developer has completed the project.
Therefore, only choose the hourly rate model if you’re working on a project with unclear or changing requirements.
Project-based rates
If you need to exert more control over your software development costs, look for developers who can do the work for a fixed price. Typically, they will assess your needs and offer you a fee to consider. This way, you are aware of the total development cost of the software before it is built.
The disadvantage of project pricing is that it can take a lot of time for the developer to plan the entire process and make estimates. You also cannot change the requirements once you start working. You are effectively giving up control when working with the developers on a project basis.
Therefore, it is important to define your requirements in detail and clearly before starting any work. Otherwise, the developer will have to adjust their work affecting the entire contract, which will lead to additional delays and opportunity costs. To derive maximum benefits out of the fixed-price model, you can use it for small projects that can be easily planned in advance.
Retainer Agreements
What if you want to hire a developer for a longer period of time and need a more advantageous pricing model? We recommend hiring developers to work on a retainer basis. You pay them a fixed amount each month for a certain number of hours that they work on your project.
This approach to software development is similar to hiring a full-time in-house developer, except the contract is valid for only a fixed period. If you’re building complex software that takes months to complete, choosing their pricing method provides stability and control.
Key factors that affect hiring software developer costs
The exact rate of hiring a developer can vary greatly depending on several factors.
Technical Skills and Specializations
Software development requires different technical skills, and some are more in demand than others. Most developers are proficient in common technologies like Java, .NET, React, and Python. However, it’s harder to find developers who are skilled in new or advanced technologies like Artificial Intelligence, Machine Learning, Big data, and Blockchain.
So be prepared to pay more if you hire talent that’s in short supply. For example, the average salary for a web developer in the United States is $80,685 per year (As perper Indeed.com, updated Nov 2024), but machine learning engineers earn more than $161,321 per year (2024 figure, per DataCampDataCamp). To make matters worse, startups have to compete with global companies for skilled technical talent.
Type of software application
The costs of software development also vary depending on their type and complexity. Simple software solution with minimal features is cheaper because it takes less time to develop. On the other hand, you pay more to build a software product with multiple pages, beautiful UI/UX design, with various third-party integrations, and extensive back-end services.
For example, a developer might charge $20,000 to build a simple real estate web application, but a large-scale e-commerce website can cost over $200,000. Other medium-complexity software falls in this range, with an average cost of $50,000 to $90,000.
Instead of enabling all the features in your software product at once, we recommend creating a Minimum Viable Product (MVP). An MVP has only the most essential features that help you validate your idea. Plus, it’s cheaper and quicker to develop an MVP than a full-scale software solution.
Outsourcing vs. Local Hiring
Many startups and business organizations turn to outsourcing instead of local hiring to lower the hiring costs. Hiring locally allows you to set-up your own development team, but can put a strain on your financial strength in the long run. In addition to the fixed salary, you also have to pay for job advertisement, office equipment and infrastructure, insurance, training, and office rent, etc.
Meanwhile, outsourcing can significantly lower the software developers’ cost and ultimately improve the growth of the company. Many global startups operate or outsource to Asian regions, such as Vietnam, to ensure that they have a solid IT ecosystem and talent pool. Imagine paying $25-35 per hour instead of $100 per hour and being satisfied with the development quality and all the work, when you outsource the project to Vietnam developers.
How to Estimate The Cost of Hiring Software Developers: 5 Key Steps
1. Define your project scope
First, write down the type of software you need. Do you need a healthcare web app that lets patients make appointments with doctors or an e-commerce solution that sells house-hold items to individual consumers? Sometimes, business leaders also hire developers to modernize or support an outdated software system instead of building a completely new system.
Different types of software have very different technical requirements for specifications and development. In addition, your choice of platforms (e.g. web vs. mobile, or both) and technology stacks will greatly decide the type of developer you need to hire.
2. Search for software developers
Next step, you can search for developers and compare their rates. Software development vendors can be found on platforms like Clutch and Good Firms. You can filter vendors by location, price and their focus of technologies.
Alternatively, you can ask other executives in your business network. People who already outsource their projects successfully will be happy to share their contacts with you.
3. Compare portfolios and reviews
No matter how excellent the candidates you have recruited, it is still important to check their credentials. Check their past projects portfolio and make sure they have successfully worked on similar projects in your industry. If necessary, you can spend more time on interviews and ask for relevant references.
Remember that you still haven’t officially worked with the candidate yet. If there are any red flags, such as communication issues, missed meetings, and failed launches, etc. it’s time to move on to the next candidates.
4. Choose a collaboration model
After you have narrowed down your list of potential candidates, you can choose the partnership model that suits you best. For example, if you already have clear requirements, features, and a target release date for your software project, you can opt for a model with fixed-pricing.
If you are still uncertain, it is always best to ask the developer for the best pricing model. At Trustify Technology, we believe that the start-up founders’ priority was cost savings and fast delivery of the product to market. Simply put, we can also augment your team with our experienced developers with a long-term perspective.
5. Request for a quote
Some research is required in determining and selecting the cost of hiring software developers.
Hidden Costs of Hiring Software Developers
Some startups or newly established businesses hire their own in-house development teams in the hope that it will help them save costs. At first glance, paying salaries seems more cost-effective than outsourcing. However, there are hidden costs to consider when hiring.
Onboarding expenses
Every developer you add to your team will need training and onboarding. They will also need time to build relationships with existing team members so they can contribute productively. All of this adds up to long-term costs that founders will have to bear.
Equipment costs
Unlike working with an outsourced partner, you will need to provide your developers with laptop, office space, as well as software licences and tools, etc. This can mean purchasing additional hardware and software licenses or subscribing to third-party services that incur significant operational costs.
Project management costs
You are responsible for managing your in-house team to ensure that they are working together effectively. To do this, you have to invest in project management, communication tools, and documentation software. This translates to the need of hiring additional staff to apply data security, manage internal repositories and documents, and more.
Tips for Hiring Software Developers at an Efficient Cost
We want to emphasize that cost is not the only consideration when hiring a software developer. But all things being equal, from a business perspective, it’s best to maintain the hiring costs at a minimum. Here’s how to do it:
Choose the Right Hiring Model
In addition to hiring and building your own in-house team, you can opt for freelancers and software development outsourcing agencies. Freelance developers generally cost less than agencies, but may deliver lower quality. Also, a freelancer can work on multiple projects and compromise the results.
On the other hand, hiring a reliable software agency frees you from long-term financial responsibilities. You don’t even have to manage the development team. This way you can spend more time focusing on core business activities like branding, sales, and others to grow your business.
Negotiate the Best Rates
When comparing quotes, some may seem more expensive than others. It seems like there is still room for negotiation. For example, a developer may set a higher price to prepare for uncertainties about the scope of the project. If so, clarifying your project requirements may reduce costs.
Additionally, you can try negotiating different payment terms to see who gives you a better price. For example, some developers may offer lower fees if you are willing to make a larger down payment. Most importantly, base your negotiation on the market prices.
To find out how much developers are paid, you can check sites like Indeed, Glassdoor, and Payscale.
Ensure Quality Within Your Budget
It may make economical sense to choose the developer with the lowest price, but before you do, make sure that they’re capable of delivering what you need. Be aware of red flags that can cause problems later in the collaboration.
Another concern is whether the developers include everything you need to launch and support your software. Some developers stop support after release, only to charge expensive fees later. Checking the developers’ portfolios and reviews can weed out questionable candidates.
Conclusion
It is difficult to give an exact price for building a software solution because developers charge different rates for various reasons. However, you can get a better estimate once the scope of the project, collaboration model, and working methods are determined.
In general, hiring in-house software development teams offer more control, but founders must commit to securing more financial resources in the long run. Meanwhile, outsourcing is a flexible option that quickly connects you with experienced developers to work on your project.
So, consider all factors carefully before hiring a developer. We have shown you how to estimate software costs together with average market prices.
FAQs
How much does it cost to hire a developer to build a software product?
The cost of hiring software developers to build a software product varies widely and depends on a number of factors, including experience, location, and expertise. The cost can range from $10,000 to $50,000 and more.
What is the average cost of hiring a developer?
The average cost of hiring a developer can range from $15 to $30 per hour for a freelance developer, while agencies and outsourcing companies can charge $25 to $50 or more per hour.
How do I reduce the cost of hiring software developers without sacrificing quality?
To reduce the cost of hiring developers without sacrificing quality, consider outsourcing IT to areas with lower labor costs, using a hybrid development approach, prioritizing critical tasks, and negotiating fixed-price contracts. Furthermore, careful planning and clear specifications can simplify development, reducing the need for revisions and additional costs.