Software Development Costs: Understanding the different pricing models

Determining the Software development costs is often seen as a herculean task.It is difficult to determine the exact software development cost as there are many variables involved in the calculation of the cost estimate. Some of these variables involve design methodology, technological expertise, project duration, the complexity of the project, platform or technology used, risk assessments. In order to increase the accuracy of software development costs estimate, it is important to analyse the entire SDLC.

Here are some important Software development pricing models:

Fixed price model: Fixed price model is suitable for projects with a limited or small scope. Here the software development costs and time frame are specified before the commencement of the project. It is difficult to make any alterations in the project plan afterwards. This type of pricing model is mainly adopted by companies that follow waterfall methodology.

Time and Material model: Time and material software pricing model are more appropriate for long-term development projects. This model provides the flexibility to make any changes in scope, features and delivery plans as and when required at any stage of project implementation. Time and Material pricing model is usually used by companies that use Agile development methodology.

Dedicated team model: In dedicated team model, an outsourced company provides skilled and dedicated experts depending upon the project requirements. Here the software development costs are decided on the basis of the level of expertise, domain knowledge, number of dedicated resources required for the project and their hourly or monthly rates.