How does the cost chart work in a typical IT project?

How does the cost chart work in a typical IT project?

Do you have an idea for a business based on IT software, but do not know what costs are associated with it? Are you interested in what is the final cost of a mobile or web application? Do you want to check how quickly your project will generate profits? If you need answers to these questions, read our article. We discuss everything that is most important when it comes to IT project pricing.

What influences the cost of making an application?

There are quite a few factors and the issue is highly individualized. Even when building similar types of IT systems, the price can vary significantly, so the question of how to calculate the value of the project does not have a clear answer.

What is the reason for this? Various issues should be taken into account, including:

– the complexity of the project – the more complex and containing many non-standard features or special effects, the higher the amount will be, which is why simple e-commerce websites built as MVP (Minimum Viable Product – a product with basic functionality) consume much less money than information or social networking sites,

– range – an application designed only for Android costs much less than if it will be available also for iOS devices and Windows computers and laptops,

– goals of the project – building software that is aimed at a wide target group and assumes an increase in product sales usually means higher rates than in the case of a system that will help streamline internal processes,

– the level of application security – the use of such solutions as multi-factor authentication, validation of cookies and user input data, as well as the purchase of an SSL certificate, increases the price of the project.

It is also important who will do the project. It will cost a lot of money to use the services of a qualified team, which includes a business analyst, UX/UI designer, frontend and backend software engineer, project manager or system administrator. However, such a solution is the most effective – in each case it will allow you to receive a product that is functional, responsive and consistent with the needs of users.

IT project cost estimate

Building web and mobile applications involves 4 stages:

planning – understanding the needs of the market and customers, isolating the target group, determining software components and work schedule,

design – creating the interface together with UX/UI design,

development – verification of correctness of system operation, including code correctness, correctness of website actions or compatibility between frontend and backend systems,

alpha testing (within the development team) and beta testing (carried out by potential users) and implementation – the final elimination of errors, improvement of the application.

Costs are incurred from the first stage. They include:

designing and building the architecture, including the landing page and individual tabs,

implementation of various functionalities – for example, integration with ERP or SAP software via an API interface, automatic emailing, aggregation microservices (product catalog) or business services (user comments), integration with social networking sites

design development (graphics, animations),

integration with external systems, including e-payments.

The valuation of an IT project can be carried out under different approaches. The most common are:

top-down – determining the price based on other projects, expert knowledge and the market value of the software,

bottom-up – the total budget is the sum of the cost of all tasks performed by team members.

The way of valuation may also influence the final price, so special attention should be paid to this issue. The total cost of a mobile or web application is usually from several dozen to several hundred thousand zlotys.

IT project costs do not end with the implementation of the application for use. In order for it to function properly, i.e. without breakdowns and downtime, and generate benefits for the owner, it must be properly maintained, supported and managed. Therefore, the cost of application maintenance is important.

It consists of activities related to:

introducing improvements in the interface or functionalities, in order to constantly increase the number of users, better adjust to market requirements and more effectively fight the competition,

fixing errors, including those noticed by site visitors,

maintenance of hosting and domain,

management of data collected from users and stored on the server,

adjusting software to updates and patches published by external vendors – this applies to Android and iOS systems, for example,

performing security tests, including dynamic, static and penetration tests.

Annual maintenance of the application can generate costs up to 15-20% of the total amount spent on the construction and implementation of the solution. They should be taken into account even before the start of the IT project, so that later there is no negligence in terms of maintenance and management of software.

IT project costs – when do they pay for themselves?

It happens gradually, and starts after the application is put into use. If it works properly, is scalable, i.e. can cope with the growing number of users, and has been properly positioned, it will quickly start generating profits – this is the moment when costs suddenly drop and concrete results appear.

Depending on the business goal, profits come from conversions, which are the actions expected by the site owner to be taken by site users. This can include:

– making purchases through the app,

– newsletter sign-ups,

– returning to the site to make a purchase,

– clicks on an advertising banner.

Each such action is beneficial for the owner of the application, as it increases interest in the website and allows it to achieve high position in Google search results. This directly translates into increased revenue.

The cost-benefit graph of a typical IT project can most simply be represented by the following chart:

You can clearly see how, during an IT project, the costs of creating an application for a phone or computer increase, only to stabilize at a much lower level after the testing phase. At the same time profits begin to increase and at some point their level will exceed the cost of writing the application.

The time in which the investment will pay off is an individual matter. It depends, for example, on whether the site successively eliminates errors and is optimized for SEO, as well as whether security tests are performed, affecting a high level of user confidence in the site.

Is it worth the cost of an IT project?

Definitely yes. When deciding to build a web or mobile application, you must be aware of the high costs. They can amount even to several hundred thousand zlotys – everything depends on the complexity and sophistication of the project, its objectives or who will carry it out. You should also remember about the expenses that are incurred in connection with the maintenance and upkeep of the application (patches, updates, hosting, domain, security tests). An application that is attractive to users, however, will quickly begin to generate profits. Therefore, it is worth incurring the costs in the initial period of its implementation in order to reap the numerous benefits connected with it later.