How to Keep a Custom Software Development Project On-Budget

Custom Software Development Project On-Budget

It’s a momentous time in the life of any organization — the decision to bring a brand-new software solution to the marketplace. Or to abandon off-the-shelf operational software solutions in favor of a custom software solution, developed bespoke for your organization to do exactly what your organization needs it to do.

Organizations understandably light up with the thrill of possibilities, but a bucket of cold water looms — the cost of such an endeavor. Custom software development can be costly. But for managers in search of the perfect solution with no compromise, the effort and expense can be well worth it.

Unless the expenses spiral out of control. Every project manager fears cost overruns, and with a product as finicky as custom software, it’s a real possibility. How do you keep a custom software solution from devolving into a money pit?

Let’s explore six critical steps to keep a custom software development project on budget.

1. Understand the Business Value of Your Custom Software Development Project

Why bother? If a custom software solution is time-consuming, costly, and carries the risk of cost overruns, why have you commissioned it in the first place?

Presumably, the software solution has some asset value to your business. Otherwise, there’s no point in having it. Have you taken the time to quantify that business value?

Understanding the business value of your custom software solution isn’t just critical to staying on budget — it’s important for the establishment of the budget in the first place. 

Your development budget is an investment. How much return on investment can you expect? Is your budget so high that the ROI will be minuscule? In that case, perhaps the scope should be reimagined, the budget reduced.

Before you kick off your custom software development project and the incumbent spending, take the time to make a comprehensive estimate of its business value. Factors to consider include: 

  • Cost Savings. How much will your organization save in terms of labor costs once the custom solution is put into place? How much will you save in outside contractor costs and third-party software costs? This will affect your ROI in terms of cash flow to your business, as well as the resale value of your business.
  • Increased Revenue. Do you expect the software solution to drive more revenue to your organization? If so, how much? Again, this will affect your ROI in terms of cash flow to your business, as well as the resale value of your business.
  • Value of the Software Itself. What is the resale or licensing potential of the software? How much would a business appraiser value the software solution as intellectual property, contributing to the resale value of your business?

2. Align Internally on Custom Software Development Project Requirements


Custom software development projects rarely have only one stakeholder. The solution is meant to serve the team, and everyone on the team has a stake in the finished solution. They are going to have opinions. 

Any project can fall apart when it’s done by committee. There needs to be leadership, cooperation, and a unifying vision. Without it, stakeholders could send conflicting messages to the development team, leading to duplication of effort, contradictory effort, and muddled goals. That’s a one-way ticket to delays and cost overruns.

The time to bring all stakeholders into alignment about the goals and expectations of the custom software development project is before kickoff

Sit down with all stakeholders. This could include all managers whose departments will be affected by the software solution, but it could also include team members lower in the hierarchy. After all, they often have the most hands-on exposure to the software solution. Their input has to be considered. The solution will not succeed if the rank-and-file does not fully buy in.

Once the team is assembled, go around the table to answer the following questions:

  • Who is the primary user? The team? The end-user? Management? All of the above?  
  • What is the core problem to be solved? What does success look like? What one thing must the solution accomplish above all others?
  • What features are on the wish list? In a perfect world, what would each stakeholder like the software solution to see the software solution accomplish?

3. Create a Complete Estimate That Accounts for All Phases of the Project

Organizations often underestimate what goes into the development of a custom software solution. Software development entails no fewer than seven phases: 

  1. Planning. Mapping out the project goals, budget, resources, expected ROI, and timeline for the project. All stakeholders must be brought into alignment with this plan.
  1. Requirement Analysis. The “defining stage” — once the goal is agreed upon, developers determine how software can fulfill that goal. The development team assesses the functional and technical requirements for the delivery of that solution.
  1. Design. Designing and prototyping of the software solution, including system architecture, frameworks, and UX/UI design. 
  1. Implementation. This is the stage that most people think of as “software development” — the coding and building of the actual software solution according to the plan and feedback from the prototype.
  1. Testing. Once the solution is developed, it must be tested to identify bugs and make corrections in response to user feedback. Tests that may be conducted at this stage include system testing, integration testing, A/B or split testing, user acceptance testing, beta testing, and quality assurance testing. 
  1. Deployment. When the software has passed all relevant tests, it may be deployed to the operating environment or to the marketplace. 
  1. Maintenance. Even after deployment, the development process continues. Software developers must always plan for ongoing maintenance to fix bugs and perform upgrades as needed.

Costs can be controlled at every one of these stages — for example, reusable code in the design phase. But costs can only be controlled if you anticipate the phases and prepare for them. Make sure to consider all seven phases in your cost estimate.

4. Understand Any Variables and Risks and Factor Them in Accordingly


Remember what Robert Burns said about the “best-laid plans of mice and men.” Even the most meticulous planning phase can’t account for the unexpected. That doesn’t mean you shouldn’t try, though.

Try to look at every possible “either/or” or “if/then” situation. Don’t assume everything will go swimmingly — talk to your developer about worst-case scenarios and make contingency plans for them. 

Risks and variables to prepare for include:

  • Immature Or Legacy Technologies. If the software solution has to integrate with legacy tech or use immature programming languages, problems could arise. 
  • Complications Of Regulated Deployment. Regulatory compliance may complicate what would otherwise be a simple deployment.
  • External Integrations. Data exchange between your software solution and external software introduces another potential point of failure. 
  • Security Risks. The average cost of a data breach increased from over $3 million in 2006 to over $8 million in 2019. New software is a magic carpet for cybercriminals if careful attention is not paid to data security. 
  • Number Of Platforms. Problems could arise if a solution has to traverse platforms like a native mobile app, native desktop app, web app, or other platforms. 
  • Complications Of Data Migration. Data migration can become complex and costly if the systems must run in parallel during the migration.  
  • Hidden Requirements. Sometimes, the inclusion of a product requirement begets another, contingent requirement, adding unexpectedly to the scope. 

5. Establish a Detailed Timeline and Communication Plan

Time is money. In order to maintain control of the money that flows into a custom software development project, you have to maintain control of the time. 

Don’t just settle for a start date and a target due date. Establish milestones at every phase of the development project. That way, you have concrete markers to tell you if the project is on track or if a course correction is needed.

Of course, milestones don’t matter if you have no way of keeping track of them. Stakeholders and project managers must have an orderly system of communication with the development team, whether in-house or third-party. Considerations should include:

  • A regular schedule of meetings and conferences to confirm that the project is on track.  
  • An agreed-upon channel of communication. If teams are bombarding each other on competing communication channels (text, email, Slack, etc.) it could easily become a chaotic stew of conflicting instructions and feedback.
  • A unified workflow management system to track the progress of the project in real time. 

6. Have a Post-Development Support Plan

As mentioned above, the work of custom software development continues, even after deployment. Software is a tricky and sensitive animal. Bugs and glitches always pop up, while upgrades and room for improvement can always be identified.

The final step to keeping a custom software development project on budget is to include a post-development support plan in the budget. You don’t want this ongoing expense to catch you off-guard or undermine the ROI of the completed solution. 

Considerations for post-development support include:

  • Identifying the responsible team, whether it be in-house IT or a third-party contractor.
  • Training plans for users and support staff.
  • Analytics to track the metrics of the software solution to identify inefficiencies and bottlenecks. 


Custom software development can be costly, but the solutions can be more than worth it. The key is to plan for the costs and take the necessary steps to avoid unexpected costs. An on-budget custom software solution can be a source of long-term rewards for organizations that manage them properly.