Section 508

February 2nd, 2016

Average Cost of Developing a Mobile App Now over $200,000

What the cost of developing a mobile app is one of the most common questions we get from clients before they even tell us what they want to do. The answer is somewhere between zero to $40M. The zero cost option comes from using online app tools such as AppMakr and the $40M could relate to an extremely hyped startup idea.

For the purpose of answering the question now, I will focus on custom apps of high complexity such as retail apps from Ikea, Walmart or Best Buy. This will highlight the increasing challenges of mobile app and responsive website development in a competitive market with highly demanding customers. The companies which invest in customer experience are the winners.

These are the 7 phases of mobile app development and example costs in the table below. Our goal is to keep the end-to-end delivery within 5-6 months for the initial release although this may be challenging with some larger companies due to governance and resourcing.

1. Discovery and Research

The first part of any project or business should be to understand the problem (or problems) that you want to solve. E.g. for Ikea this could be that customers find it frustrating when a product they’ve found in the store display rooms is not in stock when they go to pick it up.

This typically involves emerging yourself in the problem through qualitative and quantitative research, interviews and experiencing the problem yourself.

2. Service Concept Design

Once you’ve understood the problem you want to solve you can start working on the solution. E.g. if the problem is finding out if a product is available in inventory then the solution may be to enable customers to scan and search for the product available themselves through mobile.

For most problems the solution is not as obvious. Therefore, the methodology is normally to test lots of different concepts with rapid prototyping until you’ve zoned in on the solution.

3. Prototyping and Designing the App

The traditional way of designing mobile solutions was to start with describing the use cases followed by more detailed user journeys. These were then converted into detailed wireframes showing the flow and layout of every part of the service. Finally, mockups were created to show the look and feel of the service. The wireframes can be an enormous amount of effort to create but also to maintain and are not necessarily self-explanatory to the developers.

Therefore, the latest approach we and other top design firms use is working with prototyping instead using a combination of flows and mock-ups. This requires more collaboration within the team but the final results are much better.

4. Technical Solution Architecture

In parallel with Prototyping and Design of the app the technical team works on translating the concept and use cases into a technical solution. This may include backend and backoffice design, integration, Web, App or Hybrid implementation approach, the app architecture, selection of platforms and tools (e.g. payments, CMS, analytics, monitoring, push notifications) to use, non-functional requirements such as performance, reliability, security, target devices, etc. It also includes estimating the effort of developing the solution.

5. Development of the App, Integration, Back End Development and Setup

Designs, solution architecture and use cases are all clear and development work can begin. In reality development could start much earlier with a very agile approach but this will typically increase cost as the scope will change drastically from the problem description to design and architecture.

Based on the estimated effort to deliver the solution and the time available, a team is assigned. This can consist of anything from one developer for a month for a very simple app to 15+ developers for a retail app. For bigger projects the team is also comprised of a project manager, solution architect, test lead, testers, one or more designers, product owner, analytics expert and an operation engineer.

In addition to this you may have costs for 3rd party tools for analytics, attribution, performance monitoring, security, customer engagement (e.g. push notifications, chat, SMS), customer feedback, video as well as hosting platforms such as AWS or Google Cloud.

6. Testing and Launching the App

Testing should start from the first sprint delivered and continue to the very end of the project. The role of the testers is to ensure that the final quality of the app lives up to the expectations of the project. This includes giving continuous input to the developers about bugs, reliability issues, performance, functionality, design, device specific issues and more. Read our blog about the QA superheroes for more about this.

A lot of the testing is done through test automation which means that the developer or tester writes scripts that can automatically test use cases. Security tests and load testing is often performed just before launch as well to ensure that requirements are met.

The amount of testing depends on the final quality requirements. E.g. a banking app with billions in transactions will generally take 2-3x as many hours spent on testing as spent on development. Our general rule is about half a man day’s testing for every day of development.

7. Launch and Post Launch Roadmap

The app is ready to launch, uploaded and submitted for approval to Apple and Google. However, this is just the end of the beginning. As soon as the app is launched the post launch work begins including monitoring feedback, fixing bugs and optimizing the app.

Normally there is a long backlog of things that couldn’t be included in the initial scope. In addition to this user feedback on improvements and analytics will provide additional input and tasks for the roadmap.

If no new functionality or improvements are added, then the typical maintenance cost is about 15% of the original build cost on an annual basis.

Effort of Each Development Phase

Average cost for developing a mobile app in 2016

So What Is the Cost of Developing a Mobile App?

You can calculate the cost based on the resources you are using as this will take into account location (local or global delivery team), country/state, in-house, contractors, large system integrator or premium mobile developer. According to a Forrester report from December 2015 (link at the bottom of the article), the rate for development alone can range from as little as $15 per hour to $300 depending on who you work with.

The rates per category for app development are approximately:

  • In-house developer US/UK: 550 dollar / man day (salary, taxes, insurance, etc.)
  • Contractor US/UK: 800 dollar / man day
  • Large system integrator US/UK: 800 dollar / man day
  • Premium mobile developer: 1,000 dollar / man day
  • Global Delivery Team: 240 dollar / man day

However, development can be as little as 40% of the overall effort and therefore rates of business development, design, solution architecture and analytics make up a large share of the cost.

How Does the Cost of an App for iOS and Android Compare to Developing a Responsive Website?

The costs are actually pretty similar other than for the actual development. Design is generally more demanding for responsive web as you need to take into account different size screens and context of the user. For the development part backend costs and related components are about the same. The thing that differs is the cost of developing a responsive website versus developing two different apps. Due to the challenges of browser support the total cost doesn’t differ that much with like for like functionality with perhaps the website coming in a bit cheaper.

If you need web and apps then usually the best solution is some kind of hybrid approach where the apps are developed as hybrids between native and the responsive website. We’ve previously discussed PhoneGap/Cordova as the best tool for this.

What Ratio of Cost vs. Reward Is the Norm? How Fast Does a Website or an App Pay Off?

Many enterprise apps have a return of investment in as little as 3-6 months with investments of up to $500k. The reason is simply that the cost savings and productivity increases are huge. On the other hand, most start-ups take at least 12-18 months before they break even and can pay on the initial investment if they ever do. 85% of all start-ups last less than 3 years which means that they will probably never pay off the original investment.

The key lesson here is to start small with prototyping and MVPs before you invest heavily in a full scale mobile app. This way you can figure out if the concept will work before you spend too much money. Our app development methodology described above has led to a success ratio where more than 60% of our apps generate a positive return to the business within 12 months. In some cases, this is measured in engaged users rather than direct revenue.

For more mobile app development rates, see Forrester’s recent report What Does It Cost to Source a Mobile App? (December 2015) based on interviews with consultants and companies.

Magnus Jern, President DMI International

Tags: app development development cost mobile apps

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