February 20th, 2012

What is the cost of mobile app development?

Quora, blogs and forums are flooded with questions and answers about mobile app development costs. Some of the responses are comprehensive but without sources and lack qualification, where as others are simply opinions from independent developers. This has resulted in some major misconceptions about the real cost of mobile development which I will now attempt to straighten out.

Firstly, apps will cost as much as you have budgeted for. For example, when you build a house, you don’t ask the developer how much it will cost. They ask you for a budget and then tell you what you can get for your money. This is no different when developing a mobile app. You get what you pay for and contingency needs to be allowed to make sure there is a buffer as decisions sometimes need to change or a new (business) requirement may need to be added during the development.

To simplify it, there are six tiers of app development (extended from three according to Brett Miller’s article in Custom Software by Preston) based on over 6 years’ of experience in the industry as we have worked with all of them:

1. DIY app development tools
Do it yourself (DIY) development allows anyone to develop a mobile app based on templates without the need of development skills. The advantage of this is that you can launch an app at a very low cost however the downside is that you are very restricted by the templates and functionality and you still need to have a pretty good understanding of apps and or great designers and creative resources to develop and launch a great app.

Examples: Mobile Roadie, Swebapps, Kanchoo and AppBreeder

Cost: from 500 USD for the tool + your own time

2. Off-shore development
Most big corporations off-shore some of their development and operations today, whether it is direct or indirect through a consultant such as IBM, Accenture, Sapient, etc. The advantage for well specified IT off-shore development and production development to India and China can be a big cost saving. However, the disadvantages include longer lead times, greater overheads in communication and specification work, less proactive solutions that don’t address your local market. It also takes time to learn how to manage offshoring efficiently (The Hidden Costs of Offshore Outsourcing in CIO Magazine). If the price seems too good to be true, then it probably is.

Examples: There are 100+ developers in this category

Cost: 15-30 USD per hour

3. Freelance developers
Using contractors or freelancers are popular among midsize companies as they have the freedom to bring in specialists for a limited period of time without taking the risk of permanent hire. In addition to this, it is usually easier to check the references of a freelancer when hiring. The disadvantage’s are that projects can take a lot longer and cost more than expected, the person may disappear with all knowledge at any time, there could be a single point of failure if something goes wrong, it is limited to the persons own expertise and experience and lastly it is difficult to verify the quality of their work and ensure a quality QA/ testing of the app.

Examples: Thousands of freelance mobile developers in the UK and US

Cost: 40-50 USD per hour

4. In-house development
Big companies such as Amazon, eBay, Google, Walmart, etc hire, train and frequently acquire their own developers since the mobile app platform is considered as a core part of their business (e.g. eBay acquiring Critical Path in Dec 2010 and Walmart picking up Ubermind in Jan 2012). The advantages of in-house development includes, keeping knowledge in-house, less time spent on contract negotiations and potentially slightly lower development cost than when using third parties. The disadvantages are that recruiting and retaining skilled developers is very difficult, salary costs are high or very high in areas such as Silicon Valley, New York or London, less experience and input from other businesses and projects and frequent major project overruns as there is less accountability in internal IT departments.

Cost: Salary ranges from 40.000 USD to 200.000 USD depending on location (assuming US or Europe) = 40-140 USD

5. Mobile app development agencies
There are hundreds of mobile app development agencies ranging from companies with 2 to more than 100 people and most are made up by people with a web development background. The advantage of these specialised agencies will usually commit to a fixed price and timeline for projects which reduces risks for the customer. The disadvantages are that your expertise and quality varies a lot between agencies, development skills for more complex tasks such as back-end integration are limited and costs frequently rise during the project due to unplanned changes and issues.

Examples: The Icon Factory, Chelsea Apps, Rancon Apps, Sprpd, Idealapps

Cost: 50-150 USD per hour (example from Twitterific)

6. Premium agencies
There are a few bigger agencies that have a reputation of consistently delivering mobile services and marketing campaigns with great user experience, innovation and creativity, managing complex backend integration and projects across multiple OS and territories and launching industry leading mobile services. These agencies consist of a mix of experienced digital agencies that have gone mobile and mobile specialists. The advantages are that they have processes, people, technology and quality assurance based on years of experience and their reputation doesn’t allow failure. The disadvantage is that hourly rates and minimum budget commitment will be higher.

Examples: AKQA, LBi, Razorfish, Ustwo and DMI
Cost: 100-250 USD per hour.

Once you’ve chosen what kind of development partner/method you want there are still four key factors that will impact the cost:
a. Backend integration complexity including maturity and documentation of APIs
b. Functionality in terms of number of features, complexity (e.g. Augmented Reality) and whether it has been done before
c. User Experience requirements by client can range from simple to very detailed wireframes and interaction design which requires a lot of optimisation
d. Quality Expectations in terms of performance, reliability, error management and target devices to be fully supported.

Paying a higher hourly rate doesn’t necessarily mean that the project will be more expensive in total. A great developer usually completes tasks much faster (5-10x) than an average developer and writes cleaner better code which means that it will be cheaper to maintain (Source: The Mythical Man-Month by Fred Brooks).

In summary there is no simple answer to the question “What is the cost of developing a mobile app?”. The cost can range from 1000 USD for a DIY app to 41m USD for a mobile service that is the basis for a mass-market consumer business (Story about Color Labs).

Last but not least, when choosing the company or developer you want to work with its important to check their references and ensure they have the experience and the aptitude they claim. Ask for several references, contact them and make sure what they’ve worked on is relevant for you and that the developer or team you are getting actually carried out the work. Check what part of the work they carried out, what their responsiveness was like and delivery compared to timelines and budget. This will increase your chance of success a great deal. Sometimes choosing an App developer can be like choosing between ‘apple’s and pear’s’ and chemistry and whether you like and trust them is as important. Good luck!

Author: Magnus Jern, President of DMI’s Mobile Application Solutions Division

Tags: App development insights mobile apps

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