How We Estimate IT Project Costs
Get a behind-the-scenes look at our IT project cost estimation process – from proven budgeting methods to risk analysis – to plan your budget with confidence.
Techniques we use to estimate IT projects
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Bottom-up approach
For the bottom-up approach, our experts define requirements and develop a work breakdown structure, which serves as the basis for the estimate. Then, we assess costs for individual elements, such as functional points, and summarize them to form the final quote.
- Accurate estimate
- Good for complex projects
- Detailed and task-oriented
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Three-point estimation
We develop three project scenarios: optimistic, pessimistic, and most likely (e.g., realistic or expected). These points serve as the basis for the final cost calculation. The technique mitigates the risk of error by smoothing out the influence of optimistic and pessimistic assessments.
- Provides a realistic cost range
- Includes uncertainty
- High detail and precision
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Analogous estimation
Our team uses historical data from similar projects to deliver estimates fast when your requirements are high-level or incomplete. We improve accuracy by analyzing our recent projects with a comparable tech stack and functionality.
- Quick early estimates
- Fits medium-complexity projects
- Grounded in actual project history
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Expert judgment
For an expert judgement technique, we select tech professionals with extensive experience and knowledge of related technologies to help determine the project’s cost. To do so, they review requirements, referring to prior similar projects, and referencing industry benchmarks.
- Provides ballpark pricing
- Is based on real-world experience
- Helps to identify high-risk areas
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Mixed approach
To get a project baseline fast, we combine the analogous estimation with expert judgment. It allows us to get a cost range through data-backed references, practical execution factors, and expert input.
- Efficient at early stage
- Fits projects with partial requirements
- Transparent, realistic estimates
How we lower project costs using AI
SoftTeco embeds artificial intelligence in SDLC to reduce costs and accelerate development.
Support in strategic planning
The use of AI tools for decision support is not limited to analysis automation. Applied for effort assessment and risk evaluation, it helps to improve estimation accuracy, prevent rework costs, and cut planning effort.
Faster requirement discovery
AI helps to summarize and structure project requirements, reducing manual effort and improving documentation consistency at the initial stage. Our business analysts apply AI capabilities to shorter discovery phases, minimize requirement gaps, and avoid costly rework.
Reduced manual UI design effort
While our UI/UX is human-created by default, our design team can develop AI-assisted wireframes and prototypes to cut prototyping costs, improve design workflows, and speed up UI delivery. Expect no AI-generated visual content unless approved.
Accelerated coding
Our developers use Cursor, Codex, and Antigravity tools to speed up development by 20% and ensure clean, maintainable code. We apply AI assistance to tasks where it can deliver the most value, cutting engineering hours without compromising quality.
Improved defect detection
AI tools for test generation, regression automation, and bug prediction not only allow us to iterate faster but also improve defect detection. With the help of artificial intelligence, we reduce regression testing cost, cut flaky test maintenance overhead, and improve test quality by 50–80%.
Software development team cost calculator
Software development costs take up around 80% of your project’s budget, so learning about team costs in advance helps to reduce financial uncertainty and allocate realistic funds.
Define how much it will take to hire IT experts for your project with our team cost calculator.
IT project cost estimation process
Step 1. Discovery call
During the discovery call, we learn about your business goals, the scale of your development (MVP or comprehensive), time constraints, and budget constraints. This information allows us to evaluate potential risks and uncertainties associated with your project cost calculations.
Step 2. Scope definition
Moving further, we discuss your project scope, defining functional (features, integrations, dependencies, and non-functional (security, compliance, performance) requirements. Then, our experts define a high-level scope and break it down into modules/epics, providing a structured description of the SoW and a list of assumptions.
Step 3. Technical analysis and labor estimation
We continue the decomposition by dividing the scope components into smaller tasks and selecting a suitable architectural approach for your project. Our tech professionals determine team composition and assess the required team roles. At this stage, we also apply the IT project cost estimation techniques and receive a preliminary estimate in terms of hours and budget.
Step 4. Risk analysis
Now SoftTeco’s developers consider potential risks that could affect a project’s cost, timeline, or resources. Our expert team analyzes the likelihood of technical issues, third-party dependencies, and requirements variability, and adjusts our initial estimate.
Step 5. Proposal and planning
Finally, we present to you the document that includes project scope, timeline, team composition, risks, assumptions, and budget estimate. For future work, we also agree on the collaboration model.
Common estimation misconceptions and how we approach them
Case #1. Estimating the idea rather than a specific scope of work
- Description: estimating a project without examining requirements, features, and deliverables often leads to scope creep and misaligned expectations. A high level of uncertainty makes it impossible to deliver an accurate quote, resulting in just a rough ballpark.
- How we mitigate it: we always define project goals, limitations, and assumptions before providing any estimates, even high-level ones. It allows us to make accurate budgets based on a defined scope of work and solid operational criteria.
Case #2. Overlooking performance, security, and scalability
- Description: non-functional requirements disregarded from the start can inflate the budget later, adding up to 20–40% to the initial estimates. Such practice carries the risks ranging from budget overrun to complete project failure.
- How we mitigate it: our tech professionals conduct a comprehensive scope analysis and risk assessment before preparing an IT project cost estimate. We never manipulate costs to win the client.
Case #3. Underestimating risks
- Description: ignoring unstable third-party services and APIs, detailed existing documentation, and provider limitations in the risk assessment can result in hidden costs, delays, and technical challenges.
- How we mitigate it: SoftTeco thoroughly examines the required third-party services, tools, and other dependencies, adding a contingency buffer to the cost estimate based on the level of uncertainty.
Estimation insight from our expert
A cost estimation process is not intended to determine an exact figure – it’s more of a tool for managing risks and expectations. The biggest problem arises not from “inaccurate hours” but from the undetected uncertainty at the start. In my practice, overspending has almost always been associated with a change in requirements rather than a math error. A good estimate is one that honestly outlines assumptions and risks, even if the final figure is higher than the client’s expectations.
Factors influencing IT project cost
Project scope
Technical complexity
Tech stack
Team composition
Timelines
Risks
Quality requirements
Sourcing models
Pricing models SoftTeco offers
Fixed price
Time & material
Hybrid model
We set the price before project launch based on a well-defined project scope and delivery timeline, giving you maximum budget predictability and easier planning.
FP
Budget certainty
Cost control
Clear deliverables
You pay for the work done according to timesheets and work logs. Change requests are available to adjust the scope of work or the timeline.
TM
Rapid start
Adaptive scope
Continuous delivery
SoftTeco blends models, combining predictable pricing and scope flexibility. Clear requirements go under fixed price, while evolving ones are handled under time and material model.
HM
Flexible budgeting
Adaptive planning
Mutual accountability
Sample cost ranges
We defined approximate cost ranges for software types and services based on our industry experience and fulfilled projects. They’re not official price tags, just a benchmark you can be guided by. SoftTeco assesses costs individually for each business, as no two projects are alike.
Web applications
- $50,000–$300,000+ for an industry-specific solution of average complexity
- $20,000+ for a custom corporate website
- $15,000+ for a customer web portal
- $200,000+ for enterprise web software, such as a custom ERP system
Mobile applications
- $40,000–$150,000 for a native mobile app for compliance-driven sectors
- $20,000–$60,000 for a cross-platform mobile app of average complexity
Fintech platforms
- $60,000–$2,000,000+, depending on the app’s type and complexity
- $150,000-$450,000 for a native mobile banking/financial management app
Healthtech solutions
- $60,000–$250,000 for a patient portal, depending on integrations and features
- $100,000–$400,000 for a telehealth platform with EHR integration
- $25,000+ for a simple telehealth app
- $50,000+ for a telehealth app with advanced features
AI/ML applications
- $25,000–$75,000 on average for a lightweight AI project
- $75,000 to $250,000 for an AI app of medium complexity
- $100,000–$500,000+ for an advanced custom AI solution
Edtech platforms
- $20,000–$100,000 for a basic LMS with standard features
- $100,000–$200,000 for a medium-complexity platform with live classes
- $250,000–$600,000 for an enterprise-scale platform with AI‑driven adaptive learning
IoT and embedded software solutions
- $15 000–$50 000 for a basic IoT solution
- $50,000–$110,000 for an app with a scalable backend and multi-protocol connectivity
- $110,000–$200,000 for an advanced app with advanced analytics and monitoring
Booking and reservation systems
- $15,000–$35,000 for a booking app with core features
- $50,000–$150,000 for an app with dashboards, filters, and reporting
- $200,000+ for a large booking app with automation and enterprise integrations
Reporting and decision support systems
- $150,000–$400,000+ for a BI solution with predictive analytics
- $35,000–$100,000 for setting up a basic data analytics solution
- $600,000–$1,500,000+ for an enterprise analytics system with big data and AI/ML
Marketplace and aggregator platforms
- $15,000–$60,000 for an MVP development
- $25,000–$80,000 for a small marketplace platform
- $50,000–$300,000 for a marketplace with multi‑vendor support and basic analytics
Ecommerce websites and marketplaces
- $15,000+ for a startup-level ecommerce store
- $40,000–$150,000 for a solution with multi‑vendor support and advanced search
- $100,000+ for an ecommerce solution with custom branding and business logic
Human resource management systems (HRMS)
- $10,000–$100,000+ for a custom HR management software
- $120,000–$300,000+ for an advanced HR solutions
Cloud migration and modernization projects
- $15,000–$250,000 for a cloud migration of a medium/large app
- $140,000–$280,000 for a migration to a cloud data warehouse
- $50,000–$1,000,000 for an enterprise-grade IT infrastructure migration
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Why our estimates are accurate
When estimating IT project costs, SoftTeco applies time-proven practices to ensure pricing precision.
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Risks included into the cost estimate
When evaluating project cost, we consider risks such as scope creep, hidden technical complexity, and unforeseen delays, so they are already included in the custom quote. You get a realistic, not optimistic, estimate and can plan your finances accordingly.
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Accurate resource planning
We examine how many developers, QA engineers, and niche experts team members your project needs to draw an estimate that implies neither overstaffing nor idle time. It helps you avoid unexpected costs and ensures your time and money are spent efficiently.
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Proactive technical complexity analysis
During the estimation process, we involve industry experts to identify any hidden technical complexities in integrations, APIs, or legacy systems that could shift project timelines and cause budget overruns.
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Thorough requirements gathering
Project requirements that emerge mid-development can significantly influence the project’s cost and timelines. Our business analysts meticulously collect requirements, which later translate into a detailed project scope, a transparent work breakdown structure, and cost predictability.
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Scope breakdown into manageable tasks
Our team split the project scope into smaller tasks to reliably calculate costs, define the technical complexities of certain components, and spot potential blockers and high-risk areas before they cause budget shifts.
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Non-development costs assessment
Apart from development team costs, we account for licenses, tools, and infrastructure expenses to give you a full picture of all project costs. Such a comprehensive cost examination allows you to identify areas for budget optimization.
Projects we delivered with extra cost precision
Energy management app with IoT integration – $150,000
SoftTeco developed iOS and Android premium mobile apps for a client seeking to help athletes measure and track energy levels during training. The application connects to the user-worn sensor via Bluetooth, collects data, and displays an individual’s glucose level on the smartphone or a wearable device like smartwatch. This data helps athletes to timely replenish their energy and sustain optimal performance. The project’s cost amounted to $150,000, with the design work outscoped, and was delivered within the schedule and budget estimates.
Mobile app for local freelance services – $50,000
We delivered native mobile apps that connect customers with local service providers through intuitive app navigation and a user-friendly interface. The solution allows customers to get price quotes, find the required service nearby, and make secure payments, all without any extra commission. Other prominent features include a rating system, live chats, and notifications, making communication and service provision convenient and easy. The project cost $50,000, which is in line with the client’s expectations and the quality of the product they received.
AI virtual assistant with payment processing feature – $30,000
A US startup asked SoftTeco to develop an AI-based visual assistant for Cisco Webex Desk Pro devices. They are usually placed in hotels, airports, and corporate offices to help users via voice commands and touchscreen interaction. Our team was responsible for the backend of the project, setting up an agent-based AI pipeline, integrating an LLM for agent training, and delivering integrations with the card reader and ERP. SoftTeco has successfully fit within the client’s $30,000 budget. The cost was significantly reduced by using ready-made solutions.
