What does custom software cost? A cost guide for SMEs

What the cost depends on

Whether off-the-shelf software is enough is covered in the guide Custom or off-the-shelf software. Here the question is what makes a custom solution costly. Six factors largely determine the effort:

• Scope and special cases: rules and exceptions drive the effort, not the number of screens. A workflow with approvals, deadlines, deputies and cancellations needs many times the logic and testing of a simple form.
• Roles and permissions: once groups such as staff, site managers and customers may see or change different data, every function needs checking for every role, more so with several sites or tenants.
• Interfaces: each connection to inventory management, accounting, a till system, a CRM or industry software takes time for analysis, implementation and error cases. Check beforehand whether the other system has a documented API.
• Data migration: legacy data from Excel lists or an old system must be cleaned, mapped and test-imported; duplicate customers and missing mandatory fields often surface only then.
• Quality requirements: availability, response times, backups, logging, security testing and accessibility take effort and belong explicitly in the quote. Germany’s Accessibility Strengthening Act (BFSG) does not cover all software, only certain products and certain consumer services. These include websites and apps offered after 28 June 2025 with a view to concluding a consumer contract, such as online shops. Microenterprises providing services (under ten employees, turnover or balance sheet total of at most 2 million euros) are exempt.
• Platforms: a web application runs in the browser on all common devices, without an app store; guests use Treuli, my digital loyalty programme, this way with no mandatory app download. Native iPhone and Android apps add store accounts, reviews and regular updates for new operating systems; each further platform adds development and testing effort.

Project phases: where the effort arises

A software project is more than programming. On my software development page the steps are understand, plan, build and hand over. In detail:

What hourly rates do and do not tell you

I know of no reliable, current survey of total prices for software projects in Germany. For hourly rates there is the Freelancer-Kompass 2026 by the project platform freelancermap: 5,412 registered users surveyed in four rounds between 17 November 2025 and 8 February 2026, plus anonymised platform data from the German-speaking region. Freelancers in software and web development reported a median of 90 euros an hour; net or gross is not stated.

The figure has limits. The press release claims no representative sample, and the figures describe individuals, not agencies or IT firms. Above all, the hours decide the cost, not the rate. A higher rate with little rework can cost less overall than a low one with many correction rounds.

Running costs after launch

Software is not fully paid for at launch. Budget for these items from the start:

• Hosting and operation: server or cloud service, database, backups, monitoring and domain. A provider processing personal data on your behalf needs a data processing agreement (Art. 28 GDPR).
• Security updates: frameworks expire too. Microsoft supports .NET long-term support (LTS) releases for three years and standard-term support (STS) releases for two. For Node.js LTS releases, the project says critical bugs are typically fixed for 30 months in total. The next upgrade costs work even if users see no change.
• Maintenance: fixing bugs, updating dependencies and reacting when a connected vendor changes its interface.
• Further development: daily use tends to bring new requests. An annual budget or a block of hours saves renegotiating every small change.
• Apps in the stores: the Apple Developer Program costs 99 USD per membership year (local prices may vary), a Google Play developer account a one-time 25 USD. The technical requirements, which both raise regularly, weigh more. As of October 2026, apps uploaded to Apple must be built with Xcode 26 or later and the iOS 26 SDK; new phone apps and updates on Google Play must target Android 16 (API level 36). Existing apps with an outdated target are hidden from new users on newer Android devices. So apps need care even without new features, including my own iPhone app Repp.

Fixed price, time and materials or stages

None of the three models is better in principle. It depends on how precisely the scope can be described today.

I bill by the hour or at a fixed price, depending on the project. Legally, the contract’s content counts, not its heading or billing method alone. If a specific result is owed, a contract for work under the German Civil Code (section 631 BGB) with formal acceptance (section 640 BGB) is likely, even with hourly billing. Accepting work despite a known defect without reserving your rights forfeits certain defect rights. If only an activity without a defined result is owed, a service contract (section 611 BGB) is more likely. You may terminate a contract for work at any time before completion but generally owe the agreed fee, less saved expenses and what the provider earns elsewhere (section 648 BGB). A cost estimate given without guarantee differs: the provider must report an expected significant overrun without delay. If you terminate for that reason, you owe only the fee share for work done plus expenses not included (sections 649 and 645 (1) BGB).

Comparing quotes: a checklist

Quotes are only comparable if they describe the same thing. Each should cover these points or have them clarified first:

• Scope: which functions, roles, interfaces and platforms are included, and what is explicitly excluded?
• Assumptions: what does the provider assume about data quality, interfaces or your involvement?
• Phases: are requirements analysis, concept, testing, data import, training and documentation included or extra?
• Billing: fixed price, time and materials or stages; for time and materials, an estimate, a rate and a rule on when you hear of a likely overrun.
• Changes: how are new requests during the project assessed, quoted and approved?
• Acceptance and defects: how does acceptance work, and how are bugs handled after launch?
• Operations: hosting, updates, maintenance and support with monthly or annual costs, term and notice period.
• Rights and handover: which rights of use, source code and documentation do you receive, and which third-party and open-source components and licences are included?
• Who delivers: a team or an individual, who is your contact, and what if they drop out? The guide Sole proprietor or IT firm? weighs this up.

Lowering the risk with a first version

Instead of building everything at once, you can start with a first usable version, often called an MVP (minimum viable product), containing only what the core workflow needs and going live early. That lowers the risk in three ways:

• You spend less at first and see early whether the solution holds up in daily work.
• Real users show which functions are needed before you pay for them.
• Assumptions about interfaces and data quality are tested early, not at the end.

What matters is what you order: a prototype for trying things out differs from a first version for live use that later stages build on. Define which workflow must work fully in stage one; everything else goes on the later list. A fixed price per stage suits this.

Source code and rights of use

Paying for development does not automatically give you all rights to the software. The German Copyright Act (UrhG) protects computer programs in any form, including design material, but not the ideas and principles behind them or behind interfaces (section 69a UrhG). Reproduction and adaptation are reserved to the rights holder (section 69c UrhG). For another provider to develop it further later, you need the matching rights.

If an employee creates a program in performing their duties or on the employer’s instructions, the employer holds the economic rights unless agreed otherwise (section 69b UrhG). With an external provider, the contract decides. If the types of use are not specified individually, their scope follows the contractual purpose both parties assumed (section 31 (5) UrhG). Without specific contractual provisions, section 69d UrhG lets an authorised user reproduce and adapt the program where necessary for its intended use, including error correction; whether that covers extensions remains open.

So set out in the contract: non-exclusive or exclusive rights of use, adaptation by third parties, handover of source code and documentation, and components the provider also uses elsewhere. Parting ways and source code deposits are covered in the guide Custom or off-the-shelf software.

Funding in Saxony: status October 2026

Saxony funds SME digitalisation projects through the guideline Digitalisierung Zuschuss EFRE 2021 bis 2027 (FRL Digi-Z), run by the Sächsische Aufbaubank (SAB). Eligible costs include external services for planning, design, preparation and implementation, necessary hardware and software, and roll-out including training. Grants reach up to 50 per cent for transformation projects of micro and small enterprises (eligible expenditure capped at 60,000 euros), 35 per cent for medium-sized enterprises (capped at 100,000 euros) and 60 per cent for introductory projects of microenterprises (capped at 10,000 euros). A collective wage agreement or equivalent pay adds 10 percentage points. Expenditure must be at least 5,000 euros; the project term is limited to twelve months.

Funding conditions change often; check with the SAB before planning, and the federal funding database for federal programmes. How I deliver projects is described on the software development page.