The real cost of software development: Why time, cost, and talent availability must be considered together

Looking at the total cost of software development, it’s easy to focus on different parts separately. Leaders choose teams based on hourly rates without looking at the big picture. They choose technology stacks that their vendors offer, but don’t ask if there’s going to be someone who could maintain them in 5 years. I actually wrote a whole series about situations like that.

Whether outsourcing software development or hiring an external team, there are three interconnected factors that drive these decisions: cost, time, and access to talent.

Why hourly rates don't tell you the real cost of software development

In some cases, companies focus primarily on developers' hourly rates. They see that they can hire people more cheaply in one location and decide to go there, without necessarily considering how long the entire project will take.

Imagine one company choosing PHP and hiring 20 developers, while another uses Ruby on Rails and completes a similar project with five developers. That's a simplified example, of course, but it illustrates the underlying principle.

Ruby on Rails developers might charge significantly higher hourly rates. However, if they can deliver the product in six months rather than two years, the total cost of development could still be lower.

How delivery time changes the business case

There’s also the opportunity cost. Let's say I identify a business opportunity today. I know what I could sell and what revenue I could generate if I had the right product ready in six months. But if building that product takes two years, the assumptions I made back then might no longer hold. Customer expectations may have changed, or new technologies may have emerged.

Imagine we're building an application over two years. After the first year, we begin initial testing and marketing activities, and suddenly a competitor appears. If their team can build a similar product in six months, they could enter the market while we still have another year of development ahead of us.

These are real costs associated with technology decisions, and they don't show up in a straightforward comparison of hourly rates. And that’s without even considering the impact of AI, which is further changing these calculations and accelerating the process.

Why access to developers influences technology choices

For years, I wondered why technologies such as Java and PHP remained so popular despite what I saw as their technical limitations and recent security incidents. Over time, I came to understand that businesses don't necessarily choose whichever technology developers consider the best. They also look at how many specialists are available, how much they cost to hire, and how quickly a team can be assembled.

That's one of the main reasons companies outsource software development or recruit outside their local market: cost, time, and access to talent. If a company can't find the right people in its city, it starts looking elsewhere in the country. If those specialists aren't available nationally, it looks abroad. It may also move work to a region where development rates are lower.

Of course, the differences go beyond cost. Experience, quality of work, communication, and many other factors come into play. But the important point is that technology decisions are always made within a particular commercial and hiring context.

How technology decisions affect long-term operating costs

Decisions made at the beginning of the project shape many processes. Making a poor database structure decision can mean migrating data later, which also introduces other risks.

Technology choices can genuinely change the cost structure of running a business. Infrastructure costs can vary depending on the implementation. In one case, the same service may require significantly more server spending, so the company would either reflect that in its pricing or accept a lower margin.

Some technologies, including Ruby on Rails, offer economic advantages, such as shorter development timelines and lower overall engineering effort, thanks to standardisation. This directly translates into lower development costs as delivery takes less time.

That's why it's important to consider both the cost of building a product and the cost of operating it afterwards.

What should businesses evaluate before choosing a technology or development team?

For me, the most important question is: what result do you want to achieve, how quickly do you need it, and how much are you prepared to spend? And they have to be considered together.

If a company focuses exclusively on cost without considering the outcome or how long it will take to achieve it, it risks making a decision that appears cheaper initially but proves significantly less attractive from a business perspective. That's something worth emphasising whenever we talk about choosing technology.