2025 Software Development Price Guide & Hourly Rate Comparison

But how much does custom software cost to develop, and can your company afford it? Should you hire a freelancer or a small, local consultancy?

Or maybe you should take the “safe” route and hire one of the giants. (No one ever got fired for hiring IBM, right?) But can your business afford their sky-high hourly rates?

And what about offshoring and nearshoring? Why pay US rates when you can get the same work done offshore for a fraction of the cost?

There’s a sea of options when hiring a software development company and a lot of variability in pricing and terms. Understanding software development hourly rates in 2025 is crucial for budgeting software projects effectively. 

That's why we created the following 2025 software price guide to help you make the right choice. These software development cost trends highlight key pricing shifts that businesses should anticipate in 2025.

Want to learn more about software development? Check out: Delivering Successful Software Development Projects

The Six Different Types of Custom Software Development Companies in 2025

Like most service businesses, there’s a wide variety of custom software development companies to choose from and a lot of variability in pricing.

In our experience, most development companies fall into one of the following six categories. The following development price guide will break down the differences.

Enterprise-Class Custom Software Development Companies

Enterprise-class consultancies are the largest and most established software development firms, often working with Fortune 500 companies, major government entities, and multinational corporations. 

• Project Size: $750,000 to over $100 million
• 2025 Software Development Hourly Rates: $400+ per hour, with some firms charging as high as $900 per hour
• Approach: Many Enterprise firms are moving away from strict waterfall approaches and adopting hybrid Agile methodologies, such as SAFe (Scaled Agile Framework), enabling them to deliver complex projects in iterative phases while maintaining high-quality standards.

Big Business-Class Software Development Companies

These firms cater to large businesses that need high-quality development but can’t afford the steep price tags of enterprise-class firms. They work with mid-sized enterprises and large regional businesses, offering custom solutions with strong technical expertise while remaining more flexible in pricing and project scope.

• Project Size: $150,000 to $5 million
• 2025 Software Development Hourly Rates: $250 to $350 per hour
• Talent Quality: These firms attract top-tier engineers and offer structured processes, but they come at a premium cost. While not as costly as enterprise-class providers, their focus on high-quality development and specialized expertise still requires significant investment.

Mid-Market Custom Software Development Companies

Mid-market consultancies provide the best balance between cost and quality, making them a strong choice for small-to-medium businesses (SMBs) and startups looking for scalable, high-performance software solutions.

• Project Size: $75,000 to $2 million
• 2025 Software Development Hourly Rates: $120 to $250 per hour
• Strengths: They balance cost efficiency with technical expertise, making them a great fit for mid-sized businesses. Many mid-market firms also provide custom AI implementations, mobile applications, and SaaS solutions, making them a flexible option for businesses in growth mode.

Small-Class Custom Software Development Companies

Small-class firms operate lean, often consisting of boutique agencies or specialized development teams that cater to startups, local businesses, and mid-sized regional firms.

• Project Size: $20,000 to $500,000
• 2025 Software Development Hourly Rates: $90 to $160 per hour
• Expertise: Many specialize in niche areas such as mobile development, UX/UI design, or specific programming languages. However, due to their smaller size, they may have limited bandwidth, so businesses should verify availability before engaging with a Small-Class provider.

Freelance Software Developers

If you have a small project that can be handled by an individual and doesn’t require a team effort to complete, hiring a freelance software developer can be an acceptable choice.

Freelancers tend to come in two flavors: the new developer that recently graduated from a development boot camp and the seasoned pro who used to work a 9-to-5 but got tired of the rat race and decided to strike out on their own.‍

Newbies

Newbie software development freelancers are very excited and passionate about their newly acquired skill and are willing to accept any job at nearly any hourly rate.

The best of them can sometimes be quite skilled for their experience level. However, they often don’t know what they don’t know and will overestimate their abilities, causing them to over-promise and under-deliver.

You can expect to pay $50 to $75 an hour for an inexperienced software freelancer for projects ranging in size from $1,000 to $50,000.‍

Seasoned Pros

The seasoned pro has been developing software for a long time, knows half a dozen programming languages, and has worked on dozens or even hundreds of custom software projects.

They might be willing to work on your project (if you’re lucky) and will usually charge a premium for their time, with hourly rates typically between $100 to $300 for projects ranging in size from $5,000 to $100,000.‍

Pros of hiring a freelance software engineer

• You can sometimes save money.
• There are thousands of freelancers to choose from on websites like Upwork.

Cons of hiring a freelance software engineer

• They are usually only really good at one thing — front-end development, back-end development, design, and so on. But for your project to be a success, you’ll likely need them to be good at everything.
• They have a tendency to get bored and drop projects. Finding someone to finish their half-built project will be challenging.
• It’s risky since there’s no recourse. Sure, you signed a contract, and you could sue them if things go south. It is unlikely that they are insured, and they may or may not have the ability to pay if you win.
• They can disappear. We have clients who’ve worked with freelancers in the past who simply disappeared with the code, never to be heard from again.

Offshore/Nearshore Software Development Companies

Offshore and nearshore software development companies come in many shapes and sizes, but most often they are large organizations with hundreds to thousands of developers spread across the globe.

Offshore development rates can range from $27 to $55 an hour. Nearshore software development tends to be slightly more expensive, with rates ranging from $44 to $82 an hour. Project size tends to range from $10,000 to more than $1 million for both.

Offshore development can be cost effective but also very risky if not properly managed. Many offshore software development projects fail, often for the following reasons:‍

Communication

The most important aspect of software development projects isn’t programming, it's communication.

Clients almost always underestimate how hard it is to properly communicate their vision to the development team.

Even with clients in the same time zone, or in the same city, communication can be challenging.

So you can imagine how difficult it is when the designer and developers are on the other side of the world, in opposite time zones, and speak different languages.‍

Code Quality

Many offshore shops have hundreds of developers and focus on cranking out a high volume of low-cost projects, using older technologies that produce subpar software applications.

The unfortunate result is that many offshore projects never launch — and if they do, they are often buggy, outdated, and don’t function properly.‍

Team Size

A common tactic employed by many offshore software development companies is to quote very low hourly rates, but over-staff the project with redundant, unnecessary resources.

Most projects require only a part-time project manager and a part-time QA professional, and no business consultant. But many offshore companies will staff five full time employees regardless of what’s really required, just to get the total project cost up. For example, a common staffing plan for a medium-sized project will often include:

• Front-end developer
• Back-end developer
• Project manager
• Business consultant
• Quality assurance professional

The result is that the true hourly rate, in terms of productive hours actually worked, is much higher than quoted.‍

Time Zones & Schedules

Offshore development projects often go over budget and miss deadlines, in part due to the inefficiency of communicating across time zones. Day-to-day problems that could be resolved in a matter of minutes by a team in the same time zone, can take days when working across time zones.

For instance, let’s say a problem pops up, you notify your offshore developers, and go home for the night. The offshore team needs clarification of the problem, responds while you’re asleep, and they head home while you head into the office. You respond to their message and wait 12 hours for their response. This process continues, and a problem that should have taken a few minutes to define and fix has now taken days. Multiply this dynamic across the hundreds of problems that arise on most development projects, and it’s easy to see how delays are common when working with offshore teams.

At FullStack, we regularly have clients approach us looking for help fixing their app that was developed offshore.

As a courtesy, we’ll usually review the codebase and offer our opinion. Of the dozens of offshore projects we’ve reviewed, we have yet to see one that we’d consider to be salvageable, and our analysis is almost always the same: scrap the app and start over.‍

The Right Way to Hire Offshore Teams

Despite all of the very real challenges outlined above, it is possible to use offshore/nearshore developers on your project successfully if you follow these tips.

• Hire a consultancy that’s headquartered in the US and has offshore/nearshore offices. This will give you the quality and safety of working with an onshore company, combined with the cost savings of an offshore company.
• Many offshore companies will say that they’re headquartered in the US, but in reality, their US employees are just sales reps, and 99% of their people are overseas. Double-check to make sure that you’ll actually be interacting with US-based managers.
• Find a team with a US-based technical lead developer who manages a team of nearshore developers. This blended approach will overcome many of the communication and quality challenges that fully offshore teams face. A US-based project manager who will act as your primary point of contact is also a plus.
• Go nearshore instead of offshore. Nearshore teams in Central and South America are in similar time zones to the US, which makes communication much easier.

Need nearshore software development talent? Explore FullStack’s AI & software development solutions

2025 Software Development Trends

The software development industry continues to evolve, with new trends shaping pricing, hiring, and project execution. Key trends in 2025 include:

AI and Automation in Development

AI-powered tools are assisting developers, automating repetitive coding tasks, and improving productivity. Businesses are leveraging AI-driven development environments to reduce costs and enhance efficiency. 

While these 2025 innovations won’t impact hourly software development rates, they allow developers to get more done in less time.

The Rise of Low-Code/No-Code Solutions

More businesses are adopting low-code and no-code platforms to accelerate development timelines and reduce dependency on traditional coding. These solutions enable non-technical users to build and customize applications with minimal developer intervention.

Cloud-Native Development

Companies are prioritizing cloud-first architectures to improve scalability, enhance security, and minimize infrastructure costs. Cloud-native applications are being designed with microservices and containerization for greater flexibility and resilience.

Cybersecurity & Compliance Costs

New regulations and evolving security threats are pushing companies to invest more in cybersecurity measures. Compliance with data privacy laws and industry standards is becoming a crucial factor in software development costs.

Nearshoring Growth

Businesses are increasingly looking to Latin America for high-quality tech talent at competitive rates. Nearshoring offers the advantages of similar time zones, cultural alignment, and cost savings compared to onshore development.

AI-Driven Software Development Pricing

As artificial intelligence becomes increasingly integrated into software development, pricing structures are evolving to reflect the efficiencies and complexities AI introduces. AI-driven development can lower costs by automating tasks but also demands specialized expertise, which can drive up labor costs in certain areas.

AI-Assisted Development and Cost Reduction

Businesses investing in AI-powered solutions must consider AI-driven software development pricing and talent costs. AI-powered coding tools, such as GitHub Copilot and ChatGPT Code Interpreter, are reducing development time by automating repetitive coding tasks, suggesting code improvements, and identifying potential bugs early. 

This increased efficiency allows development teams to deliver projects faster, potentially lowering total development costs. Some companies are shifting from traditional hourly billing to value-based pricing models, reflecting the improved speed and accuracy AI provides.

The Cost of AI Expertise

While AI accelerates many aspects of software development, it also introduces a demand for specialized skills. AI engineers, data scientists, and machine learning specialists command high salaries, often exceeding those of traditional software developers. The cost of hiring an AI/ML expert in the US ranges from $150,000 to $250,000 per year, making AI-related development more expensive despite automation gains.

Infrastructure and Cloud Costs

AI-driven applications require significant computational resources, often running on cloud-based infrastructure powered by high-performance GPUs and TPUs. This leads to increased cloud expenses, particularly for companies training large AI models. Cloud providers such as AWS, Google Cloud, and Azure offer AI-specific services, but costs can escalate quickly based on the scale of the AI integration.

AI in Low-Code/No-Code Platforms

AI is also being integrated into low-code and no-code development platforms, making it easier for businesses to deploy AI-enhanced applications without hiring large engineering teams. While these platforms lower initial development costs, they may introduce licensing fees and long-term expenses associated with vendor lock-in.

Key Takeaways on AI Development Pricing

• AI-driven tools reduce coding time, leading to potential cost savings.
• Specialized AI talent remains expensive, driving up labor costs.
• Cloud infrastructure costs are a major factor in AI-powered software development.
• Low-code AI platforms lower entry costs but may introduce long-term fees.

Understanding AI-driven software development pricing trends is essential for businesses planning AI-powered applications, ensuring they maximize efficiencies while managing expenses effectively.

How AI & Emerging Trends Are Changing Software Development Pricing

The rise of AI-assisted coding (e.g., GitHub Copilot, ChatGPT Code Interpreter) is reshaping software development pricing. AI-driven development is reducing time spent on repetitive tasks, automating bug fixes, and accelerating project timelines.

Cost of AI Development in 2025

AI development has become an essential investment for companies looking to integrate automation, predictive analytics, and machine learning into their applications. However, costs vary based on complexity, resources, and expertise.

• Custom AI Models vs. Off-the-Shelf AI – Custom models are costly, while off-the-shelf solutions (OpenAI, Google AI, AWS AI) reduce costs.
• Data Costs – Data collection, cleaning, and compliance with regulations add to expenses.
• Compute & Cloud Costs – AI training requires substantial computational resources, often running on high-performance GPUs or TPUs.
• AI Talent Costs – Salaries for AI/ML engineers, data scientists, and AI architects are rising due to increased demand.
• Regulations & Compliance Costs – AI models must adhere to ethical standards and privacy laws, adding financial commitments.

Low-Code/No-Code Development Costs

Low-code and no-code platforms are revolutionizing software development by enabling businesses to build applications with minimal coding expertise. One of the biggest shifts in low-code/no-code development costs is the rise of AI-assisted platforms, which can reduce developer hours.

Cost Comparison: Traditional Custom Development vs. Low-Code/No-Code

Traditional software development requires extensive coding, rigorous testing, and long development cycles. In contrast, low-code/no-code platforms offer drag-and-drop interfaces and pre-built modules, significantly reducing development time and cost. However, while low-code solutions can be more cost-effective upfront, they may come with higher long-term licensing fees and limitations in customization.

Best Use Cases for Low-Code/No-Code Platforms

• Rapid Prototyping: Quickly developing and testing ideas before committing to full-scale development.
• Business Applications: Automating workflows, internal tools, and data processing applications.
• Workflow Automation: Streamlining repetitive processes without requiring extensive custom development.

Limitations of Low-Code/No-Code Solutions

• Customization Constraints: Pre-built modules can limit the flexibility of complex applications.
• Scalability Challenges: Some low-code platforms may struggle with high-performance, data-intensive applications.
• Vendor Lock-in: Ongoing subscription fees and reliance on third-party platforms can increase long-term costs.

Market Salary Trends in Software Development

The software development job market continues to evolve, with rising salaries, shifting demand for specialized skills, and global hiring trends reshaping how businesses budget for software development in 2025. As market salary trends in software development continue to shift, businesses must assess software development prices.

Salary Trends for Developers in the US vs. Offshore Markets

Salaries for software developers in the US continue to rise, driven by strong demand for experienced engineers, especially in high-tech fields such as AI, machine learning, and cloud computing. The average US-based developer earns between $100,000 and $180,000 per year, with senior specialists commanding even higher salaries.

By contrast, offshore markets in Latin America, Eastern Europe, and Asia offer skilled developers at a fraction of US costs. Rates vary widely by region, but in general:

• Latin America: $40,000 - $80,000 per year
• Eastern Europe: $35,000 - $75,000 per year
• Asia (India, Philippines, Vietnam): $20,000 - $60,000 per year

While offshore talent offers significant cost savings, businesses must also consider factors like time zone differences, language barriers, and cultural alignment.

How Rising Hourly Rates Impact Software Development Costs Overall

As developer salaries rise, the price of software development is increasing globally. Businesses looking to build custom software must weigh the cost of hiring in-house developers versus outsourcing to external firms. The combination of rising wages and the need for specialized talent is driving companies to explore cost-effective alternatives, including:

• Nearshoring to Latin America for lower costs while maintaining time zone alignment.
• Leveraging AI-assisted coding to increase developer productivity and reduce billable hours.
• Utilizing hybrid teams, blending onshore leadership with offshore development talent.

Understanding these salary trends can help businesses make informed decisions when navigating software development prices in 2025.

Choosing the Right Software Development Partner: Final Thoughts

Custom software development remains a significant investment, but with the right partner, businesses can maximize efficiency, innovation, and ROI. 2025 hourly rates for software development will remain in flux, but the right partner can help you get the most value for your budget.

Whether you choose an enterprise firm, a mid-market consultancy, or an offshore team, understanding current pricing trends ensures you make the best choice for your budget and business goals. Keeping track of software development cost trends allows businesses to anticipate future pricing shifts.

Ready to start building? Partner with FullStack, your industry-leading custom app development company.