Thinking of software development budgets for 2023? Here are three approaches you should know about.

Curated by: Sergio A. Martínez

After all, 2023 is shaping up to be a challenging year for the software industry, with several factors coming together to create a perfect storm of sorts. First, the overall economic picture is uncertain, with slowing growth in developed markets and an ongoing trade war making it difficult for companies to plan for the future. In addition, new emerging technologies, like AI and cloud streaming, are threatening to disrupt traditional business models, and the political environment is becoming increasingly challenging to navigate. As a result, 2023 is likely to be a year where companies will need to be agile and adaptable to survive and thrive.

With all that in mind, it’s never too early to start planning for success, and budgeting properly for your development expenses today will be a critical element of that. However, budgeting for your development expenses now can be easier said than done. When it comes to producing software, there are a lot of moving parts, which makes budgeting a bit of a challenge. For one thing, you have to account for the cost of the software itself, as well as the cost of any licenses or subscriptions that may be required, then there’s the cost of hardware, which can vary depending on the needs of the project, and don’t forget about the cost of training and support. Add it all up, and it’s no wonder budgeting a software development project can be so complicated. Of course, there are ways to simplify the process, but at the end of the day, it’s still important to have a clear understanding of all the costs involved. Otherwise, you might find yourself in over your head – and that’s never a good place to be.

Designing a software budget in 2023

Let’s talk about numbers first. According to this article from The Harvest Blog: “Your project team members won’t have the necessary resources they need if you can’t secure the right funding. And if you don’t have a set plan from the start, you run the risk of joining the 57% of companies who say they don’t typically complete their projects within the established budget.” And with the challenges that 2023 will bring to the industry, reaching these goals will be critical.

So, if you’re serious about achieving your development goals, budgeting is a step that you can’t afford to avoid. By starting to budget for your development expenses now, you’ll be in a much better position to succeed. And you may already have a couple of traditional approaches to doing so, like the “Envelope System”, which involves assigning specific amounts of money to different spending categories (like licensing fees, cloud-based storage, subscriptions of all kinds, etc.), or the “Zero-based budget” that requires you to account for every single penny you spend. Nevertheless, when it comes to software development, these might not be enough. 

The traditional approach to budgeting assumes that all projects can be planned and executed linearly, with predictable costs and results. But software development can be anything but predictable; it’s an iterative process, where changes and improvements are constantly being made based on feedback. This means that software development teams need to be able to adapt their plans on the fly, which can make it difficult to stay within a fixed budget. In addition, the rapid pace of change in the technology industry means that teams often have to scrap their plans and start from scratch if they want to stay ahead of the competition.

Whichever approach you decide to use, the important thing is that you start budgeting for your development expenses now; 2023 is around the corner, and with it comes a new year of projects and innovations to look for. As always, software organizations of all kinds will be looking to stay within their budget while delivering quality products, with some basic tips that can help you to do so:

• Use an agile development methodology. This will allow you to break the project down into smaller pieces and deliver them incrementally, which can help to control costs.
• Make use of open-source software. Many high-quality open-source options can save you money on licenses and support fees.
• Take advantage of cloud computing. Cloud-based solutions can be a cost-effective option for hosting and running your software.

But beyond these common-sense suggestions, the correct approach of an organization to budget for a software development project depends on a variety of unique challenges and goals. So, we’d like to present some budgeting techniques that can ensure that your software project stays on track, making a positive outcome more likely for any software enterprise. For example…

• Bottom-up estimating: This is a great way to avoid any surprises when it comes time for your team’s final budget. Essentially, it’s about working closely with the team and examining each step of the project to the most minute detail, to ensure that you have all the important information laid out to create an accurate roadmap. This process helps ensure no hurdles come up later down the road, which ultimately saves money by having fewer unexpected costs associated with these «known problems» during development. 

• Top-down estimating: Top-down estimating is a more efficient way to budget for large projects. By looking at the scope as an entire entity, you can identify which tasks will take up most of your time or resources without having any uncertainty between them. This allows us to estimate costs with greater accuracy than the “bottom-up” technique, allowing an organization to know exactly what work needs to be done first. The key difference between “Top-down” and “Bottom-Up” estimating lies in how much detail goes into each stage: With the top-down method, all elements must be defined upfront. However, some flexibility when deciding upon specific costs should remain.

• Analogous estimating: A great way to get an idea about how much your project will cost when you don’t have enough data for the upcoming task. This technique only works because it relies on previous projects as references, so keeping its accuracy depends largely upon what information there was available from those jobs. That’s why reports, notes, feedback, and the information collected in project management systems can be so valuable to implement, allowing tracking of internal costs and reviewing past work while informing future scope decisions all at once, making sure every penny counts.

Final words

It’s no secret that software projects can be costly. All too often, companies find themselves over budget and behind schedule, scrambling to contain the costs of their project. However, with a few strategies like the ones we just mentioned, costs can be kept under control. However, there’s no better strategy to plan your software development budget than managing expectations about the outcomes, clearly communicating the scope of the project and what will be delivered at each stage. 

This will help your organization to avoid scope creep and ensure that everyone is on the same page from the start. By following these simple strategies, companies can ensure that their software projects stay on budget coming 2023.

The Key Takeaways

• The software industry, alongside the rest of the technology sector, will have a challenging 2023, for a variety of reasons.
• One of the crucial elements of any company’s success is budgeting projects and operations sensibly, ensuring that an organization can meet all the goals it needs.
• However, software development can be somewhat finicky when it comes to planning, so traditional approaches to budgeting might not cut it out; rather, a holistic view of the whole process can be the right way to plan any expense.
• It’s important to keep in mind past approaches in order to understand where the biggest challenges might come when budgeting for the new year.

Scio is an established Nearshore software development company based in Mexico that specializes in providing high-quality, cost-effective technologies for pioneering tech companies. We have been building and mentoring teams of engineers since 2003 and our experience gives us access not only to the knowledge but also the expertise needed when tackling any project. Get started today by contacting us about your project needs – We have teams available to help you achieve your business goals. Get in contact today!