What Is Custom Software Development?


This guide will define custom software, show how custom software development can enhance your business and offer guidance on how to screen custom software development services.
What Is Custom Software Development?

What Is Custom Software?

Custom software is software designed with specific users in mind. Compared to software purchased off-the-shelf (for example, Microsoft Excel), custom software is tailor-made by an in-house development team or by third-party contractors to address a specific need that generic software would be unsuccessful in solving. Unlike typical software, custom software is not packaged for re-selling as it’s meant solely for users within a specific organization.

What Are The Different Types Of Custom Software For Your Business?

There is great variety in the application of custom software, and a corresponding variety in the ways that custom software can benefit your business. Custom software can come in the form of a web app, mobile app, or desktop software, and might be relevant to B2B operations, B2C, or purely for internal use. In the section below, we’ll walk you through examples of how custom software can benefit your business in each of these categories.

B2C applications

Custom software in the form of B2C applications can help to provide a stellar experience for your customers. Slick B2C custom software may help you retain customers, enhance brand awareness, and improve your ecommerce store.

Examples of customer-facing custom applications include:

  • Customer portals
  • Payment systems
  • Client apps such as shopping apps or a mobile banking solution
  • Self-service portals
  • eCommerce solutions

B2B applications

In addition to a wide selection of B2C applications, custom software can help facilitate interactions between your business and its partners by providing for the safe exchange of data, services, and products in a way that’s both fast and secure. B2B applications require an added layer of expertise to develop as the software engineers must contend with not one but two sets of business processes and protocols; for this same reason, B2B apps can be incredibly impactful for speeding up communication between businesses.

Examples of custom B2B applications include:

  • Billing and invoicing software
  • Contract management systems
  • Vendor portals or procurement portals
  • Order management systems

Internal applications

Certain custom software applications may be best utilized by your company and no one else. Software applications for purely internal use can help drive internal efficiency, increase transparency, and aid with reporting and planning.

Examples of internal software applications include:

  • Financial management systems
  • Data analytics dashboards to drive marketing and product decision-making
  • Project management solutions
  • HR software

Reasons To Consider (Or Avoid) Custom Software Development

Prior to investing the time and resources of your business into a custom software development project, you’ll want to make sure that this is a legitimate need for your business.

The best time to pursue a custom software development project is when your business needs software with specific features that off-the-shelf software simply doesn’t provide.

Perhaps you’re looking to build an online banking app but this app requires more stringent security authentication measures than are available in existing generic apps. In this case, highly customized software will drive efficiencies for your business that should more than offset the heightened costs of developing custom software.

The main drawback of developing custom software is the cost. This is perhaps unsurprising as any sort of custom application will end up costing you more than an off-the-shelf solution used by thousands or even millions of customers. You should expect most custom software development projects to fall in the five-figure range.

In addition to the cost, there’s a degree of execution risk with custom software development that isn’t present when purchasing a generic software product. You can limit this risk by making sure you have a thorough understanding of the problem being addressed and provide your development team with a clear picture of what is needed. We’ll provide more advice on how to limit execution risk and limit “scope creep” in the sections that follow.

7 Steps Of The Custom Software Development Process

In the section below, we’ll walk you through the step-by-step process of developing custom software for your business.

1. Evaluation and discovery

The first and most important step when evaluating your need for custom software development is asking an oft-overlooked question: does your business actually need this?

As discussed in the sections above, custom software can be an incredibly powerful tool to supercharge your internal processes and ramp up the exchange of products, services, and data with other businesses. That said, the return-on-investment of a piece of custom software will pale in comparison to simply using an existing, off-the-shelf solution that accomplishes the same objectives.

Before shelling out on development, it’s worth looking at existing solutions to make sure you’re not reinventing the wheel.

Once you’ve established that your need for custom software is both significant and not met by existing solutions, the next step involves examining your internal capabilities to determine the scope of work required by this project.

Can the bulk of development be handled by your in-house development team? Or will it need to be outsourced to third-party contractors?

Perhaps there are only specific pieces of the development puzzle that will need to be outsourced? Especially in a case where you do not have an in-house development team, will you be able to integrate this software into your processes? Or will this also have to be handled by the third-party team?

Once you’ve validated a strong need for a custom solution as well as sketched out a rough scope of the work needed (with the work loosely divided based on in-house and third-party labor), it’s time to begin with budget estimation.

2. Budget planning

At this early stage of the project, you should establish a wide budget range to leave room for changes in the planning process that may occur further down the line. Given there’s no single figure that would accurately apply to all custom software development jobs, your best bet lies in modeling out the expected dollar value the custom software will drive to your bottom line.

For example, if developing a customer portal could lower your business’s customer churn by 10%, you can determine the value of the project by looking at that 10% figure alongside the lifetime value of a customer. After determining the increase in revenue attributable to the decrease in churn, you can add back customer acquisition costs that you’d be able to forgo due to this increase in customer retention.

The final figure from this exercise (i.e. the total increase in revenue attributable to the customer portal) can form the ceiling of your development budget. Given the business knowledge needed to make these decisions, the budget range is best determined by a mixture of stakeholders with deep technical and business knowledge.

If this project will be handled internally, you should conduct a rough return on investment (ROI) calculation to see if the resources spent will be worth the cost.

Remember that you’re not just evaluating the custom software project against its cost, or against the scenario where you don’t have the custom software project; you’re evaluating the custom software project against all other possible uses of your developers’ time and resources.

We’ll discuss budget considerations for working with third-party firms in the section “What to Look For in a Custom Software Development Company” below.

3. Methodologies and technologies

After determining a general budget range, you’ll want to sit down with your in-house developers or a technical project manager to determine which development methodologies and which technologies will be required to bring your custom software project into fruition.

Agile development

Agile development is all about breaking development into its constituent parts and using rapid feedback cycles to incrementally move towards the ideal version of a project. This is a high-touch style of development requiring consistent monitoring and regular feedback, but with the bonus that your team can cover a lot of ground quickly, all while being closely monitored to ensure the project never veers too far off track.


DevOps is a more holistic version of agile development that fuses design, development, and software deployment into a single process. It’s tough to pin down exactly what a development team means by DevOps given the (at times excessively) broad use of the term, so if used by a contractor, it’s worth clarifying what’s meant by the term.

Scaled Agile Framework (SAFe)

SAFe was originally designed as a way to make agile development principles applicable for large enterprise. In pursuit of this, SAFe offers an approach to development that decentralizes decision-making and carefully maps roles, responsibilities, and activities in relation to the project’s objective to keep all stakeholders aligned.

The major benefit of SAFe is that it can accomodate teams of 100+; the downside is that the top-down approach can add cumbersome levels of oversight and administration (a bit ironic given its goal of decentralizing decision-making!).

Rapid Application Development (RAD)

RAD is another form of agile development that emphasizes working software and user feedback over careful planning. This methodology may be helpful as you can break projects into small, manageable pieces, and allows you to get to a working more quickly than other approaches.

The major downside of RAD is the speed of execution requires a high skill level from the developers. Furthermore, the speed of execution can be a drawback as it limits opportunities to receive and incorporate user feedback.

4. Technologies

While there’s an enormous number of technologies and APIs that may play a part in your software project, see below for a rundown of some of the most common technologies appearing in development projects of late:

Open Source

Open source is software source code that is freely available and open to the public. By using open source code, you avoid the use proprietary architectures that can limit interoperability of your software down the road. A few examples of open source software include Linux, Drupal, and PostgreSQL, although there are plenty of others across all areas of development.

Cloud-Based Development

Developing on the cloud offers a variety of benefits in custom software development. Not only do many cloud-based systems offer enhanced security (as you’re limiting hardware failure) and incredible amounts of storage, but hosting your development in the cloud means the many functions required during a development cycle–coding, design, integration, and testing–can happen more quickly as everyone will have access to the true north files at once.

Artificial Intelligence (AI)

AI allows the software to handle the learning and decision-making normally performed by humans. Machine learning algorithms can help to improve your user experience, and applications of AI such as natural language processing can help convert text-to-speech (and vice versa), improving the accessibility of your application.


Blockchain is a secure, digitally linked ledger that lowers the transaction costs and offers enhanced security compared to solutions offered via regulatory bodies or banks. Savvy developers will be able to use blockchain ledgers to build new types of secure transactional and financial applications.

Mobile Applications

As more and more consumers and businesses interact with the internet primarily through their smartphones, developing a mobile presence is critical for any business. Mobile applications often provide users with an improved user experience compared to browser-based applications and offer superior integration with existing apps and services already accessed through the user’s phone.

5. Design

Design is the final technical step of the planning stage that applies to everything from the design of algorithms to sketching out the wireframes and look of the software’s UX. Many development firms will handle design themselves, although may request that you provide examples of designs you’d like to emulate or existing brand guidelines that any new designs should adhere to.

6. Scheduling

With the budget roughly allocated, an understanding of the methodologies and technologies that will be required, and a solid grasp of the design requirements, the next step of the development process involves determining a schedule to orient team efforts around.

This schedule should include clear milestones that list out key deliverables and responsible stakeholders. While changes in development may happen (and, inevitably, pieces of the development cycle will take longer than anticipated), it’s essential to keep everyone aligned to the same schedule to the greatest extent possible. A clear schedule helps accomplish this.

7. Build Phase

Finally, you’ve entered the software build phase! This is when the dirty work gets done and when your administrative powers will be needed most, as things can veer off course rather quickly.

To ensure the team stays focused on hitting the right milestones, you should encourage weekly status updates from all stakeholders to make sure everyone is moving in the right direction. Consistent and efficient communication with team members will help identify and think through blockers before they arise and throw your development schedule seriously off-course. While changes to a project’s scope will happen during almost any development project, this “scope creep” can be handled in such a way that it won’t seriously impact budget or timelines; the key to ensuring this is maintaining visibility into all aspects of development throughout the build phase.

What To Look For In A Custom Software Development Company

There are many things to think about when screening custom software development companies and agencies. Some of the key attributes you’ll want in your developers or development team include:


Speed at every stage of the development process–from design to prototyping–is essential for getting the most value out of your custom software project. Rapid development will allow you to iterate quickly, something that’s invaluable in cases where you need to change project direction or find another feature that you want to include last-minute.


Paying for high-quality developers may save you money down the line as you won’t need to waste time rewriting broken code. Higher quality code will also be significantly easier to update and maintain for future developers working with the custom software.

Stable code

Related to quality, stable code refers to code that’s bug-free and has been thoroughly tested. Look for development teams who perform extensive quality assurance (QA) and run from agencies where past clients mention app failure or data loss.

Reliable UX

According to Peter Morville, a pioneer in the field of UX, there are seven factors that describe user experience: Useful, Usable, Findable, Credible, Desirable, Accessible, and Valuable. You’ll want to make sure your software’s UX possesses all of these attributes.


Designers and developers that understand that software is only as good as its users’ ability to find value in it, and will develop with the end-user in mind at all times. The best firms will incorporate regular user feedback into their design and development cycles to make sure that the team doesn’t spend months building an unusable mess of code.

Staff augmentation

Staff augmentation is a flexible outsourcing strategy where you can hire talent selectively to fill knowledge or skills gaps within your existing team. Rather than hiring an entire team of developers, you may be better off working with an agency that can provide the developers you need to see a software project through without taking on the cost of contracting out an entire team.

Payment Structure

If you’re looking to outsource this project to a third-party development team, carefully consider whether you’ll contract the developers via a flat project fee, or have your developers bill as part-time or hourly.

The benefit of accepting a flat project fee lies in knowing what you’re in for. While you miss out on the chance of finishing the project earlier than anticipated (and the associated cost savings), you’ll eliminate the risk of the project going way over deadline and blowing up the project.

While a development project contracted under a flat fee may still go beyond the original schedule, you won’t be paying the (literal) price for this.

Hourly project are better suited for cases where you’re contracting developers in the context of staff augmentation and the majority of your development team is already accounted for.

Team Location

An additional consideration when deciding on third-party developers is the physical location of the development team.

For example, if you’re based in a major U.S. city, you’ll pay a premium to work with local developers who are on-site or even just available for regular in-person meetings. If you are comfortable hiring remote developers, especially developers based internationally, you’ll find the cost of development will plummet, although you now must more carefully control for quality.

There’s no easy way to control for quality of remote developers unless you turn to brand reputations. In the section below, we’ll detail a few of the most reputable services you can use for outsourcing custom software development projects.

The Best Custom Software Development Companies In 2021

Below, please find our top 5 services for finding custom software developers online.

1. Toptal

Founded: 2010

Toptal is a global talent marketplace with developers located worldwide. Toptal allows you to flexibly staff the top 3% of talent worldwide on projects ranging from digital transformation to building out full, automated analytics system. Due to the distributed nature of Toptal’s workforce (i.e. developers based all over the world), you’ll be able to find the highest quality engineers at the best rates. With stellar engineers, rapid project start times (always within three weeks, but often shorter), a strong quality guarantee, and no termination rates, Toptal is widely regarded as the industry leader in staffing remote tech talent.

2. Fingent

Founded: 2003

Fingent is a U.S.-based custom software development agency with offices in Australia, the U.A.E., and India. Distinct from some of the startup-focused firms on this list, Fingent focuses primarily on developing web and mobile applications for enterprise and mid-sized businesses. With offices in the United States (Boston and New York), India and the United Arab Emirates, Fingent's team of 230 full-time employees can provide support across Mobile Application Development, Product Development (SaaS) and Enterprise Software Development.

3. Itransition

Founded: 1998

Itransition is a U.S.-based custom software development agency. The firm consists of a comprehensive team of IT professionals who serve everyone from SMB to enterprise clients. Itransition can handle projects ranging from enterprise app development to mobile app development and application security projects.

4. Kin+Carta

Founded: 1998

Kin + Carta (formerly Spire Digital) is a U.S.-based custom software development agency. Kin + Carta’s focus lies in strategic consulting, user experience design, software development, DevOps, and staff augmentation to the world’s top companies. Kin + Carta supports startups and enterprises in a variety of industries and across an array of technologies such as web, mobile, IoT, wearables, AR/VR, AI, or blockchain. Check out the firm's work in their public portfolio that you can filter by industry or by service.

5. Eleks

Founded: 1991

Eleks is a Ukraine, U.S., and U.K.-based custom software development agency. With a long track record in the industry (going on 28 years!), Eleks is equipped to provide a range of services including software engineering, technology consulting, QA, R&D, and security services. The firm's team of 1,100+ professionals and international staff means you'll be able to find the right skillset necessary to complete your project at a fraction of the cost when compared against fully U.S.-based firms.

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