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Hiring & Budgets

Where the Money Actually Goes in a Software Project

Why software projects cost what they do: roughly 15% specification, 45% build, 20% testing and exceptions, and which parts of the budget you can cut.

Updated 2 min readBy SpiderHunts Technologies

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Quick answer — TL;DR

Roughly: 15% specification, 45% building, 20% testing and exception handling, 10% deployment and documentation, 10% project management. The part clients want to cut — testing and exceptions — is the part that determines whether it works.

The rough shape

PhaseShareWhat it is
Specification10–20%Understanding the process, writing down the rules and exceptions
Building40–50%The part everyone imagines is the whole project
Testing and exceptions15–25%Making it work on the awkward cases
Deployment and documentation5–15%Getting it live and leaving it maintainable
Project management5–15%Coordination, demonstrations, keeping it moving

Proportions vary by project. What is consistent is that building is roughly half, and clients consistently expect it to be nearly all.

Why specification is not padding

The specification phase is where someone watches how the work is actually done and writes down the rules nobody has articulated. That is what prevents building the wrong thing.

Every project we have rescued had a thin specification. The build was competent; it was built to a description of the process that was missing the parts that mattered.

Why testing costs what it does

Testing here does not mean checking that buttons work. It means running the awkward cases: the record with unusual characters, the double submission, the third-party system being down, the user with the wrong permissions.

Cutting this makes the project cheaper and moves the cost to your first month in production, at a considerably higher rate.

What you can genuinely cut

  • Scope. Fewer features, fewer roles, one intake channel instead of three.
  • Design polish on internal tools, where function matters more than finish.
  • Admin interfaces, initially — a developer running a query is adequate at first.
  • Integrations that can wait for phase two.
  • Migration of historical data nobody will look at.

Each of these reduces cost without reducing whether the thing works.

What you should not cut

Exception handling, testing, documentation and the ability to see when something has failed. These are what separate a system you can rely on from a demonstration that ran once.

A supplier who agrees to cut them to hit a number is telling you something about how the project will end.

Where the day rate comes from

A UK development day at £600–£1,200 covers the person doing the work, the people not billable that day, holiday and sickness, tooling, insurance, and the overhead of running a business that will still exist next year.

Rates far below that range usually mean inexperience, an unrealistic quote, or a business that will not be there for the warranty period.

FAQ

Frequently asked questions

The questions readers ask us after this guide.

Still have a question?

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Ask about your project

Can we do the specification ourselves to save money?

Partly, and it genuinely helps — documenting your process and listing exceptions is valuable preparation. What a supplier adds is knowing which questions predict trouble.

Why is the second phase cheaper per feature?

The foundations exist: architecture, deployment, authentication, testing setup. First phases carry costs that later ones do not.

Is offshore development cheaper?

The rate is lower and the total is closer than the headline suggests once specification effort, management overhead and time zone friction are counted. It works well with tightly specified work and someone able to review quality.

What is a fair project management share?

Five to fifteen per cent. Much higher and you are paying for process; much lower and coordination is probably not happening, which shows up as delay.

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