Fixed Price or Time-and-Materials?
The application is developed by a "software company" or "digital product studio"?
Features of the project, platforms, integration, involvement of the product development team.
From our experience and market research, the average total cost of mHealth applications before the launch is $425,000, including $200,000 for development alone.
The basis for calculating the costs of a digital health application is the choice of an appropriate cost estimation method. Should the valuation be calculated as Fixed Price or Time-and-Materials? What are the advantages of one or the other solution in general?
Fixed Price is a flat rate for application development. It is convenient primarily for the customer, who can easily plan the budget. If the terms of cooperation and the project itself are very simple, predictable and repeatable, a software company with experience should have no problem with accurate cost estimation.
Fixed Price will be appropriate when:
terms and conditions of cooperation are elementary and limited,
the project is compiled at a given stage and there could be just numbered changes to it,
the project is simple, repeatable and measurable from the beginning,
the budget is fixed,
the deadline is short and immovable.
However, does this description fit digital health or FemTech projects?
From our experience with digital health and FemTech projects (Elvie Trainer and Elvie Pump, MysteryVibe), at the very beginning, it is complicated to predict how complex the project will be. When working with devices that connect to the application, it is necessary to deploy, e.g. BLE native implementation or during the project we can see the need to add further functionalities, there is no possibility of billing it through Fixed Price.
Time-and-Materials will be appropriate when:
the conditions and scope of projects may change over time (e.g. after user tests have been reprocessed),
you expect flexibility from your team,
during the work, further functionalities can be added,
the project is constantly developed and long-term,
the budget is not very limited,
there is no specific deadline.
Complicated projects are generally difficult to plan in Fixed Price models, and digital health, FemTech or IoT are almost always among them.
Another critical factor that determines the cost of the application is which company you decide to cooperate with. Whether it will be an average software company or digital product studio.
Software company differs from digital product studio mainly in its methodology of work, approach to projects and participation of people involved in product & software development.
For a software company, it is mainly the software itself, where no one interferes in the product anymore, and the aim of creating a web or mobile application is to write decent code. In digital product studio, the aim is to create a good product that solves real problems of people and is user-friendly. The code is not an objective in itself.
In the process of creating applications in digital product studio, apart from web and iOS/Android developers, there is also a product manager, product owner, UX/UI designer, Q&A or even CTO or independent consultants, if they can bring value.
Due to the priority of quality, which is in the digital product studio, people involved in the project are selected individually in terms of the merit that they can add to it. Together with this value, however, the costs also increase.
Read more about the differences between a software company and digital product studio.
Besides whether it will be Fixed Price or Time-and-Materials and cooperation with a software company or digital product studio, the price is influenced by the scope of the project.
For cost calculation, the complexity of the project, the platform on which the application is to be written, the integration to be implemented and the degree of involvement of the product development team in the project are also taken into account.
The cost of developing a simple but thoughtful application for one platform can amount to $50,000–80,000. More complex applications for several platforms can be an expense of $80,000–120,000 for the development itself.
From our experience and market research, digital health or FemTech applications are at the cost of $120–250,000 per development alone.
The average total cost of mHealth applications before the launch is $425,000, including $200,000 for development alone.
Of course, the amounts given are only estimates, because many factors affect the final price. This does not mean that it is not possible to make an application much cheaper or more expensive — everything is a matter of expected quality and the requirements that the product & software development team places on the digital health app.
Take into account, that after the very development of the product and application, you will still have to pay for promotions, marketing, server maintenance, and application updates.
Before you decide to build a digital health application, take into account all the factors that make up its cost. Simple applications can cost from $50,000, but digital health or FemTech is not usually one of them and the cost of development alone can range from $120–250,000 final.