The Cost of Custom Digital Solutions is Plummeting

In 2004, delivering a significant digital project required a budget of at least $2.5 million. A typical team consisted of 12 or more people, and projects would take 12 months to complete. A large portion of that budget went to infrastructure, as we had to set up our own data centres, supply computers, networks, and configure everything from scratch.

By 2010, with the advent of Cloud V1.0 technology, we could deliver the same scope of projects for around $1.5 million, typically within a six-month delivery phase. This reduction was possible because cloud vendors began handling much of the computing and networking infrastructure, freeing us from the need to order, supply, and install hardware ourselves.

By 2016, Cloud V2.0 technology had further reduced costs. Projects of similar scope could now be completed for approximately $450,000, with a team of six people in just four months. The need for infrastructure provisioning had been eliminated, dramatically reducing both resource requirements and the lead time associated with setup.

Over the past year, I've observed the start of yet another drop in costs, driven by a new generation of young developers harnessing AI tools to accelerate project delivery. Today, I'm starting to see projects like those above delivered by teams of just three or four people in two to three months, with budgets around $180,000.

It's important to note that these figures haven't been adjusted for inflation. In real terms, the cost difference over this 20-year period is even more pronounced—today's costs are over 90% lower than they were two decades ago.

This trend is undeniably good news, but there are a couple of nuances worth noting.

Firstly, projects that would have been unfeasible 20 years ago due to high costs are now almost no-brainers. Today, we can achieve the same business benefit at a fraction of the cost, especially for smaller projects. In other words, building integrations and connected user experiences makes far more sense now than it did 20 years ago.

The second nuance is that to fully leverage this cost reduction, we need to rethink how we assess and prepare for these projects. In many cases, the overhead of assessing a project costs more than delivering it. This issue is particularly pronounced with smaller projects, where the cost and time of assessments, approvals, and partner management can outweigh the project delivery costs.

There's little value in applying a traditional 12-month assessment, funding, and management process to a project that can now be delivered for $100,000 in a couple of months.

Personally, I'm excited about this trend, as it promises to lead to more niche software offerings in sectors like human services.

Andrew Walker
Technology consulting for charities
https://www.linkedin.com/in/andrew-walker-the-impatient-futurist/

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