How Much Does AI Software Development Cost?

Artificial intelligence and machine learning have been all the rage for the past decade, but in the last year or two the hype around AI has grown to unimaginable levels. As an artificial intelligence development company, we have a good grasp on what AI is capable of, and we are aware the hype is justified – mostly.

While artificial intelligence is capable of performing a wide variety of tasks, like recognising and tracking objects in photos and videos, generating human-like text, extracting information and extrapolating from large amounts of data, and much more, it’s not the magic pill for every ailment. AI systems, while being widespread, may still not be the perfect fit for solving a given problem.

One of the main reasons behind companies rejecting AI is cost. Artificial systems may seem omnipresent, thus inducing the feeling of them being easy and affordable to create, but this is far from the truth. Even the most simple AI-powered app of the system requires a significant time and money investment, and it’s not always obvious just how much of a commitment artificial systems really are. 

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In this article, we aim to help businesses assess the cost of AI development more accurately as well as evaluate whether AI is truly going to save money in the long run.

The Capabilities Of Artificial Intelligence

Modern AI and ML systems are capable of performing complex tasks that are either traditionally performed using manual labor or were not performed all due to lack of appropriate level of technologies.

Detection of objects in photos and videos

AI systems are capable of detecting and tracking objects and complex events in real time. Using photos or videos, both live feeds and pre-recorded videos, modern AI can easily detect any object even if it’s obstructed or in poor lighting conditions. Object detection and classification is used in many systems and has found application in nearly all business areas:

  • Facility surveillance: AI systems analyze videos from surveillance cameras in real time and detect various events, like equipment malfunction or safety violation, and alert staff or record the event in the system,
  • Predictive maintenance: Based on previous data, artificial intelligence system can detect early signs of equipment breakdown and help prevent failure
  • Emergency detection: Machine learning is used to monitor sites around the clock to detect events, like forest fires, floods, car crashes, and more to help emergency services deal with natural and man-made disasters more efficiently,
  • Real-time object recognition: Machine learning systems can detect various objects on video and track them in real time, like humans and animals
  • Colorimetric analysis: AI systems can accurately detect colors in images and video for colorimetric analysis. For example, AI can analyze urine test strips and interpret test results by detecting the colors of chemical pads.

Natural Language Processing And Generation

With Open AI and ChatGPT, human-like text generation is not a problem anymore. Modern large language models can analyze and generate text indistinguishable from that written by a human.

  • Extract customer sentiment: LLMs can analyze large amounts of data, like customer reviews, and extract customer sentiment from it, thus improving marketing efforts and helping with better product positioning online,
  • Smart assistants: For easy navigation in large knowledge databases, language models are used to create smart assistants that help employees navigate company documentation and find relevant information,
  • Assessing candidate CVs: LLMs are capable of “reading” CVs and assessing the candidate’s skill level, helping HR managers range candidates more efficiently.

Automatic Document Processing

Optical character recognition is a powerful tool for digitizing paper documents, while artificial intelligence can determine document type and extract relevant information.

  • Digitization of documents with complex layouts: Modern OCR systems can easily handle the task of digitizing documents with complex layouts with multiple text columns, images, headers and subheaders, like newspapers and magazines. Archives use AI-powered OCR systems to preserve old paper documents,
  • Digitization of technical drawings: Technical drawings include not only text, but complex drawings of tech parts, floor plans, buildings, and much more. AI can navigate through any complex layout and extract not only text, but the drawing itself,
  • Extraction of complex spreadsheets: Spreadsheets panning across multiple pages with multiple merged cells can pose a serious problem for classic OCR approaches, AI-powered OCR tech is capable of easily and quickly processing spreadsheets of any complexity, turning a paper document into an editable Excel spreadsheet.

The Cost Of AI Development

One of the main misconceptions about AI is that due to its popularity it’s affordable and easily attainable. Artificial intelligence software, despite it being widely used in many business operations, is complex to develop and takes a lot of time and, consequently, money.

It’s crucial to calculate as precisely as possible the cost of AI development beforehand to avoid wasting time on looking for an AI development team and disappointment when the total project cost doesn’t fit your budget.

Calculating the development project is not the main step in the process of assessing the cost of AI development. In our opinion, calculating how much money it takes to complete a task you’re looking to automate now, using manual labor, is far more important. On the surface, it may seem like automating a certain task is the most sensible approach, when in reality, implementing an AI system to replace human labor is more often than not too expensive and not as effective compared to human labor.

Calculate The Current Cost

Before looking for AI developers, it’s vital you understand your business processes and have a clear look at how much it costs to complete a task you are looking to automate with AI.

For example, a complex AI surveillance system that counts how many clients visited a store in a day may seem like a good idea on the surface: the counting process is automatic, AI can not only count the people in the store, but also track their purchases or general behavior. Falling for the AI hype, a business owner may consider getting such a system developed to get insights into their business operations.

However, the cost of developing a real-time video processing AI for object detection is likely to be far more expensive, especially if your business is on a smaller side, than hiring an additional employee who will complete the same tasks for much less money.

On the other hand, certain tasks may require a lot more human labor. For example, a company working with a lot of paperwork may find itself with 50+ employees sorting through hundreds of paper documents daily, looking for relevant information and punching it into the systems manually.

The cost of labor of over 50 employees, in the long run, is considerably more than the cost of developing an AI-powered OCR system for automatic document processing. Even with the upfront cost of system development, the AI solution still remains the more sensible option for the business money-wise. 

This step may seem obvious, but many business owners seem to skip it entirely, falling for the AI hype. AI remains a complex technology which is rather expensive to develop, requires lots of data, lots of testing, and lots of time. While AI is superior to humans in completing certain tasks and may seem like the ideal choice for a certain business scenario, it may not make sense economically even in the long run.

Calculating the cost of labor a certain task requires is the first step in developing any AI project for a business.

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Estimate Project Scope

Some AI systems are smaller and less complex than others, and understanding where your project lies on this spectrum is the best way to get a precise project cost estimation.

Here are a few questions to ask yourself to understand the size of the project at hand:

Define The Project Goal

Define a precise goal of the AI system, whether it’s looking for a specific piece of information within a document, detecting forest fires, or facial recognition for an onboarding process. It’s better to define the goal as precisely as possible, e.g. “an AI for detecting if a document has been signed and by who” instead of “an AI for processing documents automatically”.

Define The AI Type

Object recognition and classification, OCR, natural language processing, data analysis are all different in what type of AI models are used and how complex they are. Defining what type of an AI model your project requires will help with estimating the total project complexity and, therefore, its cost.

Assess The Dataset

A dataset is the cornerstone of any AI project. A dataset is used for training and testing machine learning models, and is often one of the most time-consuming and challenging parts of a project.

Datasets are not small collections of images: to get accurate results, you need to include hundreds, better thousands of images, videos, audio recordings, scanned documents, etc. Estimate if you already have a dataset, for example, an archive of scanned paper documents or videos from surveillance cameras, and if not, estimate the time it would take to gather the needed data.

How Much Does AI Software Development Cost

A precise cost calculation of any AI project can only be done by a professional AI development company which will assess your project and your business needs, test and choose ML models to get the best accuracy, and provide you with a breakdown of different development stages. It’s always better to talk to a development team to get a clear understanding of the project cost.

There are certain guidelines when it comes to AI project cost. Here’s how much time a projects requires depending on its complexity:

  • A tiny AI project with very limited functionality and a predictive AI, e.g. a model that identifies patterns in past events and makes predictions about future events, takes at least 100 hours to develop,
  • A small AI project, including object recognition and classification, starts at 2000 to 2500 hours,
  • Larger AI projects can easily span across multiple years.

With the average rate of AI developers being $50, an AI software development project costs between $5000 and $200.000+. Here's a breakdown of the AI project cost based on its complexity:

  • A very small AI project with a simple pattern detection and event prediction model costs at least $5000,
  • A small AI project with an object detection model starts at $100.000,
  • A large AI project with multiple starts at $200.000.

There are rough estimates, but they can be a start at assessing the cost of your AI project. Keep in mind that the hourly rate of AI developers depends on the region and county and can vary, significantly affecting the total cost of development. Additional costs, like the hourly rate of a project manager, servers, etc. also add up to the total project cost.

Assess Additional Costs

While additional costs are not the main chunk of the total investment, they are important to keep in mind when assessing whether an AI system is worth it for your business.

Cloud Renting Fees

A lot of custom software runs in-cloud, meaning you need to pay a monthly or yearly fee for renting servers. These costs are usually small enough to not have a large impact on the overall cost of development, but AI systems are different in this regard. AI systems require servers with powerful GPUs to run efficiently, and those tend to be more expensive, thus increasing the cost of a monthly system upkeep.

Post-launch Support

If you’re looking to develop a complex AI system, or an AI system which will be used by dozens of employees, you need to account for tech support to guide users through the system and fix any bugs or malfunctions a system may experience.

Additional Development

Another important cost to consider is the cost of additional development. During the system operation you may develop a need for additional functionality. For example, you may need to start processing new document types, or detect more objects on a video. These additions can be costly, so you need to keep them in mind when calculating the total project budget.

The Cost Of AI vs Human Labor

After you roughly estimate the cost of the AI system in question, compare it to the money you now spend on completing the same task. You may be surprised, but more often than not the price of human labor is much cheaper than the price of a custom-made AI system.

Even with all the hype around AI, it’s important to keep your head cool and hype-free when looking into having an AI developed. Tempting as it is, implementing AI is not always a sensible idea due to economics.

AI is a complex technology which can’t be developed cheaply: it requires a team of seasoned developers well-versed in AI to create a high quality product. It requires a lot of time as well, so it’s important to understand if it makes sense for you economically to pay for that time.

How To Choose An AI Development Company

There are multiple steps you can take to make a well-informed decision when it comes to hiring a AI development company:

  1. Take a look at platforms like Clutch, Manifest, Upwork and Goodfirms to read client reviews and testimonials to get a better idea of past company projects and overall customer satisfaction,
  2. Analyze the size of the vendor as large companies are more likely to have enough resources to provide a dedicated team for your project when compared to smaller vendors,
  3. It is important to have a clear understanding whether your outsourcing provider complies with local and international standards like HIPAA, ISO, PCI, and has data security protocols and solid security policy in place,
  4. Ask your potential vendor the right questions to be sure that the provider is reliable. Compile a list of questions that you can ask a software development outsourcing company that will help you get all the important information about the vendor. Questions like “Has your company received any industry awards?” and “Do you have experience working with companies of our size and in our industry?” will help you understand the company’s market presence and its average client. Questions like “How do you ensure information security in the workplace?” and “Do you have a comprehensive disaster recovery plan?” will get you an understanding of the company’s facilities and the security practices,
  5. Take a look at a company’s portfolio on their website, platforms like Clutch or Goodfirms, or ask the provider directly for a portfolio of successfully delivered computer vision projects,
  6. Evaluate the tech stack the company works with and assess the skills of its computer vision developers:
    • 2-5 years of experience in the field of artificial intelligence development,
    • Experience with data science, cloud development, AI system development, big data,
    • Technical stack: Tesseract, Python, OpenCV, TensorFlow, Cafe, etc.,
    • Experience in the development of machine learning models as well as creating and balancing datasets,
    • History of working with object recognition, natural language processing, OCR.

Why choose Businessware Technologies as your software development company?

  • Businessware Technologies is a reliable AI development vendor: it has been recognised as one of the top software development companies by Clutch and Manifest, it is a Top Rated Plus agency Upwork, and has received local awards for its excellent work,
  • A team of over 70 highly skilled software engineers with extensive experience in developing complex software for both startups and Fortune 500 companies,
  • Deep expertise in modern AI technologies and approaches to system development, like data science, machine learning, OpenCV, Python, Tesseract, and many more,
  • Businessware Technologies is a Microsoft Gold Certified partner,
  • Businessware Technologies is compliant with GDPR, ISO 9001, ISO 27001 standards,
  • Businessware Technologies works with Fortune 500 companies and has had decades-long relationships with most of its clients,
  • Businessware Technologies has proven to be a reliable AI outsourcing partner by having an excellent track record in AI and ML development backed by an extensive portfolio of successful projects.

If you have a computer vision project in mind and need help with implementation, contact our manager and they will be happy to help you.