Software Development Costs: Why AI Hasn't Changed Prices

Everyone keeps asking if AI tools are making software development cheaper. The short answer is no. The long answer is more interesting.

I've been building software for over two decades, and the past two years with AI have fundamentally changed how I work.

AI has made me significantly more productive. Tasks that used to take 3-4 hours now take 1-2 hours. You'd think this means I could charge more per hour, right? After all, clients are getting more value for their money.

Wrong.

You can't walk into a client meeting and say "I'm two to three times as fast now with AI, so pay me double and we both win." It doesn't work that way. Clients have a number in mind for what software development costs. That number is based on market rates, not on your personal productivity.

Project Scopes Are Expanding

What has actually changed is the scope of what you can build within a given budget.

Before AI, a client would come to me with a budget in mind and a list of desired features. We'd have a conversation that went something like this:

"We can build features A, B, and C within budget. Features D, E, and F would be nice to have, but they're realistically out of scope unless you want to increase the budget and/or accept a much longer timeline."

Now that same conversation goes:

"We can build features A through F within budget, and probably squeeze in G if we're efficient."

The client isn't paying less. The project isn't cheaper. They're just getting way more functionality for the same price. Instead of prices dropping, project ambitions are rising to fill the available productivity gains.

Productivity Gap

Before AI, I'd estimate a really good developer was maybe 5x more productive than a weak developer. Different skill levels, sure, but everyone was working with the same basic tools.

AI has turned that 5x gap into something closer to 20x.

Experienced developers who know how to work with AI are absolutely flying. We understand when to trust AI suggestions and when to ignore them. We are able to verify that generated code actually does what it's supposed to do. We use AI to handle the boring, repetitive stuff while we focus on architecture and complex problem-solving.

But at the same time I think AI makes weak developers even weaker.

Weak or inexperienced developers often become LESS productive when they start using AI tools. They accept suggestions they don't fully understand. They introduce subtle bugs because they can't verify the AI's output. They create maintenance nightmares because the code looks good on the surface but has fundamental issues underneath.

Research backs this up. Studies show significant increases in bugs when inexperienced developers use AI coding assistants. Some developers actually perform worse with AI than without it.

AI vs Junior Developers

The routine coding work that junior developers used to cut their teeth on? AI can do most of that now. And it does it faster and with fewer bugs than a junior developer would.

This creates a real problem for career development in software engineering. How do you become a senior developer if all the entry-level work has been automated? I don't have a good answer to that question, and I'm not sure anyone does yet.

What I do know is that the market for basic, routine development work is collapsing. If your value proposition is "I can build a standard CRUD application," you're competing with AI now. And AI is getting better every month.

Senior Developers Are More Valuable

At the other end of the spectrum, experienced developers have never been more valuable.

When AI handles all the routine work, what's left is the hard stuff. The complex architectural decisions. The tricky integration problems. The performance optimizations that require deep understanding of how systems actually work.

With AI, I spend almost all my time on challenging problems now. Every task requires real expertise because the simple tasks are automated. It's intellectually exhausting in a way that pre-AI development wasn't, but it's also more engaging.

Everything is Easier and Harder

The weird thing about AI in software development is that it simultaneously makes everything easier and everything harder.

It's easier because routine tasks are automated. It's harder because the bar for "good enough" has risen dramatically. Clients expect more because more is now possible.

It's easier to write code quickly. It's harder to write code that's actually correct, maintainable, and performant, because AI can generate plausible-looking code that's subtly broken.

It's easier for great developers to be incredibly productive. It's harder for weak developers to hide their lack of understanding behind effort and time spent.