How to Reduce Software Development Cost

Software development can be tricky. Whether your goal is to build commercial off-the-shelf software or a custom software solution, it can become a huge challenge and quite an expensive one if you are not sure how to do it right.

In this post, we want to highlight some thoughts on how to approach the development stage in order to significantly reduce software development cost without compromising the quality of your future product.

Choose the right pricing & business model

Approach your budget planning with a holistic view to complexity and costs of building your software, and decide on the business model that would suit your goals best: fixed-cost, time-and-material or dedicated-team.

Fixed cost. There are two main reasons why customers have always preferred fixed-cost contracts: predictable budget and strict deadlines. It sure does provide low monetary risk and puts the development team on a strict path, but the lack of flexibility in development and a longer time-to-market is often very impactful and comes at a very high cost in today’s rapidly changing world. That is why we see the use cases of this traditional model getting narrower with every coming day.

Not only your time spent in pre-development grows exponentially, but you also risk going through a long and frustrating process of requirement changes, moving deadlines and cost adjustments in case you came up with some new ideas, or there was some major shift in the market environment that requires a change of strategy. Therefore, this approach is only good for short-term, small-scale projects with crystal-clear business requirements. For anything that takes longer than a couple months to develop, you should probably go with one of the other two models.

Time and material. Whereas the fixed-cost model loses its momentum, the time-and-material approach is gaining its ground. Considering that today’s market environment is very unpredictable, companies can no longer afford to spend months or even years coming up with and developing a large project, because no one, especially their competitors, will wait for them to release it. That’s where time-and-material model comes in to solve this issue with superb flexibility.

Using this model, your vendor will engage you with the project on a regular basis. Through incremental planning and day-to-day communication, your software solution gets developed in iterations, where you decide on the priority of each feature. These features are implemented step by step, where you get a functioning version of your product with each iteration. The give-and-take of this approach is that the predetermined budget and immovable deadline are replaced with higher flexibility, lower risk and faster ROI. This doesn’t mean you don’t get to estimate the approximate time and budget needed for the development, it just won’t be solidified in place. What it does mean though is that you can make changes to your requirements and features at any point of the development stage. Your project spends way less time in pre-development as every issue is solved through constant collaboration, reports and updates. Last but not least, you don’t have to worry about the quality of your product being sacrificed in order to meet the deadline — you get a viable, functioning product with every iteration and can stop the contract at any time if you’re satisfied with the result and ready to market.

The model is very well suited for today’s dynamic market and projects of any scale. It serves best for projects with unclear requirements and ones that are in a very competitive field, where you have to adapt fast and make your time-to-market much shorter.

Dedicated team. This approach is pretty straightforward when it comes to description — you find a vendor that is best qualified for the job, and hire, or rather, “rent” a team of professionals for a certain period of time. Such a team might include not only developers, but also project managers, designers, testing specialists, QA engineers, and whoever else you need and your vendor has to offer to suit your project goals.

Dedicated-team is a remarkably flexible model in terms of requirements and pretty much the development stage in general, where the scope, workload, deadlines and the costs are entirely up to you. This approach proves to be the simplest in terms of calculating and keeping track of the development costs as you pay a set monthly sum, which depends on the number of team members you hired, their salaries and the fee you and your vendor agreed on.

A dedicated-team approach requires you to invest more time in management and communication than the other two models. However, for that you get the highest level of flexibility, deep commitment, full accountability and predictable budgeting. You get to choose the exact size of your team and the project management methodology they will be using to achieve your goals. You can adjust the scope and priorities of your project on the fly and be certain your team will effectively deliver on fulfilling them as they are fully immersed into your business environment and focused on the project.

When it comes to cost-effectiveness, a dedicated-team model is somewhere in-between the fixed-cost and time-and-material models. The cost per unit of work can be considerably lower than the same indexes in a fixed-cost approach, which is a big plus, in addition to the ability to budget ahead, since you know the exact monthly rate you need to pay. However, it is important to consider that you bear full responsibility for keeping the project in check, and that the costs may vary depending on your managerial capacity. A dedicated-team model is your best option if you have a large, complex product to develop from scratch with long-term strategy or business expansion in mind.

Have a project in mind? Let us help you decide on the cooperation model that suits your goals best.

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Get your requirements in check

A qualified vendor should be able to analyze and research the problem you’re trying to solve, helping you establish the most precise business requirements for your software development project without letting any ambiguity slip. The clearer the requirements you and your vendor attained through joint efforts, the more accurate estimates you get, which puts your vendor on a strict path and lowers the time and cost spent on development. This will leave no latitude for misinterpretation of data types, business logic, system behaviors and functionality, helping your vendor provide a solution that caters to your specific needs best.

Consider the development approach your vendor is practicing

Do not underestimate the importance of project management when it comes to software development. Choosing the right vendor with the right development approach can help you prevent some excesses that are pretty common with vendors sticking to traditional, linear methodologies (e.g. waterfall model). Traditional development processes can be unnecessarily bulky in terms of time and effort spent on the preparation and development stages, in addition to being not at all flexible. You might spend a lot of time planning and refining specifications for your project, but end up shifting them at some point during development. Having planned and formalized everything for the whole project beforehand, you may fail at delivering the features that would properly cover your users’ needs simply because you didn’t get timely user feedback. In addition, there’s always a risk of overdoing it, wasting lots of money and effort on supercharging your software solution with unnecessary features your users could easily do without.

On the other hand, vendors, who practice contemporary, more iterative approaches, like Agile and Scrum, can provide your project with much more flexibility, and potentially, for much cheaper. Applying these methods can have a very positive impact on cost-effectiveness of development, as well as overall project outcomes. Even though these contemporary approaches require day-to-day communication and customer’s deeper involvement in the development processes, they can undoubtedly prevent all the described excesses from happening, and more. Vendors that adopt Agile methodologies exceed “traditionalists” in adjusting requirements, adaptability, accomplishing tasks on time and ensuring high-level performance throughout the development. One of the biggest advantages in terms of cost-effectiveness would be that an iterative approach means incremental planning, which enables you to finalize the development stage as soon as you’re satisfied with the implemented functionality, in contrast to traditional ones, where even the slightest change of course can turn messy. However, do not rush taking an Agile team on board until you’ve done your research and made sure you vendor has substantial experience in these methodologies. When choosing a vendor, a CMMI certificate would serve a good argument in respect of internal management.

Utilize your testing capacity early-on

Having your testing and QA team working on your software solution early-on will help you avoid a lot of potential risks. It is very important to remember that as soon as your product makes it out there, every error could cost you a hundred times more to fix than it would during the development stage. If you begin testing the moment your development stage starts, it will help you eliminate most of the issues before they even start showing. This is vital to helping your team optimize the development process as both manual and automated testing will provide your team with continuous feedback on the architecture of your software solution and your feature scope. As a result, you get shorter development time, less rework and security of your budget from unforeseen issues.

Don’t be shy of using third-party and open-source components

A fully customized software experience will undoubtedly ensure high user satisfaction and give you a significant competitive advantage if done right. However, when budget is of the essence and there are multiple other paths you could take to achieve nearly the same result, why spend your time and money building something from scratch? Do not invent the wheel unless it is absolutely necessary. Consider a more modular approach if you’re looking for a less expensive alternative to a fully customized software solution. There’s nothing wrong with building your software from a combination of already existing components that provide the very same functionality you’re looking for. A qualified vendor will be able to provide you with a wide range of options, carefully selected “building blocks” from their own IPs, open-source software databases and legacy products that could be improved, adapted and seamlessly integrated into your software solution at very low or even no extra cost. Taking advantage of work that has already been done can cause a tremendous reduction in the overall cost of your project, as well as open up new opportunities.

Focus on usability rather than visual impact

UX/UI design is one of the essential elements of a highly successful software release. It should definitely remain one of the top priorities in your development plan as it can become a huge ROI in the long run. However, if your budget is a bit short for a full design phase and you need a little extra flexibility at the development stage, there is a way to save costs without sacrificing much of the quality of your design. Rather than completely giving up on design, you should turn the scales of your design budget in favor of user experience over aesthetic looks. First and foremost, make the navigation and layout of your software as intuitive and handy as you can. Don’t waste much time guessing what would be the perfect color for that one particular button.

Start small and simple

Being enthusiastic about conceptualizing your product and letting your imagination run wild is always great. There’s really nothing wrong with dreaming big, but sometimes stakeholders get so carried away that they completely forget to take their budget into account. Nevertheless, having a tight budget doesn’t mean you can’t deliver a proper MVP that would be sufficient in solving the problems of your target audience, neither it means giving up on your dream. In fact, it rather means taking it slowly, step by step, carefully picking the absolutely essential features for implementation, saving the fancy ones for later. After all, what might not fall within your immediate grasp can definitely be implemented in the future versions of your freshly released MVP.

Final thoughts

Approach software development with the future in mind. Make sure your development team is fully aware that you’re looking for an extensible software solution. Build trust with your vendor and inform them of all the short- and long-term goals you’re planning to achieve with your software solution, so that all the required tweaks, additional features and changes are anticipated. Communication and trust will make further development of your released software solution much smoother and easier, ensuring the continuous extension of functionality without hurting the quality or making your budget bloat.

Need help getting your software solution developed on time and within budget?

Contact us!

Head Of Business Development at QArea. I’m passionate about new technologies and how digital changes the way we do business.

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Sandra Parker

Sandra Parker

Head Of Business Development at QArea. I’m passionate about new technologies and how digital changes the way we do business.

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