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.