The buying decision for custom software development – how important is cost?

By Mark Gebhardt – CEO of Saratoga. Implicit in the decision to build a custom software solution is the realisation that technology is a key strategic element of your business’s competitive edge. The decision-making landscape around how to build this capability is often a complex one with multiple opposing factors. In light of this complexity, many businesses will opt for low up-front price or low unit rates as their primary decision driver. In other words, the primary factor in their decision-making is software development cost.

However, research shows that there are other key factors which should be considered ahead of up-front cost estimates in order to get the best value outcome.

Understand the ‘Why’ of Your Buying Decision

As a business decision-maker embarking on a custom software project, in 9 cases out of 10, you should view digital technology and systems as a key enabler of your business strategy. This is the ‘Why’ of your buying decision.

Understand ‘What’ You Are Buying

As with any buying decision, you need to be clear on what exactly you are buying. You might think that it is a software solution, but as only 20% to 25% of software features defined in advance are used on average, spending a lot of time and money on detailed, upfront specifications in order to define and outcome for the process is not a good investment.

It follows from this that you are not, in fact, well positioned to purchase a system with a defined feature set.

Understand The Natural Evolution of the Custom Software Delivery Project

For most custom-build software delivery projects, the detail of the required feature set emerges during the initial delivery, changes with business priorities during implementation and includes additional features beyond the original delivery timeframe.

Therefore, the end-point cannot (and some would argue, should not) be specified in detail at the beginning.

So, how do you buy and contract for an outcome that you cannot describe? The answer is to accept that while the outcome matters, it is not known at the outset and so what you need to contract for at the start is a process and not an outcome.

The Essential Factors When Choosing a Software Development Approach

The result of contracting for a process is that some key elements that would not have been as important in the buying of an outcome, become essential factors in your decision-making process.

These key factors include:

• Trust and working relationship, including transparency;
• A balance between Innovation and best practice that suits your organisational culture;
• Engagement and Communication, in both directions;
• Efficiency and Cost.

Generally, the set of delivery options available to a CIO, product owner or head of development includes in-house (your team), co-sourced (your team augmented with a vendor team) and outsourced (vendor team). The last two of which imply working with a software delivery partner and being mindful of the criteria above to make your decisions about vendor selection.

Challenges to Consider When Outsourcing Software Development

Jebreen and Al-Qbelat’s review of outsourcing challenges (ICBASET 2023) shows the five most common issues in software outsourcing, ranked from most frequent to least.

• Poor outsourcing relationship;
• Lack of quality;
• Language and cultural differences;
• Non-competitive price;
• Poor coordination and communication;

Similar results were presented by Wahab and Piak San (IJ of Engineering and Technology).

The True Cost of Successful Project Delivery

We see that, while unit price-point is important, there are other, more prevalent factors that are likely to affect project duration, outcomes and total cost.

These factors are critical to consider when choosing a development partner and engagement model for your delivery and should be given significant weighting in the decision-making process.

As a solution owner embarking on a software development journey, you have the opportunity to build your own team, or choose from 1000’s of providers through on-shore, near-shore, offshore and hybrid delivery models.

To ensure success, it is critical that you consider and select for some of the factors that are harder to quantify, but which will ensure that you have the right team that aligns to your goals and approach.

At Saratoga, for more than two decades, we have focused on building the right teams, for the right customers and running these relationships with transparency and commitment. We have found this to be the best way to deliver real value and great software.