Key Metrics to Measure Success in Software Outsourcing

Using metrics for development outsourcing leads companies to increasing efficiency and productivity. Metrics measure several aspects of the software development process and serve as a foundation for important decision-making that will ultimately improve business operations and performance.

There’s a wide variety of KPIs and metrics for outsourcing, but not all of them suit every software development project. Business leaders need to have a deep understanding of their projects’ needs to know which metrics are relevant to them.

The Importance of Measuring Software Development Metrics

Metrics for software development outsourcing allow companies to measure performance, track productivity, and manage the development process efficiently by analyzing distinct numbers and trends. Project managers can combine their expertise with these metrics to create more efficient processes, develop maintenance plans, and inform their teams regarding any issues.

The main goal of tracking and analyzing metrics for development outsourcing is to determine the overall quality of the established process or end product. Doing so also allows teams to improve the quality of their work and predict a wide variety of outcomes. By measuring these metrics, software development managers can help increase ROI, identify areas that require improvement, manage workloads, reduce overtime, and reduce costs throughout software development projects.

Metrics are also important when assessing, managing, and prioritizing problems. They help project managers detect and fix issues early on, which translates into an easier and more affordable troubleshooting process.

Key Software Development Metrics

Tracking the right metrics for outsourcing is important, especially when measuring and controlling the quality of developed products. However, the process of selecting exact metrics differs among organizations.

Relevant metrics push development teams in the right direction, giving them huge advantages, but following irrelevant metrics will divert them from focusing on aspects that matter. While different teams value different metrics and KPIs, a few of them are common to most organizations.

Time-Based Metrics

Time-based metrics track the time it takes a team to complete a specific task. They’re great ways to transparently assess and estimate performance and allow managers to predict deliveries within established timelines, analyze the current work pace, and identify areas that need improvement.

By combining time-based metrics with other metrics, companies can also determine if they’re making a profit or not. These metrics are so effective because they’re easy to follow and represent actionable steps that complete objectives. They’re specific for each member, easily measurable, and align with the organization’s strategy.

Tracking time-based metrics can help companies keep projects profitable, even in the case of unexpected events, improve pricing, make better estimates about deadlines, and manage their teams more efficiently.

Project Delivery Time

Project delivery time measures the time a project takes from beginning to end. This metric evaluates the team’s ability to meet deadlines and stay on schedule and allows them to identify project management areas that need improvement.

Teams can measure project delivery times in weeks, months, quarters, years, or any other way that best suits their project needs. Sticking to timelines is important for businesses, as even the slightest delay in development can cost the company time and money.

Companies can use specific tools to measure project delivery time. Good examples have built-in timeline features and display the progress of each task and overall timeline for the project using Gantt charts or Kanban boards.

Time to Market

Time to market measures the time required to move a product from conception to market until it reaches its audience. This needs to account for a wide variety of workflow steps and strategies considering that the process involves the combined efforts of stakeholders, product management, marketing, and other business departments.

It offers a good indication of the overall efficiency of internal management processes associated with software development. Team members can also measure time to market in weeks, months, quarters, years, or any other way.

Usually, a shorter time to market means a quicker ROI and offers a competitive advantage to companies working with short life cycle products. The quicker a product gets on the market, the less competition the company faces and the bigger its market share is.

However, reduced time to market still needs to accommodate appropriate development to ensure product quality and avoid low customer satisfaction. There’s no specific method to calculate time to market, as it depends on the needs of the business, project, and development team. Good points to begin the measurement period include:

Formulation of the idea
Approval for development
Complete funding
Development start

Similarly, teams can consider the final date as the day when:

The engineering team delivers the final production design
A client first purchases the product
The company reaches a certain production value

To help reduce time to market and improve the development process companies can try optimizing the development workflow, setting realistic goals, making detailed product roadmaps, and implementing automation.

Resource Utilization

Resource utilization measures how productively and effectively an organization uses available resources. This metric helps companies evaluate and improve productivity and understand if the development team is either under or overworked.

Inappropriate resource utilization might result in reduced productivity, inability to meet customer demands, and low-quality products. This then translates into higher costs, lower profits, decreased sales, customer loss, bad market reputation, and market share losses.

To measure resource utilization, companies can use a production index that measures the amount of produced output in comparison with the input used. This method allows teams to identify development problems and track changes over time.

Quality Metrics

Businesses worldwide adopt quality metrics to track the quality management system of their companies. These metrics provide a comprehensive insight into the quality of developed products and provided services.

Monitoring relevant quality metrics can help business leaders monitor customer satisfaction, improve product and service quality, reduce costs, and drive continuous improvement.

Defect Density

Defect density is a common metric calculated by dividing the number of defects found by the size of the complete software, normally in terms of lines of code, function points, and user stories. It measures the quality of software products and helps determine if and when they’re ready for release.

Assessing this metric helps QA engineers identify areas of the product that need more testing or improvement, compare the quality of different software versions or modules, and monitor the progress and effectiveness of their testing activities and resolution processes.

QA engineers can improve defect density by not only finding and fixing but also avoiding and preventing them. To do this they should:

Adopt a quality-oriented mindset through the development process
Apply best practices and standards throughout the development
Use effective testing methods (unit testing, integration testing, regression testing, automation testing, or exploratory testing)
Use feedback loops as collaboration mechanisms
Conduct root cause analysis and corrective actions to learn from the occurring defects

Code Review Feedback

This metric is a measure of code stability. Throughout development, developers might go back and change a few lines of code, but they should strive to write sustainable code that endures other product changes.

Code churn measures how often a piece of code changes during development. Code will always change to some extent, especially at the beginning of the project due to additions, modifications, and code deletions. However, code churn should be as minimal as possible, particularly before the product launch.

Tracking code review feedback and churn rates allows project managers to identify any spikes in code changes that might suggest existing problems with the app architecture, coding or testing practices, or the developer’s expertise.

Test Coverage

Test coverage defines the extent to which the team covered the functionality of a software product. It is a great way to determine the conclusion of testing activities, by dividing the number of detected faults by the number of predicted defects.

This quality metric allows QA engineers to evaluate the functional coverage of test case designs and specify required procedures whenever requirements don’t align with any test cases.

Cost Metrics

Cost-based metrics, as the name suggests, help quantify the costs associated with the software development process. Establishing and tracking these costs over time allow business leaders to avoid going over budget, better understand where their money is going, and evaluate the efficiency of their overall operations.

Cost of Outsourced Development

The cost of outsourced development metric measures the cost of outsourcing the development from beginning to end. This includes costs related to research, design, prototyping, testing, and production.

This metric helps ensure that product development stays within budget. While it’s important to keep costs low, nothing should compromise product quality or functionality.

Cost Savings

Cost savings is an essential metric for measuring software development outsourcing success, considering that most businesses resort to this business model to save costs. It tracks the project’s actual costs in comparison with the initially established budget to determine achieved cost savings.

There are many different ways to improve cost savings while working with an outsourcing provider. Some of them include searching for a vendor that offers a good cost-quality balance, negotiating with the provider, and picking the right outsourcing model (staff augmentation, dedicated teams, or full-cycle development) depending on the project’s needs.

Return on Investment (ROI)

ROI measures the return on the investment made in the outsourcing project by dividing the total profit earned by the amount of money invested in the project. This metric measures how financially successful the partnership was.

Most business decisions take into consideration the ROI, as it plays a vital role in measuring the performance of any company and helps business leaders understand how particular projects will benefit them in the future.

Calculating the ROI is important to determine how much money companies invested on a team, project, or campaign. It also helps shape the direction of product development and steer the team.

Conclusion

There are many metrics by which companies measure the success of their software development outsourcing projects. However, every metric won’t work for every business, which is why it’s so important for teams to decide on the most important metrics to analyze and track for their individual needs.

If you enjoyed this article, be sure to check out some more outsourcing articles.

FAQ

How can I track the performance of my outsourced software development team?

To track the performance of outsourced software development teams, companies should select relevant metrics, as these will push their teams in the right direction and give them market advantages. The right metrics allow companies to measure performance and productivity, manage development processes, and identify and prioritize different development issues.

What are some common challenges in measuring metrics for software outsourcing projects?

The biggest challenge in measuring metrics for software outsourcing projects is picking the right metrics. To choose the right metrics for outsourcing projects, companies need to have deep knowledge of their key business processes and drivers.

The second biggest challenge in measuring metrics involves creating and displaying KPIs. Other potential challenges in measuring metrics for software outsourcing projects involve data accuracy, communication barriers, and cultural differences.

How can I ensure continuous improvement in my software outsourcing projects?

To ensure continuous improvement in software outsourcing projects, business leaders should regularly review metrics and make data-driven decisions. By analyzing quality key performance indicators, organizations can determine if the development processes need to improve and how they can do so.

To continuously strive for excellence, business leaders should align their goals and expectations, monitor and measure results, encourage continuous feedback, and recognize and reward good performance.