How to minimise software development outsourcing cost

You have planned to create new software application or web application or mobile application so that you could reach your customers through technology and reduce your investment in office infrastructure. You didn't do anything wrong so far. I am, however, concerning about your IT or software development outsourcing spending.

I do believe, you have read many online articles and research papers on how to manage outsourcing or project cost. And you have certainly learnt about it and started finding right IT outsourcing team for your company. My best wishes for you and your product idea.

If you are new to outsourcing and software product development then I am sure you find difficulty in managing the development cost. Why? Because software development has many abstract things and you couldn't, may be, understand as why team demanded more money than what you calculated. Not everyone is cheater and not everyone is friend. The world has both kinds of people and therefore you need to take special precaution when hiring remote team and managing outsourcing product development.

I have invested almost 14 years - at time of writing this article - and compiled following guidelines for managing outsourced product development and minimising it's development cost.

Get complete product understanding

You created product idea and I do believe you validated it against the small set of customers. Product idea and product both are different things and therefore once you know product idea is viable and people will pay for it, then you should start think about product itself.

You may have read online or hear through friends that product idea is what makes profitable business. I agree no doubt. I do, however, know the product - effective execution of your product idea - makes it sell-able and scale-able. The right product have all important features around product ideas and makes them integrated so well that customers can't ignore it. And surely they will pay for your product not for product ideas.

If you find difficulty in understanding what features are really important and what features should be excluded, then my advise is to hire experience consultant - who really know as how to evolve product from mere idea. He may also help you to find right development team and connect with other resources. You can start your own search for finding development team if you are comfortable dealing with technical and non-technical jargon. You will learn technical language in the end. 

Furthermore, your understanding of product makes you more comfortable during marketing and promotion and customer development tasks.

I have seen product owner who didn't have proper understanding of his product and invested more money than it was required. In the end, he had to close his online product because of lack of funding for the marketing and promotion.

Hire right IT outsourcing team and right size

You have deep understanding and you know very well about technical expertise and number of people in your team. That's where you should start searching for team. Otherwise you may very well find wrong development team and pay later. My experience says wrong team makes triple the development cost than the original.

You should start writing down technical expertise of your team and clearly mention the responsibility of team. You should never try to find team only through any freelancing sites. You should consult with your contacts and LinkedIn connections to get list of people. Also, you should run google search to find them. 

You should not make abrupt decisions though. You should discuss technical expertise with people and get proper understanding of their view. Sometimes, you find right people who give you more insight about product than you have assumed. 

Furthermore, you shouldn't consider per hour cost of people work while selecting team, but expertise. Expert and experience people finish the task early and probably right at first pass. 

I will leave all calculation on you. You will find the right development team - despite having higher per hour cost - is more cost effective than others.

Divide the tasks in three different groups

Once you have right team at place, you should start discussing different tasks with them. You could divide the tasks in three different groups as follow;

1. Core task - this requires more efforts from team member to create core solution. My experience suggests that almost 20% tasks fall in this group.
2. Repeated task - this requires less efforts compare to core tasks. Because team has already worked on similar tasks and could replicated according to new business logic.
3. Monotonous and simple task - this requires no extra mental energy and can be done by anyone. 

Now, you have list of tasks divided into three different groups. You can start optimising product cost. For example, you should be paying high for the core tasks because it requires expertise and paying medium payment for repeated task. You should pay less for the third group of tasks.

Unfortunately, I have seen product owner who doesn't seem to understand it. And pay similar cost to each task result in higher development cost. 

Start from epicentre

Every project's tasks follow 80/20 rule i.e. it has 20% complex tasks  and 80% recurrent or easy tasks. And it makes sense if your team starts development from epicentre i.e. from core complex tasks to easier ones. It takes long efforts and deep understanding to finish core tasks. And human feels motivated at the beginning and feels tired or unmotivated in the end.

If you start development from easier tasks then team won't feel motivated during complex tasks in the end.

Progress slowly and deliberately  

Software development is very fragile and delicate task and you should take care of it's speed. Team needs time to development core concepts and these are building blocks of complete software. You should help team to create proper development pace so that both parties don't feel tired and unmotivated during entire development.

Also don't try to integrate all features in single development life cycle. You can divide complete project into different milestones and then ask team to develop accordingly. It gives you time to evaluate project feature sets better.

I understand your position as I have worked with many client since 2008. I have seen many projects failed due to lack of funds or lack of cost management. Fortunately, we are on positive side.

From start, I have clear understanding of my client profile and therefore I always find them - they are adept of cost management and have clear product understanding. If you are thinking of cost effective software development or web application development or mobile application development then I will be happy to review your product requirement and will send you quotation without any consulting fees.