Key metrics to measure success in software outsourcing

Using metrics for development outsourcing leads companies to increase efficiency and productivity. Metrics measure various aspects of the software development process and serve as the basis for making important decisions that will ultimately improve business operations and performance.

There are 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 project 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 experience with these metrics to create more efficient processes, develop maintenance plans, and inform their teams of any issues.

The main purpose of tracking and analyzing metrics for development outsourcing is to determine the overall quality of the established process or final product. This also allows teams to improve the quality of their work and predict a wider range of outcomes. By measuring these metrics, software development managers can help increase ROI, identify areas requiring improvement, manage workloads, reduce overtime, and reduce costs across all software development projects.

Metrics are also important when evaluating, managing, and prioritizing issues. They help project managers detect and fix problems early, 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 products developed. However, the process for selecting exact metrics differs between organizations.

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

Time-Based Metrics

Time-based metrics monitor the time it takes a team to complete a specific task. They are great ways to evaluate and estimate performance in a transparent way and allow managers to forecast deliveries within established deadlines, analyze the current pace of work and identify areas that need improvement.

By combining time-based metrics with other metrics, companies can also determine whether they are making a profit or not. These metrics are very effective because they are easy to follow and represent actionable steps that complete objectives. They are member-specific, easily measurable, and aligned 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 deadline

Project lead time measures the time a project takes from start to finish. This metric assesses the team's ability to meet deadlines and stay on schedule and allows you 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 the needs of the project. Meeting deadlines is important for companies, 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 the overall project timeline using Gantt charts or Kanban boards.

Time to hit the market

Time to market measures the time it takes to take a product from conception to market until it reaches its audience. This needs to take into account 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 provides a good indication of the overall efficiency of the internal management processes associated with software development. Team members can also measure time to market in weeks, months, quarters, years, or any other way.

Typically, a shorter time to market means a faster ROI and provides a competitive advantage for companies working with short life cycle products. The faster a product reaches the market, the less competition the company faces and the greater its market share.

However, reduced time to market still needs to accommodate adequate development to ensure product quality and avoid low customer satisfaction. There is no specific method for calculating time to market, as it depends on the needs of the business, the project and the development team. Good points to start the measurement period include:

• Formulation of the idea
• Approval for development
• Complete financing
• Start of development

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

• The engineering team delivers the final production design
• A customer first buys the product
• The company reaches a certain production value

To help reduce time to market and improve the development process, companies can try to optimize the development workflow by setting realistic goals, creating 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 whether the development team is overworked or understaffed.

Inappropriate utilization of resources can result in reduced productivity, inability to meet customer demands, and poor quality products. This then translates into higher costs, lower profits, decreased sales, lost customers, poor reputation in the market and losses in market share.

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

Quality Metrics

Companies around the world adopt quality metrics to monitor their companies' quality management system. These metrics provide a comprehensive view of the quality of products developed and services provided.

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, typically 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 are ready for release.

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

Quality control engineers can improve the density of defects by not only finding and fixing them, but also avoiding and preventing them. To do this, they must:

• Adopt a quality-oriented mindset during the development process
• Apply best practices and standards throughout 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 defects that occur

Code review feedback

This metric is a measure of code stability. Throughout development, developers can go back and change some lines of code, but they should strive to write maintainable code that can withstand other changes to the product.

Code churn measures how frequently a piece of code changes during development. Code will always change to some extent, especially early in the project due to code additions, modifications, and deletions. However, code rotation should be kept to a minimum, especially before the product is released.

Tracking code review feedback and turnover rates allows project managers to identify any spikes in code changes that might suggest existing issues with the application architecture, coding or testing practices, or developer experience.

Test coverage

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

This quality metric allows QA engineers to evaluate the functional coverage of test case designs and specify necessary procedures whenever requirements are not aligned with any test case.

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 allows business leaders to avoid going over budget, better understand where their money is going, and evaluate the efficiency of their overall operations.

Outsourced development cost

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

This metric helps ensure that product development remains within budget. While it is important to keep costs low, nothing should compromise the quality or functionality of the product.

Cost savings

Cost reduction is an essential metric for measuring the success of software development outsourcing, considering that most companies turn to this business model to save costs. It tracks actual project costs compared to the initially established budget to determine the cost savings achieved.

There are many different ways to improve cost savings when working with an outsourcing provider. Some of these include looking for a supplier that offers a good balance between cost and quality, negotiating with the supplier and choosing the appropriate outsourcing model (staff augmentation, dedicated teams or full cycle development) depending on the needs of the project.

Return on Investment (ROI)

ROI measures the return on investment made in the outsourcing project by dividing the total profit obtained by the amount of money invested in the project. This metric measures the financial success of the partnership.

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

Calculating ROI is important for determining how much money companies have invested in a team, project or campaign. It also helps set the direction of product development and guide 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 which metrics are most important to analyze and monitor based on their individual needs.

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

• Common Outsourcing Services in the Fintech Industry
• 5 signs that it’s the right time to outsource your software development
• Drafting comprehensive service level agreements for software outsourcing
• Why should startups outsource software development projects?

Common questions

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

To track the performance of outsourced software development teams, companies must select relevant metrics as these will push their teams in the right direction and give them market advantages. The right metrics enable 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 choosing the right metrics. To choose the right metrics for outsourcing projects, companies need to have a deep understanding of their key processes and business 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 must regularly review metrics and make data-driven decisions. By analyzing key quality performance indicators, organizations can determine whether development processes need to be improved and how they can do so.

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