Seven Software Development Cost-Cutting Tips

Quick Summary - The year that won’t end is causing some companies to find ways to save money so they won’t have to. There are a lot of ways for businesses to save money, but there are some special ones in software development that can add months to your funding runway.

7 Software Development Cost-Cutting Tips

Know your funding runway

In good times and bad, always keep an eye on how long your funds can carry your effort. Your funding runway tells you how long you have before you burn through all of your cash. A funding runway is a mechanism for managing startups and most budget-based projects. Take your cash balance and divide that by your net monthly burn rate. If you have $300k and your spending $50k monthly, you have a six-month runway. This gives you six months to:

  • increase your revenue,
  • raise additional investments,
  • and/or reducing (optimize) expenditures.

All three mechanisms can extend your runway and can be engaged concurrently. They’re listed in order of priority. Frankly, the most enduring and beneficial effort is to focus on increasing revenue. As a business, your maxim is to Do Business. Showing your business has traction makes it easier to find investors.

In addition to knowing your funding runway, it’s critical to have warning bells specific to your business and stress thresholds. Don’t get into the situation of having one month of funds but need three more months of development before you can launch. If the investors you lined up in your last month don’t come through, you’ll have to scramble to pull out a miracle. A 60 or 90-day buffer provides ample time to line up additional investors, launch a crowdfunding project, and possibly streamline operations to eke out another 15-30 days.

Cost-cutting in software development

There are a lot of different ways for businesses to cut their costs, but there are some important ones specific to software development. Some apply to direct cost-cutting measures, but cost-avoidance and improving efficiency are major issues in software development, too. If you need more tips – we have you covered there, too!

Outsourcing vs in-house developers

Your business plan should cover how you plan to staff your startup. In most cases, staffing will be your largest long-term expense. In days gone by, startups would receive funding and immediately hire a team of in-house developers in the nearest (expensive) tech hub city. Enter COVID-19 and increasingly, software developers in the United States and Europe are telecommuting.

However, the only substantive difference between an in-house software developer working from home and one outsourced via an agency is the cost. We’ve covered how outsourcing can stretch your funding runway at length, previously. For the cost of each in-house developer, you can have 2 to 4 outsourced software developers from Ukraine on your team.

  • On value, Ukrainian software developers rank #2 out of 50 countries in financial attractiveness on 2019 Kearney Services Location Index.
  • On technical skill, according to SkillValue, Where to Find the Best Developers in 2019, Ukrainian developers ranked #5 globally with a technical rating of 93.17%.
  • For comparison, US developers ranked #27 with a technical rating of 84.59% on 550 technical assessments.
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Add interns to augment non-technical staff

For software development and R&D, you want the highest skilled developers you can afford. For quite a few other areas of startup development and business operations, it can be worthwhile to bring on college interns. For many tech startups, this could be useful in areas of human resources, marketing, content development, social media management, and perhaps others. Intern programs do require some extra management effort on your behalf but can be instrumental in laying the groundwork for aspects of your business that are important, but not mission essential.

On the marketing side, interns could be very useful in helping you manage a crowdfunding campaign. Equally useful, you can put them to work researching and developing professional industry contacts in your target market.

 

Everything can be negotiated

The list price isn’t always the price, otherwise stores wouldn’t offer specials or discount coupons. Don’t let pride get in the way. If you have a startup, you’re in a good negotiating position as a lot of people would like to help you. For best results, shop around and talk with competing vendors to see what kind of deal you can cut.

Optimize subscriptions

Subscriptions and software licenses aren’t always trivial expenses. Many companies, especially online, provide discounts if you subscribe quarterly or annually instead of paying monthly. Authorize subscriptions to services only for developers who need/want them. Some informational services are only needed periodically, so only subscribe to them when you can put them to good use. And remember, these can also be negotiated.

Office furniture, virtual and shared Offices

If you must have an office, save some money by outfitting it with second-hand furniture from stores or auctions. One of our team members picked up furniture for four work stations at an auction for a grand total of $20 – and a functional photocopier for $5.

More companies are going with virtual and hybrid workspaces these days. Virtual offices have their pros and cons, but let you have a professional address without the costs of one. Shared offices, on the other hand, provide you a plug-n-play office with all of the perks of a real office that’s perfect for startups needing to get some lift before committing to a long-term lease.

Stick to an MVP

These days, most startups are using Minimum Viable Product to drive their product development. The MVP process helps to keep everyone focused on a) product-market fit via maximizing end-user knowledge and feedback, and b) the main reason why end-users will love to use your product. It’s easy to lose sight of the MVP process because you or the project owner wants additional features. Don’t. Introducing changes midstream in a project’s development will require changes – increasing development costs and delaying launch.

Efficient time management

It may come as a surprise, but numerous studies show that a majority (62%) of software developers spend less than half of their time coding! There’s a lot more to developing software than just writing code, like testing, code maintenance, code reviews, fixing bugs, and… meetings. A lot of this is essential to quality software development and can’t be cut.

Based on average US developer wages of $107k per year – the fully-loaded cost of one wasted minute, every day over a year is roughly $300. That sounds trivial, but Stripe’s The Developer Coefficient indicates software developer inefficiency may be as high as 31.6%. This accrues from many different causes including things so innocuous as not keeping to best practices in managing your Git repositories – which most developers use as their version control system.

There are two simple points to observe on this point – strive to maintain best practices and be conscientious of the value of everyone’s time. Don’t hold developers to stay in meetings longer than is necessary. That sounds obvious, but it gets an underscore for having recently seen a startup holding three hours of largely unnecessary weekly “all-hands” meetings. Here’s a tool by the Harvard Business Review to calculate the cost of your meetings – a nice starting point.

Lists of cost-cutting tips

There are many other ways to trim business costs generally – not necessarily just for software developers. If you need more ideas to trim costs, check out:

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