Monday 27 March 2017

Cost Cutting in Custom Software – 1 : Blog Series

There is no doubt that custom software is more powerful and aligned to your business than off-the-shelf products. Perhaps it would even offer higher productivity and innovation to the way you operate.  However not many opine custom software due to the cost factor.  Custom software as compared to Off-the-shelf or packaged software tend to be on the higher side of the investment. Given the need of the hour we often look at the ways to keep the cost low without compromising on the ability to achieve innovation and progress. So, this post is especially for those SME or Corporations on cost cutting mode, who are looking for custom software solutions. The below points can act as guide to cost reduction in your next custom software development outsourcing.

1.The Trap - Effort Vs Fixed costs
Often companies looking for custom software solutions, tend to make decisions based on fixed costs i.e x amount in development and delivery of a project. Most often fixed costs are derived from per man day or man hour costs and usually attributes to efforts involved. Therefore, vendors would quote you based on modules you need. Sometimes you might lose precious requirements out of the deal to keep the cost low. But, costs are only one side of the coin, and you must consider the other side i.e efforts.
The vendor charging you 20% less on a project still would need 40% more time to accomplish it and without the quality that’s needed for the project. So, you might still end up paying for it either in time or in quality or in both.


Identify a qualified vendor who can provide you a clear man hour cost break up. This can help you gauge the efforts in terms of time and cost.  The estimated hours can serve as rough gauge or relative productivity.

2.Vendor Location

Probably you never thought of location as a factor in cost reduction for custom software projects. Location plays an important role in overhead costs. Especially if the IT vendor is situated in Metropolitan, as higher the cost of living, higher the man hour costs of your project would be.
The cost difference between non-metro pricing to that of metro would be in the range of 30% to 50%. However, if you choose to outsource to any developing country or city far from your vicinity, you would have less control over delivery.


Choose a vendor who has offices in developing country, or non -metro city. Chances are they are outsourcing the work internally to provide you the best cost model. And viola, you can have the convenience of someone at the proximity with lowered cost.

3.Clear Requirements – Accurate Estimates

I cannot stress this enough, often the cost is influenced by the ambiguities of a project. If you have unknown elements that you are hoping to figure out on the go after outsourcing, be ready to pay upfront hiked up costs.  Talking from vendor perspective, they would rather charge you more for the grey areas in your requirements, as you may not want to pay extra charges after the project cost is agreed.  

Your inaccuracy can translate into assumptions from the vendors increasing the proposed costs to 30% or more.


Had you done your requirements document right, you would have ended up in clear summary of tasks for each module, kinds of users and their roles, the inputs and outputs for each module and how it contributes to the objective of the overall project.  If you are in doubt as your vendor for any requirement document format. Chances are they might have done this several times and would have developed a clear template for documenting the requirements accurately.

In conclusion, these points might be easy to achieve and can help you with great deal in bringing down your cost.  That’s all I have for today, stay tuned to our blog posts to read more posts on this series.  Alternatively, you may sign uphere to receive newsletters, or read more on this subject here. Thanks for dropping by and have a fantastic day!

Srivatsan Aravamudan
Telephone:+65 62689551
Fax:+65 62689858
Business Analyst - Snr Software Consultant.

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