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The True Cost of Software

One of the first considerations when planning to develop software is of course the cost.

The immediate way to calculate it is the “direct development cost”:

Developer’s hourly rate  x  Number of hours  x  Number of developers

It is clear that in order to lower the cost, it is better to hire developers with a low hourly rate. Likewise hiring smart developers can reduce the number of developers you need.

But is this cost the only one you will incur?

Here are a few more to consider.

  • Team research cost. The time and effort to interview, qualify, and select the right team.
  • Learning curve cost. The time and effort it takes to educate the team about what needs to be done.  The more experienced the developer the lower the cost. The real smart ones can hit the ground running. Language barriers and cultural differences play a big role here.
  • Team replacement cost. In case the “right” team proves to be the wrong one. Or if they just decide to walk away from the project.
  • Opportunity cost. The lost revenue to your company due to the software not being ready on time.
  • Damage recovery costs. Happens when the software does not function the way it should, and causes damages to you and/or your customers.
  • Maintenance and support cost. To respond to inevitable changes in the operating system and external systems, new features, and fixes.  This cost can be high if the original team is no longer associated with the project and you need to train new developers.
  • Technology theft cost. The business cost if the great software you developed somehow finds its way to the hands of your competitors.

As you can see, the direct development cost is only one part of the Total Cost of Ownership (TCO) of the software.  Choosing developers with the lowest hourly rate is not always a guarantee for the lowest total cost.

So what does it mean to you?

When considering a development team for a project, most clients will make a quick judgment based on the hourly rate since this is the single factor they can wrap their hands around.  Our mind likes numbers and in this case lower means better.

Yet as you could see above, there are other costs involved.  And when choosing solely based on hourly rate, a seemingly attractive proposition can quickly turn into a costly development nightmare.

When choosing your team consider also language and cultural factors, relevant past experience, sharpness of the team, long term commitment and availability for support after the project is over, response time, and if they are nice people with integrity to work with.

Minimize your headaches by qualifying your team on multiple factors, not just the hourly rate.

Read more about the Real X Advantage and then call us to estimate the true cost of your software project.  We will ask you a few questions and based on your answers can rather quickly pinpoint what will be the biggest cost for you.  Concact us today.

Real X Software - the true cost of software

The on-time, on-budget, on-spec completion of the Tiger Project would not have been possible without you.

J. Thomas

Vice President, Televere Systems