Many companies are having hard time in the light of the economical downturn. Investments are postponed or cancelled at all. People get fired. How to be of help in such a situation? Knowing that cost saving is a subject that many managers love today we will have a look at what are the available cost savings options in the software area.
Cost cutting or cost saving is especially popular in times of economical downturn. Shouldn’t this be a continuous thing to be aware of? The dramatic cost cutting taking place today tends to be very temporarily. You cannot keep cutting cost. Investing in a clever way is a more future oriented approach. Therefore, I would like to focus on cost saving seen from the perspective of new investments. Based on the experiences with several clients in the past few years I come to a conclusion that most of them are paying too much for: 1. Consultancy 2. Software development 3. Software licenses 4. Hosting fees 5. Maintenance and support This means that there are at least 5 saving opportunities. Among them some are quick wins and others need to be part of a more long term strategy. 1. Consultancy In general for the end user it is rather hard to define his exact needs for a requested solution. Outsourcing software development based on such a vague request, which happens rather often, is doomed to fail. To prevent this, expensive consultants are being hired to define the request. In my opinion consultants tend to charge too much for this task. In about 5-10 days it is possible to write a requirements document that covers most of the needs and that enables starting with an Agile software development approach. In practice, either the client or the consultant are trying to specify everything in too much detail. Especially knowing that a huge part of these details are hardly needed, it means we found another cost saving opportunity. 2. Too high software development cost Software development with your own developers is, in general, rather costly. Very often these developers cannot work efficiently due to all kind of internal matters and commitments. Besides, the most common ways of development do not support their efficiency. Often organizations try to solve this by hiring expensive external resources. These external resources often work at the client’s premises and in no time they loose their efficiency as well. Based on my own experience I realized that “body leasing” is way too expensive and hardly productive. A lack of capable management together with inefficient external resources do not improve this situation. In my opinion, a better solution is to concentrate on the core competencies of own employees and to outsource the rest of the work together with all the responsibilities to an external partner. Then, it is still of great importance, which partner to choose. I would advise a multiple partner outsourcing strategy to prevent a vendor lock-in. Don’t forget to consider outsourcing to Eastern-Europe and/or Asia. If you know how to handle such projects, you can really save a lot of money there. And it is expected that rates will further drop in the upcomming time. When you are not experienced in this domain, seek assistance from either a reliable consultant or a good intermediary organisation. Make sure that you trust them, as this is one of the most essential foundations for a productive cooperation. 3. Too high and unnecessary license cost Moreover we pay unnecessary license fees. Recently a client told me that he had to pay several thousands of Euros a year for his website. We totally rebuilt it and improved it for less money. Now they only pay a small amount of hosting costs. And if they want to change something or add new functionality, they know our hourly rates which I consider to be relatively low. And don’t forget about all the hidden license costs. Due to a lack of administration yearly recurring fees are paid for licenses that are no longer in use. 4. Hosting fees Hosting fees in general are either much too low, so you cannot expect too much, or way too expensive. Very often they are charged on a subscription basis, with yearly automatic prolongation. Reconsider them timely and/or renegotiate the terms of the contract. 5. Maintenance and support Together with a project or a license many providers include monthly/yearly recurring costs for maintenance and support. Very often it is unclear for the client what to expect. The cost of maintenance on average comes up to about 20% of the initial application cost! I wouldn’t agree on such terms. If you did in the past, try to renegotiate the contract. Based on our yearly experience in consultancy and software development we are open to help you look for the proper cost reduction alternative. Feel free to contact us without any obligations! The first meeting is for FREE 🙂
Entrepreneur, co-founder & Managing Director of Goyello and Webmerce. Sociologist and electrotechnical engineer, a great combination that stimulates him to look for working solutions. Passionate about converting great ideas into new solutions. He is married and a proud father of 3 great sons. Participating in (and training for) triathlons to stay fit.
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