The Debt Behind the Low Price

A real-world study – why a less expensive software development company will likely cost you more in the long run

With IT budgets tighter than ever, choosing a software development vendor offering a better price than another is extremely tempting, especially when the project is stable. Some companies go down this path, focussing on the hourly rate, hoping the delivery meets their requirements.

This approach can turn out to be a false economy due to the cumulative technical debt. Technical debt is the implied cost of future reworking required when choosing an easier coding path instead of a better approach that could take more time. It includes the impact of any technical shortcuts made to keep costs down or meet delivery deadlines. While eliminating technical debt altogether is unrealistic, keeping it to an absolute minimum with today’s tools is possible.

Technical debt is not always immediately apparent upon a project’s completion. It occurs when best practices in software development are not deployed and carefully monitored during the development lifecycle to ensure high-quality, clean code, high performance, scalability, security, governance and compliance. 

Sooner or later, the technical debt stemming from a less expensive approach will be felt when additional development effort is required to refactor solutions, conduct regression testing, perform release management, overcome scalability issues, deal with unstable systems and address poor user experience and unsatisfactory adoption.

One of our customers challenged us to prove that the hourly rate was not the only factor to consider when analysing software development costs. We conducted a comparative study to demonstrate the difference between a highly skilled team using proven methodology and project governance and another off-shore contractor team. The study sought to determine which provider produces less technical debt.

Using OutSystems AI Mentor Studio, we compared a PhoenixDX delivery squad with another one with equal conditions in the same organisation and environment. Both squads were building applications using the OutSystems platform, which provides several tools and deployment practices to ensure code quality and governance and control the growth of technical debt.

The study measured and compared technical debt data points across architecture, performance, security and maintainability for both vendor squads over a 3-month period with the same number of developers. The results were dramatic.

 

Comparison of Technical Debt Accrued by PhoenixDX vs Offshore Vendor

 

The offshore vendor squad generated five times more technical debt than the PhoenixDX squad, which decreased technical debt by 160 points per day (whereas the other vendor increased technical debt by 700 points per day).

A further technical debt study for another customer opting for a cheaper provider yielded similar results. Over three months, cumulative technical debt grew six times faster with the cut-price vendor squad than the PhoenixDX squad.

 

Cumulative technical debt last quarter

 

These findings underscore a crucial point: merely comparing hourly rate card costs overlooks the additional expenses stemming from cheaper options, which include considerable further outlays to manage and rectify runaway technical debt. While the research focussed solely on technical debt, other aspects of software development quality, such as performance, bugs and user experience, should also be part of any price analysis. These studies confirm that businesses save money in the long run by working with a highly qualified and experienced software development team.

 

“The bitterness of poor quality remains long after the sweetness of low price is forgotten” Benjamin Franklin

 

To find out more, check out these articles:

How to avoid the 3 key risks of low-cost software development

Here’s how IT Leaders can do more with less

How IT leaders can minimise their Total Cost of Ownership (TCO)