Eastern Europe is one of the go-to destinations for businesses that need external development teams. If you are looking to hire developers, it is important to measure your team’s return on investment (ROI) and key performance indicators (KPIs). This article explains how to get the best results when looking for offshore development in Eastern Europe. It explores how to measure your KPI, ROI, and explains how you can optimize both for the best results.
How to Measure ROI for Your Dedicated Team
Most businesses opt for dedicated teams over in-house ones because they are more cost-efficient. When you hire Eastern European developers, it is essential to verify that your investment will be worthwhile. However, calculating ROI is not as simple as using a formula to see if your investment paid off. Here is the formula to calculate the total ROI:
(Total Value of Benefits – Total Costs)/Total Costs * 100
First, you have to define the total value of benefits. Here are the things businesses typically include when calculating the total value of benefits:
- The total revenue increase you get from the new software or upgrade
- Customer retention
- New sales
- Productivity increases
- Revenue increases
- Cost savings
- Avoided costs like fines or penalties
For the total cost, you have to include all of the direct and indirect expenses involved in your project. Here is a quick breakdown of what to include:
- Total external development team costs
- Licensing or additional costs
- Cloud infrastructure costs
- Communication and collaboration expenses
- Additional sprints or scope changes, if applicable
Do note that some of the benefits are not instant. Many software projects may yield value for your business in the long run, and your returns on investment may improve over time. Once you have your total value of benefits, deduct the total costs from it. This gives you an accurate representation of what your total returns are.
You can now divide the returns by the total costs and multiply them by 100 to get your return on investment rate. Include the total cost of your project and any additional expenses that you had to incur in-house. Add all of the costs under the total costs and subtract them from the total value of benefits. There is no metric to define a good return on investment. Some projects are low risk and don’t add important features, and they will naturally have a lower rate of investment.
You have to set expectations for your business and plan your investments accordingly. More importantly, ROI is not the sole factor that determines if your project was successful. Here are some of the other intangible things that you have to consider when evaluating your ROI:
Completion Time: You can factor in how long it took to complete your project. External teams should be able to deliver your projects on time. While bugs and other issues can occur, your developers should promptly resolve them and keep things on track.
Innovation and Future Impact: You should not measure your ROI solely through immediate profits. Many development projects often introduce new features or streamline business processes, which you have to consider. Consider customer feedback, new features, and how your project affects you long term when measuring your ROI.
Quality of Work: Your developers should complete their projects with minimal hassles. Teams should have low rework rates and complete projects without requiring too much from your end. The faster you can launch a new app or upgrade existing systems, the bigger the edge you get against your competition.
Some projects will naturally have a high ROI potential if they can generate long-term benefits for your employees or customers. You can set your expectations accordingly and evaluate your ROI for future projects.
How To Measure Your KPI
Using KPIs helps you identify how good your development efforts are. You can measure KPIs by choosing the right metrics to measure your development team’s performance. Here are some of the best metrics that you can consider using:
Sprints: Sprint is a term from agile development. It measures how much work your team can push out during a fixed amount of time. By breaking down your project into sprints, you can set actionable goals that your developers can work on. You can then use sprints ot measure if your team is on track to finish the project.
Release Burndown: Release burndown is a metric that shows if your team is ahead of or behind your schedule. It helps you work with your team in case the members fall behind. You can also use release burndown to get a clear estimate of when your project will be completed.
Cycles: In software development, cycle time measures how much time your development team spends on a specific task. It is a good way to see how efficient your external teams are. You can then use the data to estimate how long some of the future tasks will take to complete.
Flows: Flows help you find out how much of your development time is being used efficiently. Cumulative flow helps you track the status of all your projects. If something is approved or in progress, you can see the relevant status in your KPI reports. You can use the data to see the flow efficiency of your team. Flow efficiency helps you track how efficiently your developers completed their tasks. Good teams will typically never have a disruptive backlog and complete all tasks on time.
Code Quality: The most important KPI in software development is the code itself. Your code has to be simple and stable. Whether you are adding new code to your existing apps or releasing a brand new app, your code should be stable and work without any hiccups.
More importantly, your code also has to be simple. Cyclomatic complexity is a quantitative way to measure your code’s simplicity. While complex code can function without any issues, it becomes difficult to make changes in the future. The simpler your code is, the easier it gets to push out upgrades for your software.
Conclusion
Measuring your KPIs and ROI can help you hire developers in Eastern Europe who deliver quality results. As a business owner, you can benefit a lot by setting clear expectations and having metrics to judge your dedicated team’s performance. Knowing how to measure the quality of your project helps you get the best results from your developers.