Thanks to software development outsourcing, entrepreneurs can create a digital product relatively cheaply and quickly without building a technology team from scratch.
However, no software product can ever succeed without the proper measures of success, and that’s why today,v we’re breaking down KPIs in software development.
What are KPIs in outsourcing projects, and why are they worth tracking at all? How can a company that outsources software development to another company verify if they’re doing a fine job?
Welcome to the world of Key Performance Indicators for software development.
Why is it worth tracking KPIs in software development?
KPIs measure the company’s effectiveness in achieving business goals, such as expected quarterly revenue or the number of hired employees. In the digital world, KPIs have the same function but focus directly on the software development team’s performance.
They indicate how well your development team is doing. And if this argument doesn’t convince you that it’s actually worth tracking KPIs, then the following will surely dispel all your doubts.
You have control over the project
As a company handing over software development, you want to know where the project is; after all, it’s your unique product in the making. You don’t want to overlook anything in the process.
KPIs, in this context, give you a complete picture of the situation and control over the project. By tracking them, you can react early enough if you notice an alarming situation.
You will have the manager’s most important resource, which is the peace of mind resulting from access to precise information on time.
You achieve your business goals
A software development project without KPIs is like traveling without a map. After all, you may want to get lost, land in any city, and never look at the calendar or watch, but only some people like or can travel this way.
There is rarely room for such spontaneity in business because it’s costly. Technology projects almost always pursue a specific goal and therefore need accurate measures of distance covered, time spent, and cost taken.
You see the engineer team’s commitment
Imagine that the project is clearly behind schedule, and no KPIs have been set at the level of the software team and individual programmers. If you ask the team what happened, they can tell you whatever story. Everyone can have another reason why what was supposed to happen didn’t happen, and you’ll have no actual tool to verify who’s telling the truth.
Thanks to software development metrics, such a problem will never arise because KPIs turn opinions into facts and numbers. So you know precisely to what extent and who has fulfilled or not fulfilled their task.
You have complete information for investors
If you are a startup and finance the product externally, investors will want to know exactly where their money is going and how you use it. So when Venture Capital asks about the project’s status, as in the case above, you don’t want to answer with opinions but with facts, meaning software development KPIs.
12 Metrics important in software development
KPIs, depending on the company or project size, the method of financing, or even the industry, can be radically different. Here we’ve listed the 12 essential KPIs for software development that should be measured.
Net Promoter Score (NPS)
Let’s start with a software development KPI that applies primarily to past and actual projects of a software outsourcing agency.
NPS examines the clients’ general satisfaction with the company. Two simple questions examine it:
- On a scale of 0 to 10, what is the chance you will recommend our services to your friends?
- Why did you give such an answer?
The NPS survey shows the subjective feelings of clients towards the company’s work. The survey can be conducted online or live, and it’s supposed to be repeated periodically, at intervals of 3 to 12 months.
NPS allows companies to discover what works well and doesn’t in their customer service. NPS results can also be used for marketing or sales, e.g., you can up-sell or cross-sell companies that score high.
NPS is measured by subtracting the % of detractors (scores of 0 to 7) from the % of promoters (scores of 9 and 10). It’s assumed that a Net Promoter Score between 0 and 30 is decent, while above 60 is excellent.
An alternative to NPS is CSAT (Customer Satisfaction Score), measured on a scale of 1 to 5.
Employee Net Promoter Score (eNPS)
eNPS is a KPI for software development that, like NPS, examines the satisfaction, but this time of the company’s employees, not its clients. The principles like surveying, repeatability and evaluation scale are the same.
eNPS is carried out to identify the reasons for one’s dissatisfaction with their job as soon as possible and to work on these reasons. Of course, it also works the other way around – eNPS allows you to capture what employees like about the company, so you can use this information to keep the good things going.
Importantly, you may also utilize eNPS to examine the employees’ satisfaction with one particular project. In this case, you run eNPS to find out what programmers have on their stomachs and what they don’t want to say during the Sprint.
eNPS is also an interesting metric for companies reaching for the support of a development agency because one of the biggest challenges of IT projects is the rotation of developers. Therefore, the higher the eNPS, the lower the risk of outsourced developers leaving after the coding starts.
Velocity is a software development metric that shows how many tasks specified by the Product Owner were completed by the team in a given Development Sprint. Based on the team’s average pace of backlog clearance, it allows you to estimate when and how long the team will work on specific tasks.
The two most popular ways of measuring Velocity are
- Issue count – simply marking tasks as completed or not,
- Story points – evaluating tasks according to their complexity scale.
Velocity is a variable value because each Sprint may differ in pace. It’s assumed, however, that you can assess the team’s average Velocity after three sprints and estimate further progress based on it.
Sprint burnout is a KPI that measures the work done during the Sprint against the timeline.
While Velocity refers to the expected pace of work, Sprint burnout shows the team’s speed within one Sprint. It’s most often measured as a percentage of completed tasks according to the remaining sprint time, e.g., we have completed 60% of the tasks and still have 30% of time left.
Release Burnout shows how fast the team releases features or products. Therefore, it’s a broader software metric than sprint burnout because a release may consist of several or a dozen sprints.
Thanks to Release Burnout, the team knows if they can keep up with the product’s release date. It’s also information for the investor or product owner on whether the agreed deadline is doable.
Throughput is a Key Performance Indicator that shows how many and what tasks the team has done in a given sprint. It doesn’t evaluate progress, only the total number, and type of completed tasks.
Thanks to this KPI, managers can assess what the team spends the most time on and why. Tracking this metric makes the most sense in projects conducted in Kanban, but you can occasionally use it in Scrum-driven projects too.
Cycle Time determines how much time the team spends completing a specific task. Managers use this one a lot because it objectively assesses the pace of the team’s work and allows them to estimate and evaluate the speed of future sprints.
Cycle time is counted from the moment the team accepts the task to its completion; there is no room for opinions in this KPI, but you need to ensure clear rules for receiving and completing tickets by the team.
Lead time is similar to Cycle Time, but it covers the time from the moment you come up with the idea of the task until its completion. Thus, it gives broader information about how long it takes from ideation to successful execution.
WIP – Work-in-Progress/Process
WIP measures the number of open tasks team members are currently working on. Thanks to WiP, managers can assess the team load and each engineer’s capability.
Deployment Frequency measures how often the team delivers code ready for deployment. Thanks to this KPI, you will check the team’s ability to provide tangible value, like a new feature or a bugfix over time.
This is a fundamental metric for teams working in short development intervals, like startups that want to verify various business assumptions quickly and need to release functional prototypes regularly.
Lead time for changes
Lead time for changes measures the time from laying the first lines of code to releasing the code to users. This is a similar metric to Deployment Frequency but narrowed down precisely to the time it takes for the development team to deploy code.
Change failure rates
Change failure rate measures what percentage of deployment fails at the production stage. It measures the effectiveness of the development team, meaning its ability to release high-quality software that doesn’t require corrections.
How do we measure KPIs in CrustLab?
As mentioned above, projects differ in their dynamics, and not all KPIs are always worth tracking, although the ones listed above, in most cases, are necessary.
But let’s stop with the theory for now. Instead, let’s look at some practical examples of how we handle the team’s performance metrics at Crustlab.
Your Key Performance Indicator is ours too
We start each project by mapping the business mission and vision. When a client comes to us, we first carefully examine their business goals, like when they want to put the product’s final version into use and what a “final version” actually means to them.
Then we break down these goals into tangible pieces and estimate how much time is really needed to implement such a plan. This is when we transform the client’s vision into numbers and define goals numerically – that is, we set KPIs.
Finally, we familiarize the software development team with the defined KPIs. From now on, the client’s goals become our goals, and the product’s success is our success.
Sprints and sprint retrospectives
At CrustLab, we work in Agile software development methodologies. They assume work in 1 or 2-week intervals, during which we open and close a particular, clearly defined project section, be it a feature or a whole product.
After such an interval, called a Sprint, we hold a team meeting to analyze the project’s progress. It’s called a Sprint Retrospective, and it’s the moment to ask yourself what you did well and what needs improvement.
Why is it important? Because working in Scrum requires us to monitor the project’s progress on an ongoing basis. We measure the KPIs of both Sprints and the entire project. This gives our clients a detailed insight into the progress of work on a micro and macro scale.
Access to KPIs
In our daily work, we use Jira, a task management tool to which our clients can access and check such KPIs as sprint burnout, project roadmap, or programmer’s capacity and workload on an ongoing basis.
Track KPIs for software development or die guessin’
If I had to summarize the topic of KPIs down to 5 main points, it would be:
- KPIs indicate how well your outsourcing partner is doing, evaluate the software team’s productivity, and help optimize processes within the project development,
- KPIs allow you to work with facts, not opinions,
- KPIs allow for improvement because you can only improve what you can measure,
- You can, and in fact, should measure KPIs at various levels, like the company as a whole, a specific project, or an individual software engineer,
- When reaching for the help of a development agency, choose only those that work on reducing business and software assumptions to straightforward KPIs.
So if you’re looking for help in determining the KPI for your product, or if any of the above indicators need to be clarified, we will break it down for you with great pleasure. 🙂
And in the meantime, If you’d like to know more about the software engineering outsourcing process, check these other articles we’ve written recently: