Proprietary software is often seen as the holy grail for companies, a sure sign that they’ve “made it.” Ushering in digital transformation establishes a business as technologically advanced and innovative, while simultaneously boosting the company’s overall value.
However, when creating a software development budget, many upstart businesses tend to be overly cautious, leading them to spend more money in the long run. A tight initial budget doesn’t account for project changes that will inevitably crop up during the developmental stages.
Overhauls in software and app development can result in higher long-term costs when the necessary capital isn’t available from the onset. According to a 2020 report from the Consortium for Information & Software Quality, unsuccessful software projects cost companies $260 billion, and software systems with operational failures cost $1.56 trillion.
Building more budget into the front end of software development can help you anticipate failures and properly allocate resources to make the software successful. I connected with Mohan Karunanidhi, Consulting Director for Propel Technology, who has expertise in helping businesses navigate the processes of sourcing software and managing projects, including offering innovative ideas to solve budgetary problems.
When creating the budget for propriety software, here are three things that Karunanidhi recommends businesses consider:
1. Set expectations on what your software will accomplish.
What does the team want the software to actually do? Are there specific problems that the software will solve? How will it do so? Are there experts in-house already, or does a person or team need to be hired to help develop the software? Outlining the goals of the software and having an in-depth understanding of what it will do is an essential first step in establishing your budget.
“Budgeting for a software solution should be preceded by budgeting for a hypothesis or a proof of concept,” Karunanidhi said. “Having a deeper understanding of the requirement by identifying and onboarding the right people with subject matter expertise and industry experience is critical to having a keen sense of budgeting once the hypothesis is proven.”
2. Consider the end-user experience.
Who is your software’s intended user, and how will they use it? A key component in software development comes from real user trials and feedback implementation, where the trials are repeated until the software is completely dialed in. Conducting trials and integrating changes into the software require capital. If enough isn’t set aside up front, a business can—and ultimately will—lose funds from having to recreate its product or from a lack of product sales and revenue.
“A constrained budget will have a direct influence on time and quality—the triangle factor that stays relevant until this date,” Karunanidhi said. “When it comes to budgeting, the optimistic part of the human mind tends to associate only with the best-case situations. With so much to accomplish on a restricted budget, incompleteness and inconsistency in requirements are frequently uncovered later in the development lifecycle.”
Karunanidhi went on to say: “Failure to construct for scalability and test the solution is particularly damaging because the potential delay happens at the end of the development lifecycle, making recovery impossible. A limited budget forces the compression of many deliverables into a short period of time, diminishing the possibility to construct an application based on feedback from actual users.”
3. Create a realistic timeline.
“When is this software needed?” is always the big-picture question. But between now and the deadline, myriad risks and problems can occur, and they need to be budgeted for. You must widen the scope of work to include the “what ifs.” What could happen? What expectations does the team have? What kind of hiring and training is needed? Roughly 20% of software development is spent fixing problems that likely could have been avoided if a larger budget had been created.
Tight software budgets cause headaches for everyone involved because they directly influence the time and quality of the product. Budgeting with an optimistic mindset, as opposed to a realistic one, only allows for best-case scenarios to play out in development. The lifespan of production in software requires a lot of work. Attempting to accomplish it all on a restricted budget leaves room for an incomplete and inconsistent product, factors that are often uncovered later in the development lifecycle.
Failure to account for scalability and test the solution is particularly damaging because the potential delay happens at the end of the development lifecycle, making recovery impossible. A limited budget forces the compression of many deliverables into a short period of time, diminishing the possibility of constructing an application based on feedback from actual users.
As an example, Karunanidhi explained that a tight budget caused a company to build an app for users on only one platform. Later, the company discovered that the application should have been designed as a cross-platform solution (on iOS, Android, and the web). The software had to be redesigned for cross-platform user expansion, a consequence of starting the project with a too-conservative budget. This ultimately cost the company more money because it delayed the time to market for all platform users and affected users who had already used the application.
The new businesses that think incorporating propriety software into their companies is a sign that they’ve “made it” are forgetting a few things about software development: To truly “make it,” you must understand what your software solution aims to accomplish, onboard the right team to achieve your goals, and create a budget that allows for trial and error to fix problems as they arise. Ultimately, creating a larger budget for development will prove that your business has truly arrived.