How to Set KPIs to Assess the Performance of the Outsourced Software Development Team?

KPIs (Key Performance Indicators) is a term which, as an entrepreneur, you probably know very well. They enable people to quantify business objectives, monitor their performance regularly, and determine what works and what needs to be improved.

But have you wondered how to set them when you outsource software development? In this article, we present you with project metrics that you should track along with software KPIs. Check them out and enjoy the benefits of IT outsourcing!

Why are KPIs so important?

Establishing and monitoring performance metrics allows you to manage the progress of your business projects properly.

Today, KPIs are used in almost all industries, including IT, where they help measure and manage the progress of software teams. Establishing KPIs that measure programmer productivity in outsourcing projects is crucial because outsourced projects are much more challenging to manage than in-house ones.

If you want to be as efficient as possible, you should prepare both KPIs and metrics related to smaller tasks to get you closer to achieving your goal.

Introducing software engineering KPIs into the development process allows you to:

• Manage the project workloads effectively
• Identify problems on time
• Prioritize the work accurately
• Reduce overtime

Key project KPIs for IT outsourcing

Costs

Regardless of the industry and project specifics, one of the most important metrics is cost. By establishing this at the beginning of the project, you will avoid going over budget.

You can divide this ratio into two parts by considering:

• Actual costs — which will allow you to regulate ongoing expenses;
• The budget needed to complete — which enables better estimation of all potential budget deviations.

Productivity

Another important determinant is team effectiveness. It will monitor how much work is done and measure the effectiveness of software development teams. This issue is significant for Project Managers who watch over the team’s efficiency and make sure that the project is delivered on time.

When measuring the effectiveness of a team, you should focus on following issues:

• Cycle time — the number of hours/days required to complete the task;
• Lead time — time in which the task will be completed, taking into account other tasks the team is working on;
• Team execution speed — which will help estimate the number of iterations the team needs to complete each task (in this case, we recommend using code churn — a measure that shows the rate at which code is evolving);
• Deployment frequency — that is how often new functionalities are added into production. This metric should be maintained at a similar level for the project duration)
• Schedule compliance — allows measuring the ability to schedule and complete work on time.
• Sprint burndown — showing the speed at which work in a particular sprint is completed and how much work remains to be done.

Customer satisfaction

Another critical KPI for IT outsourcing is attention to customer satisfaction. How to measure it? The most important issues include:

• Scheduling (on time/deadlines)
• Quality (service & deliverable)
• Satisfaction working with the team (taking into account their willingness to be helpful, proactive and good communication)
• Transparency (providing feedback)
• Overall customer satisfaction

The best proof to confirm whether you have achieved your goal will be to ask for references or complete a customer satisfaction survey.

Working with the customer

Customer satisfaction is one thing, but effective customer collaboration can also be considered a KPI. You should pay attention to:

• Customer engagement — for example, the time spent by the customer in meeting the supplier’s requests.
• Delay time on the customer side — monitoring this factor helps to explain possible delays in the project.

We hope these metrics will help you become more efficient in your operations. And if you’re looking for a productive team that works with specific KPIs — contact us. We’ll provide you with the best IT professionals willing to join your project.