Custom Application Development Costs: Understanding ROI

Getting a handle on custom application development costs is difficult but understandable. When undertaking any large project, the last thing you want to realize is that there was a far-better approach that you missed during the planning phase. For an analogy: It would be awful to be the one responsible for building a bridge and, six months into construction, realize there was a superior location for it. It would be even worse if, in that superior location, you could have built a bridge of the same quality for half the price, or in half the time.

In a world where companies often buy software off the shelf, it can be easy to forget that the worst-case scenario for custom software isn’t a bad application—it’s one that seemingly works fine but doesn’t have a significant impact on your business. That’s when software becomes a cost center, rather than a true investment.

What Are the Highest-Value Opportunities for Custom Applications?

Before talking about custom application development costs, let’s talk about value. The great thing about custom applications is that they can solve just about any business workflow problem. However, identifying the best problems to solve is paramount to getting the best-possible value for your investment—and this isn’t always as easy as it might sound.

You might start by attacking the most frustrating issues in your daily work, and that’s not necessarily a wrong approach. But, as in real life, a quick solution for a superficial-but-nagging problem might create even more problems. Another analogy: You could move your offices to a new location to improve your commute, but you might end up dealing with higher rent or noisy neighbors, offsetting any potential gains with new problems. Likewise, custom software might reduce your frustration with a given task but require so many compromises or trade-offs that it feels more like a break-even scenario than a gain.

Granted, there are times when a problem is so pressing, it needs to be fixed right away. Other times, it pays to take a step back and look at your workflow as a whole. A little reconnaissance might reveal that solving an “upstream” problem makes other problems simply disappear. For example: Having a tool that categorizes and stores scanned forms in a database might prevent errors stemming from manual entry and file storage. But would that tool be needed if those very same forms were filled out and sent to your company electronically in the first place? Probably not. So electronic forms could obviate the need for a smart scanning tool.

Further complicating the picture is the fact that value can be hard to measure. Great software could have multiple positive effects, including time saved or increased customer retention. While those would be great benefits, their value is measured against those counterfactuals, making them difficult to evaluate. (How do you measure the time not spent on a task?) When establishing ROI (return on investment), you have to be careful with your attribution if you want to capture the true impact to measure against your custom application development costs.

What Is the ‘Solution Space’ Available for the Problem?

Assuming that we’ve picked the right problem to solve, picking the right solution is another process—one that needs careful consideration to achieve good value. There is often more than one solution to a given problem. Sorting through those solutions requires an estimate of their impact, both positive and negative.

Categorizing Custom Application Development Costs with Good, Better, Best

When there is an array of potential solutions available, a good first pass is to categorize them in terms of “good,” “better” and “best.” A “good” solution, for example, might add a feature to an existing piece of software that shaves off a few seconds of work every time that feature is used, whereas a “better” solution might build out an entirely new process to support a new and improved workflow altogether.

Both parties might benefit most from the “best” option in an ideal world. However, we know that the real world has constraints, and so a “better” or “best” option isn’t always viable. (For example, the “best” solution could be too expensive, and the “better” solution might take too long to develop and deploy.) Evaluating tradeoffs is critical to getting the best solution with the resources available.

Sometimes, the best way forward is a “yes, and” solution. This happens, for example, with the decision to rebuild or remodel a database or application. We’ve had clients decide to remodel a part of their existing solution in order to keep it functional for a little longer, giving them the breathing room to build a whole new solution from the ground up. This combines a short-term “good” solution and a “best” solution, with minimal disruption to the business.

Focusing on the Right Things When Determining Custom Application Development Costs

When we work to maximize value for our customers, we’re looking for the intersection of two things. First, we want to understand what is the most impactful problem in your business. That may not be the most annoying or top-of-mind issue, or it might be so ingrained in your day-to-day business that it’s not obvious at first. Once we’ve established what that problem is, we want to find the solution that provides the highest value with the resources available.

The real magic lies in finding that pairing of the most-significant problem with the highest-value solution. Sometimes it is unclear what is the best way to do that. In our bridge example from earlier, the best way to avoid building the bridge in the wrong place would have been to hire a surveyor to evaluate several potential construction sites so you could make a decision based on data. Likewise, you’d want your doctor to run blood or imaging tests before handing you over to a surgeon for major surgery.

For software development, the best prep work is typically a discovery project. That often surprises our clients, but we’ve found that diving into the workings of a business to understand its workflow not only helps familiarize us with the systems in use and their shortcomings, but it also helps both parties determine those problems worth solving. The better the discovery up front, the better we can identify those custom application costs that are truly justified, and thus worth the investment.

The Skeleton Key Difference

At the end of the day, you could hire from among many different software development companies. Several of them could do a good job. Most will do exactly what you ask them to do…and nothing more.

What few business managers realize is that the value they’re getting for the price they’re paying isn’t as good as it could be. Worse, they might expend precious resources to solve a problem without a meaningful result. At Skeleton Key, we work with our clients to understand their issues and provide solutions with the biggest-possible impact, maximizing overall ROI.