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KPIs for Outsourced Software Development: What Are They, and Why do They Matter?

Krunal Shah

Nov 05, 2021

7 min readLast Updated Jul 07, 2023

Measuring KPIs is critical to gaining new insight and learning new things. Having everything you need, laid out at your disposal, is a significant time-saver. Once everyone has a general understanding of what they are measuring, correlating those metrics to results is easy.

Measuring productivity of the teams while outsourcing development services should bring these pertinent questions to answer:

  • Do you have a great knowledge of your team's strengths and weaknesses?
  • Do you measure your team's emerging strengths?
  • How do you know which engagement metrics matter most?
  • What is it taking to get your projects to completion (or non-completion)?

Also Read: How To Overcome High-Risk Problems of Outsourcing Software Development

Calculating meaningful numbers is hard work, though. Without looking up beyond your company's borders to gather comparisons, you'll likely miss out on a key performance indicator that is vital to know.

In this article, we will be explaining in detail how to extract data from your team's KPIs to find valuable insight and measure the productivity of your outsourced software projects.

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The Significance of KPIs Lies in The Performance of a Project

About 24% of workers surveyed by the Workforce Innovation CMS found performance metrics to be the most useful. When combined with a central point of view information, metrics give leaders an invaluable tool when determining emerging and close to term opportunities. And the success rate of software development has some exciting revelations. 2018 witnessed almost 70% of projects meeting their stipulated goals, and 60% stayed well under their budget.

Yet, the management of software projects seems to be a challenging task. A 2020 survey revealed that 11.4% of investment goes to waste because projects performed poorly. And the factors contributing towards substandard performance are missing the deadlines and going over the decided budget.

Precisely for the same reason, measuring and drawing valuable conclusions is one essential remedy when things don't seem to add up as planned. Tracking your software development team on their progress allows you to experience:

  • Enhanced improvements in managing projects.
  • Precision in predicting the costs and outcomes.
  • Identifying the bottlenecks is easier
  • Wider scope for driving improvement through data and drawing conclusions
  • The clarity in expectations and goals
  • Visualizing the accomplishments of teams

Hence, the success of an IT project depends majorly on the balance between tracking the business and software metrics. A recent study by Gartner shows that 56% of business outcomes' data and 44% of IT information maintains that ideal ratio for the CIOs. In the age where several approaches of analytical tools exist, Agile software development metrics came out as the most popular performance indicators for 71% of organizations.

Also Read: Best Agile Practices To Make Project Management More Efficient

Therefore, we will discuss the performance indicators of Agile software development for developing meaningful, effective, and productive projects.

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The Common Agile KPIs that Reflect the Effectiveness of Development Processes

The effectiveness and productivity of a software project depend on shorter time-to-market, staying focused on estimations, and delivering high-quality functions that speak business value. Efficient KPIs can answer crucial questions like "how will a particular scenario impact the consumer experience?" Thus, these KPIs should also answer questions related to achieving specific goals, generating revenue, and enhancing user satisfaction.

While there is no standard protocol for using such indicators, team productivity depends on measuring results, and efficiency demonstrates improved business. Similarly, team velocity is a metric for measuring progress at a team level, and measuring the code quality would suffice at an individual level. Each software development company has a different style and culture.

Hiring expert and experienced developers from the right outsourcing partner for your software development needs, help you define the high-performance that your firm seeks. Identifying complex numbers to quantify the value and tracking the performance of developers enable them to focus on the big picture.

Also Read: How To Outsource Software Development Projects The Right Way

Here are the invaluable Agile software performance indicators for tracking the progress of a project:

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For Measuring Productivity and Work Progress

  1. Sprint Burndown

Agile methodology focuses on the assumption that the division of a project enhances the team's flexibility. Hence, under this metric, a project is divided into small pieces called sprints. The length of each sprint is different for each group of developers, but usually, it takes two weeks. The purpose of sprint burndown is to bring ease in the planning process by even division of the work.

The visualization uses a chart to display the days on the horizontal axis and the time required for completing all the tasks on the vertical axis. It visualizes the estimated time for the work needed to be complete before a sprint ends. A burndown chart plays a significant role in showing the workflow and productivity of a team as compared to the sprint goals. Additionally, it assists in enhancing project management and making well-informed decisions. For instance, if the chart shows a sudden drop in the graph, it might mean that a new update takes place only when a sprint is near its end. Similarly, if the graph doesn't touch zero on deadline, it indicates that the work allotted is more than a team's capability.

  1. Team Velocity

This metric shows the average work measured in a story point that has been completed within a sprint. The team velocity would differ for each team because there can't be two similar projects. Consequently, it helps assess the last efficiency of a team, set realistic expectations, and determine forecasts. And it can also change over time, with established teams seeing an increase before arriving at an equilibrium between processes.

Thus, each team's approach would also vary, making it futile to compare each velocity. However, implementing this KPI in internal projects can help program sprints and analyze a team's output. This, in turn, would also assist in making projections regarding a team's capability to achieve further sprints.

  1. Release Burndown

A release burndown chart is for measuring the work that needs to be completed before a version is released. It displays the overview of the work progress and enables implementing the required changes for timely delivery. When a project undergoes any changes while developing a software project, a release burndown chart helps gauge the impact on the release date. It makes predicting the release date easier by real-time predictions according to the updates.

Furthermore, project managers can also estimate a team's capability for timely releases and anticipate any changes required in shifting the deadlines.


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For Measuring the Health of a Process and Finding Obstructions

  1. Lead Time and Cycle Time

Lead time measures the time taken to complete a task from the point of its creation. It measures and provides insights into the stages involved in a development process. It also directs the attention towards the practices that need improvement. Hence, keeping the lead time as low as possible would indicate a higher response time to the customer. Higher lead time is usually due to poor backlog management and slow approvals.

Cycle time is the period between commencing a task to its completion. It measures the length of the overall period and enables estimating the time to introduce a new function based on data. This KPI is a great tool to find recurring problems in projects undergoing unpredictable cycle times. It also helps in making decisions about completing new tasks by making estimates through past examples.

  1. Flow Efficiency

Flow efficiency is an essential metric to gain insights into the divisions between work and waiting time. While developing a software project, a developer usually needs to wait to complete a feature, as the code contains many dependencies. Measuring the time for waiting between starting and finishing a functionality can prove more valuable than streamlining the entire process.

Also Read: How to Measure and Improve Productivity of Your Software Development Team

For Measuring Code Quality

  1. Code Coverage

Code coverage is the metric used for defining the number of executed lines or blocks of code while running automation tests. It forms a crucial part of TTD (Test-driven Development) practice. For efficient continuous delivery, it uses a simple approach of higher the code, the better the execution. Detecting tools include Coveralls that show the percentage of the called lines of code.

  1. Code Churn

Code churn works as an essential metric for envisioning all the trends and fluctuations on a codebase. It covers both the process and time before a release and measures the addition, removal, or code lines changes. The metric is essential to decipher the stability of a code in different stages. Sometimes, regular spikes can indicate the unfocused approach for generating tasks, and irregular spikes help determine the level of dependencies.

Partner with a Reliable Software Development Company for Outsourcing your Projects

Outsourced software projects are much more tricky to manage than in-house development. Hence, it is essential to focus the flow of KPIs on the smaller tasks in order to achieve the desired goal. However, measuring performance and progress is not the main challenge. It is choosing the relevant and right metrics for assessing the performance that causes the mayhem. KPIs are invaluable pieces of data and information to keep an eye on how a project unfolds. At Third Rock Techkno, our team of expert developers is there to assist in all your software development needs from beginning to end. You can hire a developer or contact us for a detailed roadmap related to your outsourced projects.

Krunal Shah

Krunal Shah is the CTO and Co-founder at Third Rock Techkno. With extensive experience gained over a decade, Krunal helps his clients build software solutions that stand out in the industry and are lighter on the pocket.

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