Top Software Development Metrics and KPIs in Outsourcing

Outsourcing your software development brings a variety of benefits, from accessing top talent to fast-tracking processes and ensuring high-quality deliverables. However, setting the right software development KPIs for outsourced teams can be complex.

How do we determine which KPIs and metrics matter most? Understanding these data sets' roles in the development process lets you set targets that will guide your teams' efforts.

In this article, we unpack the software development metrics and key performance indicators that enable managers to monitor their team’s performance.

What is a software development KPI?

KPIs measure the performance of a company, project, or individual. They are usually designed to monitor the pace of changes and are excellent progress indicators. In the software development context, KPIs examine how well a team's development efforts are performing and if they align with the company's objectives and values.

When outsourcing software development activities, these KPIs become even more critical because they are one of the only measures project managers can use to track, evaluate, and report on progress. These indicators must take into consideration:

• Timing – at what stage of the product life cycle the outsourcing takes place.
• Roles – what responsibilities and tech stacks should be assigned to the outsourced portion of the work.
• Outsourcing model – whether a client hires a full-ownership development team or supplements the existing team with additional, outsourced personnel.

Without these KPIs, teams are flying blind, and managers can’t track and report on progress. In the event of obstacles, they're also unable to reprioritize team efforts.

What are the types of software development metrics and key performance indicators (KPIs)?

There are countless software development-related KPIs, with many projects requiring unique data sets and metrics.

Below, we've identified a selection of software development KPIs related to outsourcing and listed them according to the two stages in the software development product life cycle, plus metrics that apply at any stage.

Software development KPIs in outsourcing: During the development phase

Here, we examine the KPIs related to either a segment or the entire development process. These software development KPIs relate to the development phase, as informed by scrum and kanban agile development metrics.

1. Velocity

This indicator relates to the amount of work teams can complete during a specified period or 'sprint.' This metric shows how many tasks members can complete rather than how quickly they can get through them.

A velocity KPI is a good indicator of how effectively a team clears backlogs. It can assist in planning and forecasting product component delivery and release deadlines. The two basic units of measuring velocity are "issue count" and "story point."

The pitfall lies in story points, as these are subjectively assigned to each task to reflect their complexity. You can change this at any time and thus "increase" velocity. Hence, it’s important to use story points consistently.

2. Sprint burnout

The sprint burnout KPI represents work completed against the timeline of the iteration. Usually, it is expressed as a percentage of completed tasks. This KPI is also prone to subjectivity error when using story points as the primary variable.

3. Release burnout

The release burnout KPI provides a high-level view of progress concerning the release component of the software development process. This metric can also use story points as the main variable. However, it also risks providing an inaccurate measure of what is happening.

This KPI is essential in identifying when a product will most likely become available for release and how accurate the timeline is.

4. Throughput

Throughput provides a simple indication of the total work output already delivered by the team. In contrast to velocity, throughput is measured by going granular and looking at the number of tasks, fixes, chores, and other work items completed over an iteration.

Throughput indicators give managers a good idea of where the team spends most of their time, allowing them to refine and reprioritize essential tasks if needed.

5. Cycle time

This metric indicates how long it takes to complete individual item types or tasks. The indicator focuses on the time taken from the moment the team commits to the action to the point of completing the task.

Cycle time focuses only on time, making it a favorite among managers looking to identify a non-subjective indicator grounded in reality rather than opinion. This KPI, however, demands that the data informing it is up-to-date and clean.

6. Lead time

While the cycle time metric indicates the time taken to complete item types, the lead time KPI reports on the time needed to complete the task from the ideation stage.

The lead time software development KPI thus includes ideation and discovery phases, offering a more suitable indicator for higher-level preparation.

7. Work-in-progress/process (WIP)

The WIP software development KPI allows observers to monitor the number of items currently being worked on. The metric considers open tasks, tickets, or projects the team is busy with at the time. It allows managers to identify and highlight bottlenecks in the process.

This, in turn, enables supervisors to track more detailed metrics related to the project at specific stages, for example, while reviewing code or managing quality control.

8. Flow efficiency

This metric compares work tasks currently in an 'active' state versus those in a 'passive' (open tasks not being worked on) state. Acceptable flow efficiency rates should exceed 15%, while a team nearing 40% is performing exceptionally well.

Flow efficiency indicates waste. A low flow efficiency may mean that a certain event or factor is hampering productivity.

If any issues are detected, there might be a need for a new workflow – specifically one that allows teams to differentiate between tasks in an active or passive state and prioritize accordingly.

Software development KPIs in outsourcing: During the maintenance phase

Once the software goes live, metrics measuring the team's performance shift to software development KPIs that focus on optimization. These indicators help managers plan for the release and address failure issues that may arise once the software is live.

DevOps Research and Assessment (DORA) has identified four key metrics that measure the velocity and stability of a software development team's performance.

1. Deployment frequency

This KPI details the frequency with which a company successfully releases software to production. This metric is fundamental to teams working in an environment where changes occur often.

Deployment frequency is a particularly useful KPI for teams that follow the Continuous Integration and Continuous Delivery (CI/CD) approach, where work is split into frequent, smaller deliveries, i.e., where the feedback loop for work is shortened.

2. Lead time for changes

The lead time for changes metric represents the time needed to commit the code to production. Teams following the CI/CD approach can use this metric to track these changes in detail during production. As a result, this KPI also allows managers to track new feature lead times while forecasting delivery target dates more accurately.

3. Change failure rates

Failures are inevitable in software development, and the change failure rates KPI allows teams to monitor the percentage of deployments that end up causing a failure in production. These may include service outages or service impairments that harm the end-user experience.

This metric illustrates how efficient the team's deployment process is.

4. Time to restore service

The final DORA key metric focuses on how much time an organization takes to recover from a failure in the production process. The time to restore service KPI measures the effectiveness of a development team’s response to unplanned outages and service defects.

This indicator is of particular interest to managers monitoring products where service up-time is important to users. It can inform customer services of anticipated downtimes, keeping clients satisfied and allowing teams to improve their response effectiveness.

Software development KPIs in outsourcing: Satisfaction metrics at any stage

Satisfaction metrics are vital to ensuring software development success, no matter the phase of the process. As important as customer satisfaction is for the product, team members should also derive satisfaction from the project they’re working on. Ultimately, it’s this motivation that enables them to meet the company's organizational performance goals.

1. Net Promoter Score (NPS)

NPS demonstrates the likelihood of a client recommending a product or service to their colleagues. It possesses greater detail than online app reviews and can indicate degrees of loyalty to a company, spotlight areas in need of improvement, and help companies reduce customer churn.

The metrics for this KPI are usually solicited directly from users via surveys and should be conducted periodically with teams.

2. Employee Net Promoter Score (eNPS)

One of the biggest threats to outsourced software development is a lack of employee satisfaction. Low morale, high-stress environments, and team dysfunction can devastate a project, leading to employee churn and rotations that cause delays and weaken the product.

Without a way to assess team sentiment, managers can struggle to spot these problems and address them promptly. The eNPS KPI offers insights into 'team happiness,' preventing unnecessary waste and avoiding issues down the line.

What are the benefits of measuring software development metrics, and why are they important?

Software development KPIs afford project managers valuable insight into the complexities of outsourced projects.

Aligning work with business objectives

KPIs allow software teams to define their objectives. When assigning a specific value to a variable or interpreting a set of metrics, these measures can be used to develop benchmarks geared towards contributing to the company's organizational goals.

Helping to plan, prioritize, and forecast

Outsourcing software development efforts requires more detailed and advanced planning than doing the same in-house. Prioritizing and accurate forecasting are essential to effective software development project management.

Tracking productivity, highlighting issues, and identifying improvements

KPIs can be used to monitor, provide feedback, and justify changes. They are the perfect indicators of how effective a software development team is. When assessed in contrast to or alongside one another, they can provide managers with a comprehensive view of performance and efficiency.

Keeping stakeholders informed

Reporting progress on a software development project can be tedious and challenging. KPIs provide clean, empirical information presented in context and understandable terms. Even for those who are not directly involved in production but invested in the project, KPIs represent an effective source of information.

What are software development metrics, dashboards, and tools?

Now that we have a view of which KPIs are most critical, we must also understand how to interpret these metrics as presented on various dashboards. This allows us to examine the data before putting these interpretations to work using the project management tools available.

Metrics

These data sets and numbers represent benchmark levels, scores, timeframes, and rate ranges that teams have previously delivered, are currently performing at, or are aiming for. Metrics are gathered through various reporting channels, data collection, and directly from development teams. While some metrics are subjective by nature, managers should try to collect objective, clean, and recent data where possible.

Dashboards

The best way to interpret KPI metrics and data is to view them alongside each other. Some of the more important visual representations of these key software development KPIs include:

Cumulative flow diagrams

These visual charts depict cycle time and work-in-progress (WIP) software development KPIs. They allow managers to gain insights into lead time, cycle time, WIP, and backlog data as they accumulate over a specified period. The information gathered here is vital to tracking workflow efficiency and optimizing production output.

This chart visualizes sprint realization statistics within fixed periods. It includes:

• An estimation statistic representing chosen estimate metrics like story points.
• A remaining values statistic representing the total estimated amount of work left in the sprint.
• A guideline, which is the target projection for your team.

This bar chart depicts your team's release realization metrics. It focuses on using velocity KPIs to project how many more sprints will be needed before a software version can be sent to production. The chart tracks completed versus outstanding story points and provides an overview of the release progress.

Tools

Most CI/CD project management tools will display multiple reporting metrics in one view. This allows project managers to better understand the picture these indicators paint of team performance. These tools include built-in reports and dashboards capable of multiple integrations. Some examples of these default tools used in project management include:

• Jira (which we use for project management at Netguru) – An Agile development tool that makes managing workflows efficient.

• GitHub – A version control tool offering its own unique set of insights.

• CircleCI – A software delivery tool that prioritizes speed and efficiency.

• Bitrise – A tool that leverages expansive integrations and continuous delivery across the board.

• Firebase – A Google-backed cross-platform software development tool perfect for mobile app development.

• Zapier – A workflow automation tool that allows you to integrate data collected from multiple different sources.

Software development KPIs are key to successful collaboration

As software development needs change, the metrics and KPIs that track teams' progress and efforts are evolving, too. With better integration capacities and more advanced workflow automation available, measuring the outcome of outsourced software development tasks has become much easier to track and optimize.

But collecting metrics and analyzing KPIs means nothing without the right approach to software project management. Firstly, it’s important to set high hygiene standards when it comes to how you collect data. Secondly, once you’ve ensured high data quality, it’s important to use suitable dashboards and tools that will help you derive these insights.

By tracking and analyzing the right KPIs, managers can keep tabs on their outsourced software development teams, ensuring they get the most from their activities.

The key performance indicators mentioned here will help you ensure that your software development teams can pursue their objectives.