RST Software
Editorial Team
Ross Krawczyk
Reviewed by a tech expert

How to account for hidden costs of digital product development and offset them

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Don’t you just absolutely hate it when you have a budget allocated to a project, and we’re using the term loosely here to refer to any scheduled spending, but then it turns out you have to pay on top of what you originally expected? Ugh. This can be a disappointing nuisance, like when we learned we won’t get a charger with our new phones and have to buy it extra, or an actual headache, like when you’re pushing your MVP development with a release date coming up, but then staff shortage occurs for whatever reason, forcing you to either exceed the budget to make up for it or face a delay. 

Building digital products in-house, while offering a number of advantages, also tends to present particular risks when it comes to hidden software development costs. The degree of their severity, once discovered, and the way in which they may affect your business outcomes vary, but it’s best to be aware of their potential occurrence in the first place and then take steps to minimize them.

Resources like manpower, expertise, and the ability to use and implement a wide range of technologies are essential to creating top-notch products. Thus, outsourcing software development, be it fully or partially, can be an effective cost reduction strategy.

Now, we’re sure you’re doing a thorough expense analysis already, but just in case, let’s go over some hidden costs examples. You probably won’t be able to fully insulate yourself from all of them for the rest of your career, but what you can do is be aware and prepared to act whenever you encounter a bump in the road while trying to drive that next project home. The following post will help you account for and mitigate these hidden app development costs.

Hidden cost #1: Recruiting, onboarding, and retaining of your in-house team

In the realm of digital product development, assembling a skilled in-house team is a critical investment. However, this process can entail hidden costs that impact both your budget and timeline. When hiring new talent, recruitment efforts can incur expenses in the form of job ads, recruitment agency fees, and the time spent interviewing candidates.

Once your team is put together, the onboarding process begins. While essential for ensuring alignment with your project's goals, onboarding may lead to a temporary productivity dip, as new team members acclimate to your company's culture and practices. Average time to full employee productivity is estimated to be around 6 months.

Moreover, retaining your valuable talent is equally challenging. High turnover rates can result in additional recruitment costs, not to mention the loss of knowledge and potential project delays.

Source: Strayboots

Solution: Embrace the balance of in-house and outsourcing

To offset the hidden costs of in-house development, consider adopting a hybrid approach that combines the strengths of both in-house and outsourced teams. For critical and core functions, keep a strong in-house team to ensure direct control and quick decision-making. Simultaneously, outsource non-core tasks or specific skill requirements to specialized external teams. This approach offers flexibility and allows you to scale resources as needed without incurring permanent overhead costs.

Additionally, implement a robust onboarding program that expedites new team members' integration. Providing clear guidelines, documentation, and mentorship can significantly reduce the time it takes for them to become productive contributors.

Hidden cost #2: Staff education and development

Staying ahead of the curve is vital and requires continuous staff education to ensure your team remains well-versed in the latest technologies, tools, and industry best practices. This approach, although necessary, can lead to hidden costs in various ways. First and foremost, investing in internal employee development programs, workshops, and courses is a direct expense. Additionally, the time allocated for workers to participate in these learning opportunities can temporarily impact their productivity, potentially affecting project timelines.

Furthermore, the fast-paced nature of the tech industry means that skills can become outdated quickly. Failing to invest in continuous education may result in reduced efficiency and innovation, hindering your product's competitiveness and long-term success.

Solution: Foster a learning culture and leverage external resources

Start by cultivating a learning culture within your organization. Encourage employees to explore new technologies, attend conferences, and participate in knowledge-sharing sessions. This approach not only motivates your team but also creates an environment where skill development is valued and embraced.

Consider leveraging external resources to optimize your staff's learning journey. Collaborate with software development partners who have a strong focus on professional development. External teams often have diverse expertise, and their insights can be invaluable in enriching your in-house team's skills.

Embrace online learning platforms and webinars as cost-effective alternatives to traditional in-person training. Such resources enable continuous learning while minimizing time away from project tasks.

Hidden cost #3: Unexpected employee resignations and rushed replacement searches

Unexpected employee resignations can strike like a bolt out of the blue. These departures can lead to significant hidden software development costs, impacting your project's momentum, team dynamics, and overall productivity. When a key team member resigns, the immediate focus turns to finding a suitable replacement. Rushed recruitment searches, however, may result in compromising on talent quality or settling for candidates who are not an ideal fit for your project's requirements. These hurried decisions can lead to prolonged training periods and decreased productivity as the new team member gets up to speed.

Employee resignations can also disrupt team morale, causing uncertainty and stress among remaining members. Such emotional strains can further impede productivity and result in delayed deliverables.

Solution: Leverage staff augmentation services for a smooth transition

To deal with an unexpected workforce shortage, consider partnering with a reliable external agency that offers staff augmentation services. Having a skilled pool of talent readily available ensures a smooth transition in case of any unforeseen departures within your team.

Staff augmentation services allow you to quickly access qualified professionals with the expertise your project requires. This agility reduces the impact of employee turnover, allowing you to maintain project continuity without sacrificing productivity.

External agencies specializing in staff augmentation have a robust talent acquisition process and can provide candidates who align closely with your project's needs. This ensures that you're not just filling positions but securing the right talent for seamless integration within your team.

Hidden cost #4: Ongoing software maintenance and troubleshooting

Once your digital product is developed and deployed, the journey is far from over. Ongoing software maintenance and troubleshooting are crucial to ensuring your product's stability, security, and optimal performance. However, these aspects can bring forth hidden costs that may catch you off guard if not managed strategically.

Software maintenance involves routine updates, bug fixes, security patches, and performance enhancements. Failing to allocate adequate resources to these tasks can lead to a deterioration of your product's functionality and user experience. Additionally, the need for troubleshooting arises when unforeseen issues or bugs emerge post-launch, demanding swift resolutions to avoid disruptions and customer dissatisfaction.

In-house maintenance teams can put a strain on your budget, as you have to account for the salaries, benefits, and overhead expenses associated with hiring and retaining specialized talent. Moreover, managing a dedicated in-house team may prove challenging if the scale of maintenance work fluctuates over time.

Solution: Optimize maintenance efforts with outsourcing

The hidden costs of ongoing software maintenance and troubleshooting can be reduced by outsourcing these tasks to a reputable dev agency. By partnering with an external team, you gain access to a pool of skilled professionals who specialize in maintenance and support services.

Outsourcing grants you the flexibility to scale resources based on the current maintenance requirements, saving you from the burden of hiring and training additional staff. You can easily add or reduce resources as needed, ensuring cost-effectiveness and optimized productivity.

More so, handing over maintenance to a reliable tech partner guarantees that experts are continuously monitoring and enhancing your product's performance. Their focus on timely updates and proactive troubleshooting can prevent major issues from arising and reduce the chances of costly, last-minute fixes.

Hidden cost #5: Recurring expenses for cloud services and 3rd-party providers

Cloud services and third-party providers play a pivotal role in enhancing functionality, scalability, and overall user experience of digital products. However, while these services offer valuable solutions, they also bring forth recurring expenses that can accumulate over time and impact your company's financial stability. Services like hosting, storage, and data management often operate on a pay-as-you-go model. While this approach provides flexibility, it can lead to unexpected costs if usage exceeds initial estimates or is not closely monitored. Over time, recurring expenses for cloud services can strain your budget, particularly as your product gains traction and attracts more users.

Similarly, integrating third-party services and APIs into your product can be beneficial in adding advanced features quickly. Yet, many of these providers have subscription-based pricing models, and their fees can add up as you leverage more services or experience increased usage.

For a product company, staying competitive and meeting customer demands may necessitate the integration of several third-party services. All the same, without careful management and resources demand planning, related expenses can become a hidden cost that negatively impacts your profitability.

Source: TechTarget

Solution: Cost optimization and usage monitoring

Develop a strategic approach to cost optimization. Begin by conducting a thorough review of your cloud service usage and third-party subscriptions. Identify areas where optimization is possible, such as removing redundant services or adjusting subscription plans based on your actual needs.

Implement robust monitoring and usage tracking systems to stay on top of your expenses. Regularly assess the value each service brings to your product and consider whether alternatives or in-house solutions could be more cost-effective in the long run.

Negotiate with vendors to explore potential discounts or tailored plans that align better with your product's unique requirements and growth projections.

By proactively managing recurring expenses, conducting regular reviews, and optimizing your cloud and third-party service usage, you can avoid hidden costs of cloud services and maintain financial stability while delivering an exceptional product to your customers.

Hidden cost #6: Recurring code refactoring

Code refactoring is a necessary practice to enhance its quality, maintainability, and overall product performance. This essential process can also generate hidden costs if not managed efficiently during the development lifecycle. The process of code refactoring involves restructuring existing code to improve its internal composition without altering the actions it performs. The practice helps developers eliminate technical debt, improve readability, and enhance the product's maintainability.

However, recurring refactoring can impact your team's productivity. As developers allocate time and effort to refactor code, they may become diverted from building new features or addressing customer-facing issues. This can lead to potential project delays and affect the overall delivery timeline.

Also, if code refactoring is not performed strategically, it may introduce new bugs or regressions, leading to additional debugging and testing work. These unforeseen challenges can escalate development costs and hinder the product's progress.

Solution: Adopt agile development and continuous refactoring

If you haven’t done it already, embrace agile practices that incorporate continuous refactoring into your development process. Agile methodologies encourage iterative development and prioritize ongoing code improvements, minimizing the need for extensive refactoring efforts down the line.

Introduce code reviews and pair programming to identify potential refactoring opportunities early on. This collaborative approach ensures that code quality remains a priority throughout the development process, reducing the accumulation of technical debt.

Additionally, invest in automated testing and continuous integration to catch issues early and maintain a high level of code integrity. Automated testing helps in detecting potential regressions after refactoring, allowing developers to address them promptly.

Hidden cost #7: 3rd-party integrations maintenance

Integrating third-party services and APIs into your digital product, as was already mentioned, can bring immense value by expanding its capabilities and enhancing user experience. Still, the maintenance of these integrations can generate hidden costs if you won’t consider them in the greater development process.

However, as these external services evolve, their APIs and endpoints may change, requiring adjustments in your product's code to ensure continued compatibility and functionality.

Maintaining third-party integrations necessitates ongoing monitoring and timely updates. Failing to keep up with these changes can result in broken features, security vulnerabilities, and compromised user experiences. Consequently, your development team must invest time and resources to monitor and adapt to the updates made by the providers.

Importantly, integrating multiple third-party services can create dependencies within your product's codebase. When one of them undergoes a significant update or discontinues support, it can trigger a cascading effect, requiring extensive code modifications and potential disruptions to your product.

Solution: Proactive integration management and version control

To stay on top of the issue, adopt proactive integration management practices and version control strategies. Stay informed about updates and changes from third-party providers. Regularly review their documentation and communication channels to anticipate upcoming changes that might impact your product.

Implement version control for external APIs within your codebase. Isolate integration code and maintain clear versioning to easily update and manage changes when necessary. This allows for a more centralized approach to maintenance and minimizes disruptions caused by updates. Conduct thorough testing after updating third-party integrations to identify potential issues early on and ensure the continued stability of your product.

We’ve discussed one such critical case when automating open-source geospatial data updates for – Europe’s 2nd largest logistics platform.

Hidden cost #8: Technical debt

Technical debt can accumulate silently, posing significant hidden costs that may emerge later in the development lifecycle. Like any form of debt, it is essential to realize that it must be paid off eventually, and ignoring it can lead to dire consequences. Technical debt refers to the shortcuts and compromises made during the development process to meet tight deadlines or reduce immediate costs. These shortcuts may result in suboptimal code, architectural weaknesses, or deferred improvements that impact the product's maintainability, scalability, and performance.

While taking on technical debt can help accelerate work in the short term, it incurs long-term costs. Organizations may be tempted to cut down on web development costs or mobile development costs by taking shortcuts, but this can lead to higher expenses down the road. Addressing technical debt later becomes increasingly challenging and time-consuming, potentially causing significant project delays and increasing the overall cost of development.

Source: CodeScene

Solution: Embrace technical debt management

To tackle the hidden costs of technical debt, adopt a proactive approach to its management. It’s crucial to strike a balance between delivering features quickly and maintaining code quality. Encourage your development team to identify and address technical debt during regular code reviews and retrospectives. Prioritize refactoring efforts to improve code quality and reduce potential maintenance costs in the future.

Educate stakeholders about the importance of technical debt management and the long-term consequences of ignoring it. Balancing short-term gains with long-term stability is key to making informed decisions about trade-offs during development.

Create a culture of continuous improvement, where software engineers are empowered to suggest and implement improvements that address technical debt. Emphasize the importance of investing time in improving the codebase to ensure the product's sustainability.

Hidden cost #9: 3rd-party SaaS providers raising prices of their solutions

Integrating third-party SaaS providers into your digital product offers numerous benefits, from accelerated development to access to advanced functionalities. One hidden cost that can catch businesses off guard is the potential for these companies to raise their prices, leading to increased expenses and challenges in maintaining a cost-effective product on your end.

The allure of third-party SaaS solutions lies in their convenience and the ability to outsource certain features, saving time and development costs. However, this convenience can lead to vendor lock – a situation where you become heavily dependent on a specific provider for a crucial aspect of your product's functioning.

When an external SaaS provider raises its prices, you are faced with a difficult decision. You either accept it, which can add up significantly over time, or you seek an alternative solution. This may involve migrating to a new vendor or developing an in-house solution, both of which can generate substantial, albeit one-time, costs.

Solution: Vendor diversification and regular evaluation

To counter the threat of third-party SaaS providers raising their prices, adopt a strategy of vendor diversification and regular evaluation. Instead of solely relying on one partner for critical functionalities, consider integrating multiple providers that offer similar services. Diversifying your vendors gives you the flexibility to switch to an alternative whenever a financial reason for that may occur.

Regularly evaluate your SaaS providers and stay informed about their pricing policies. Engage in discussions with them to understand their future pricing plans and negotiate for more favorable terms when possible.

Be prepared to explore alternative solutions if price hikes occur. Evaluate the pros and cons of migrating to a new vendor versus developing in-house solutions to determine the most cost-effective approach.

Offsetting hidden costs of development with a trusty partner

There may be various reasons for why your costs of software development were pushed beyond the budget. Some of them sprout from within, others are brought up on you by external factors. In either case, awareness and prevention will serve you much better in the future than hurried treatment.

Whether you’re simply trying to make sure you’ll have enough manpower to comfortably deliver all project assumptions, or ambitiously aiming to achieve a faster time to market, you may want to consider a tech partner to avoid unexpected app development costs stacking up, straining the profitability of the digital product you have in the works.

If you discover any capacity or talent shortages on your end, at RST Software we offer staff augmentation, dedicated developer teams, as well as comprehensive digital product development services that can quickly put you back on track in case things don’t go exactly as planned.

Contact us to explore how our expertise and flexible solutions can help you efficiently manage hidden costs and ensure successful and on-time project delivery.

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