The 3 Most Important Questions to Ask When Choosing Software Development Vendor

1. What is Your Attrition / Turnover Rate?

The answer to this question is critical.  This is because, while any vendor might assemble a competent software development or Quality Assurance (QA) team for you, if a few months or a year down the road team members start disappearing, that means new replacements will have to go through the entire ramp-up period again.  Team cohesiveness, production velocity, and unity must be reestablished.

Effectively, all that system knowledge, issue fixing insights, application nuances, and problem resolution experience walks out the door every time a team member is lost.

Candidly, this issue is the other side of the coin — the dark side — of very low hourly service rates.  In labor markets that are very inexpensive (i.e. relative to US or Western European rates), the tenure at companies for development resources tends to be a lot shorter than you might think.  This makes perfect sense when you consider that in some places, developers can be working for what here in the US or in the UK, France or Germany might be considered at the minimum wage (or even lower) rates. 

Thus, if a low-wage developer gets a job offer from another company across the street for a couple of dollars more an hour than they are currently making, that could represent a substantial raise for them.  Hence, a lot of turnover.

In real numbers, some markets commonly see 40% - 50% or even more in annual turnover.  The hourly service rates of those markets may appear very attractive at first glance, but when you factor in the recurring loss and replacement of personnel, retraining, etc. your software development roadmap is ultimately going to suffer in terms of taking longer to achieve deliverables and therefore represent a lot more time between releases. 

How much potential market revenue to those delays negate?  That's your true cost — not a simple hourly resource rate.

In hard numbers, you should never use a software development vendor with a turnover rate of over 10%.  If it's closer to 5% so much the better.  Granted, it will never be zero as employees of any company never stay forever.  But if you discover a vendor's turnover is 15%, 20% or more, keep shopping.

2.  Do You Provide Professional Development of Resources?

In tandem with the attrition/turnover issue is the need to determine what vendors are doing to keep their turnover rates down.  There are basically two things that work to achieve this:

• Paying their employees above the market rate; and
• Investing in their employees in terms of professional development.

Employees tend to stay where they are if the grass isn't any greener anywhere else.  They especially develop a sense of loyalty and commitment to their employers if those employers are helping add value to the employees.  And better still, the best talent in a given market will naturally gravitate to the vendors that pay better than others.

So ask: Are their developers being given advanced training in their respective software engineering disciplines?  Can they continue their academic education?  Can they get industry certifications company paid or reimbursed?  If they are in a non-primary-English speaking country, are they provided with regular English language courses?

All of these things yield two incredibly valuable byproducts: 1) better teams; and 2) less attrition.  Both of these benefits work together to yield higher quality software development and faster development velocity — which thereby equates to better and more timely software releases, ergo a shorter path to market revenue.
So, if a vendor has low attrition rates but costs a bit more than lowest common denominator in the market, then you need understand that it's likely due to their decision to spend more on their development resources to get better people from the start and then to make them more valuable and consistent in their long-term tenure — which is exactly what you want.

3. How About References?

It is understood that getting applicable references to your requirements from a vendor is a no-brainer. Absolutely ask for that.  However, you need to know what to look for within a reference to gain the most insight and relative value from it.

Is the Reference of similar size and scope as to your needs?  Most importantly, how long has the reference been using the system the vendor built, and are they happy with it? 

These two questions actually work together in the sense that if the solution provided to the Reference is at least a year old in production, and it's working great, then chances are most of the key challenges and issues of the project have already been encountered and resolved.  That's key.

The next element to look for is post-implementation support behavior. 

There are always issues that arise in the real world with any new implementation.  What separates the best vendors from the not-so-good ones is the manner and timeliness of responses and resolutions.  You will only learn this from actually talking to the reference, or from published detailed statements and case studies from them specifically on this point. 

Are they a satisfied customer?  What has gone wrong in the past?  How fast were issues identified and addressed?  What is the communication process like between Reference and vendor?

The net-net is that any vendor can say, 'We did three XYZ projects that were just like yours.  We have experience.'  That all well and good that a vendor 'attempted' multiple projects in your area of need, but the real question is, 'How did it go?'  Successful?  A maintenance nightmare?  Client pretty-much left on their own to fend for themselves?  Or a very happy camper and proud to say so?

Takeaways:

Choosing a software development partner is more often than not a mission-critical strategic business decision.  Everyone wants to make a good decision in this area.  However, to do so, you will be wise and well-ahead of the curve if you are mindful of three critical keys:

• Low attrition rates are a MUST have, not a nice to have. 10% or less, no exceptions.
• Find a vendor that invests in their people — even if it means you're paying a little more for their services.  It's more than worth it in the long-run.
• Dig deep into References, specifically in terms of not only project applicability, but in terms of timely delivery, the quality of the actual deliverables, and most importantly overall Customer Satisfaction of the Reference.