Shifting the Focus: The True Cost of Application Development

Cost of Code and Data

In the fast-paced world of software development, it’s easy to get caught up in the excitement of building a new application. We focus on securing budgets, assembling teams, and meeting deadlines, but often neglect one of the most crucial aspects: the long-term operational cost of supporting what we built. It’s time to shift our focus from just building to building efficiently, with an eye on both functionality and the Total Cost of Ownership (TCO) over the 10 to 20 years that the application is alive.

The Rush to Deploy

Picture this scenario: you’ve got the project charter signed, a generous budget of $1,000,000, and a team ready to bring your vision to life. The project plan is in place, risks have been identified, and milestones set. You embark on the journey of design, development, and testing, celebrating each step towards the V1 application. But then comes the moment of truth: deploying the application into a production infrastructure.

 

To ensure optimal performance and minimize risk of failure, we often overestimate our needs, requesting the biggest servers available from the infrastructure team. After all, who wants their application to be slow or crash on day one? But this is where the first misstep occurs. By not accurately assessing the application’s resource requirements, we set ourselves up for inflated operational costs from the get-go. However, it’s important to recognize that this is not entirely the fault of the application teams. They typically lack knowledge about the intricacies of vCPU performance or the specific storage requirements or growth rates for their application. Without this specialized knowledge, it’s challenging for them to make precise hardware sizing decisions for Day 1 or for the next year. And once the application is in production, very seldom is the hardware ever downsized.

The Hidden Costs

Deployment day arrives, and everything goes smoothly. Applause fills the room, and rightly so. We’ve delivered on time, within budget, and met the business requirements. But the real test comes with the first cloud bill. Whether it’s $20,000, $40,000, or even $100,000, the figure is substantial and it’s just month one.

 

Below is a table that shows 2 applications, one designed with an efficiency mindset and the other with a “run and gun” approach. Notice the significantly higher operational costs over 10 years to support the application built with the “run and gun” approach. You may ask yourself what the difference between Design 1 and Design 2 is. It could be the skillset and experience of the developers, the technologies used to build the application, or the design patterns and architectural decisions made. All these factors play a significant role in the operational cost of an application over its lifetime. So, how do we build a team that will deliver the best application for the lowest Total Cost of Ownership (TCO)? That is a later blog post so stay tuned.

 

Application Design Year 1 Operational Cost Year 2 Operational Cost Year 3… Operational Cost Year 10 Operational Cost Total Cost of Ownership (10 years) 
Design 1 (Efficiency Mindset)  $240,000   $300,000   $375,000   $1,788,139   $          7,980,697  
Design 2 (“Run and Gun” Approach)  $480,000   $600,000   $750,000   $3,576,279   $       15,961,393  

 

The operational costs of an application are not fixed; they fluctuate and evolve over time due to various factors. As the user base expands and data volumes grow, transaction volumes increase, and new features are introduced, leading to changing workload requirements. Additionally, the type of hardware, high availability, and disaster recovery (HA/DR) architecture, and other technical considerations contribute to the dynamic nature of operational costs. What might seem manageable at the initial launch can quickly escalate and spiral out of control, significantly impacting profit margins and the overall bottom line. It is crucial to carefully assess and monitor these factors to ensure the long-term financial viability of the application.

The Consequences of Inefficiency

In the world of SaaS and other software products, the operating margin is a crucial metric that often gets overlooked during the development phase. Companies tend to prioritize features and functionality over efficiency, as the success criteria for a product are typically based on its ability to solve user problems and attract customers. However, this approach can have serious consequences down the line.

 

Once a product is launched and gains traction, the focus shifts to profitability. This is where efficiency comes into play. By optimizing code and infrastructure, companies can significantly reduce their operating costs without needing to add more clients. In fact, our research shows that just 1% of the code can consume up to 50% of the resources and costs.

 

Neglecting efficiency during development can lead to a host of problems. High operational costs translate to increased support and licensing expenses, eating into the company’s bottom line. It’s a vicious cycle that can cripple even the most promising applications.

 

On the flip side, companies that prioritize efficiency from the start can reap significant benefits. By identifying and optimizing resource-intensive code early on, they can minimize operational costs and improve their operating margin. This, in turn, allows them to invest more in product development, marketing, and customer acquisition.

 

Furthermore, an efficient product is more scalable and can handle a larger user base without requiring significant infrastructure upgrades. This is particularly important for SaaS products, where the ability to scale quickly and cost-effectively is a key competitive advantage.

Redefining Acceptance Criteria

The path to sustainable software development begins with a fundamental shift in how we define and evaluate success. It’s time to rewrite the acceptance criteria, moving beyond the narrow focus on functionality alone. Instead, we must prioritize efficiency and cost considerations as integral components of our development goals.

 

Traditionally, acceptance criteria have centered around meeting functional requirements. Does the application perform the desired tasks? Does it adhere to the specified business rules? While these aspects remain important, they paint an incomplete picture of what truly constitutes a successful software solution.

 

To drive meaningful change, we need to expand our definition of acceptance criteria. Efficiency and cost must be given equal weight alongside functionality. Development teams should be tasked with not only delivering working software but also ensuring that it operates efficiently and cost-effectively.

 

This shift in mindset requires a holistic approach to software development. From the early stages of architecture design to the intricacies of coding, efficiency must be a guiding principle. Teams should actively seek out opportunities to optimize resource utilization, minimize waste, and streamline processes.

 

By embracing efficiency and cost as core acceptance criteria, we can foster a culture of sustainable software development. It encourages teams to think critically about the long-term impact of their decisions and to strive for solutions that deliver value without compromising on performance or economic viability.

 

Redefining acceptance criteria is not a one-time event but an ongoing process of continuous improvement. As technology evolves and business needs change, so too must our benchmarks for success. By regularly revisiting and refining our acceptance criteria, we can ensure that our software development practices remain aligned with the goals of efficiency and sustainability.

 

In the end, changing the acceptance criteria is a crucial step towards building a more sustainable future for software development. By prioritizing efficiency and cost alongside functionality, we can create applications that not only meet the needs of today but also lay the foundation for long-term success. It’s time to embrace this new paradigm and redefine what it means to build truly successful software solutions.

Conclusion

The true success of an application is not measured solely by its functionality or timely delivery but by its long-term sustainability. That’s the philosophy behind Fortified WISdom, our flagship software, engineered to offer clear, transparent data to help you understand the value technology brings to your business. By focusing on the efficiency and cost-effectiveness of our designs and code, we can ensure that our applications remain profitable for years to come. It’s time to stop chasing the thrill of building and start building for the future. 

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