A Complete Guide to Outsource Healthcare Software Development in 2025

Healthcare startups face a daunting reality with an 80% failure rate. In fact, 20% of new businesses close their doors within the first year, and by the fourth year, half of them are gone. But there’s a way to defy the odds: outsource healthcare software development. As the healthcare industry encounters mounting cost pressures, evolving market demands, and the need for rapid development cycles, outsourcing has become a lifeline. It’s no surprise that the healthcare IT outsourcing market is expected to soar to $78.3 billion by 2031, growing at a compound annual growth rate (CAGR) of 5.9%. In this article, we’ll get to the bottom of healthcare software development outsourcing. From the hottest trends to outsource, to cost and tips for finding the perfect healthtech partner, we’ll cover it all. So let’s get right into it! Table of Contents Toggle What Does It Mean to Outsource Healthcare Software Development?Key Trending Areas to Outsource in Healthcare Software Development Electronic health records (EHR) systems developmentTelemedicine platform developmentTelemetry and remote monitoringMobile health (mHealth) app development Cybersecurity Machine learning and artificial intelligence Augmented & virtual reality in healthcareHow Much Does It Cost to Outsource Healthcare Software Development?A Cheat Sheet to Find the Right Healthcare Software Development Outsourcing PartnerWhy outsource healthcare software development to LTS Group?Why Is It Better to Outsource Custom Healthcare Software Development?Common Challenges of Outsourcing Medical Software Development and LTS Group’s SolutionsFAQsFinal Thoughts What Does It Mean to Outsource Healthcare Software Development? Outsourcing healthcare software development refers to the collaboration with external providers, often experts in healthcare technology, to craft tailored software solutions such as electronic health records and telemedicine systems. These solutions seek to elevate patient care, streamline operations, and improve efficiency within healthcare establishments. What Does It Mean to Outsource Healthcare Software Development? Given the complexity of healthcare app development, it’s of great importance that the outsourced medical software development company has an in-depth understanding of industry regulations, data security requirements, and other unique aspects of healthcare service delivery. By outsourcing, businesses can leverage the specialized knowledge of external partners who have a proven track record of delivering custom healthcare software development solutions that align with such stringent demands. More on the advantages of outsourcing healthcare software development in the upcoming section. Also read: IT outsourcing ultimate guide: Definition, types & models, and trends to look out for in 2025 Key Trending Areas to Outsource in Healthcare Software Development The healthcare sector has seen substantial technological progress with numerous trends emerging in healthtech development. For those considering outsourcing custom medical software development services, it’s wise to concentrate on areas that are essential but not directly tied to their core operations. Below are 7 prominent tasks where healthcare outsourcing delivers significant value: 7 Key Trending Areas to Outsource in Healthcare Software Development Electronic health records (EHR) systems development Outsourcing EHR system development allows for a user-friendly, secure, and compliant platform that satisfies common healthcare regulations like HIPAA. By working with specialized third-party healthcare software developers, companies can deploy efficient EHR systems that optimize patient data management and streamline clinical workflows. This approach also provides quick access to advanced features including automated data entry, patient portals, and integrated billing systems, without diverting the organization’s in-house resources from primary activities. Telemedicine platform development With the telehealth and telemedicine market expanding rapidly, reaching $214.55 billion in 2023 and expected to grow to $869.22 billion by 2033, outsourcing the development of telemedicine platforms is a smart strategy. Outsourced specialists can help bring robust, secure, and compliant solutions to market quickly. These platforms enable remote consultations, patient monitoring, and seamless communication between healthcare providers and patients. Additionally, outsourcing helps harness expertise in video conferencing, secure data transmission, and patient management technologies to meet growing demands. Telemetry and remote monitoring Remote monitoring technology, approved by the FDA post-pandemic, has greatly transformed healthcare delivery. Not only does it improve medical care, but it also enhances the timeliness and quality of services, streamlining medical processes. The global healthcare telemetry market is projected to reach $470.97 billion by 2028, with a CAGR of 12.2%. Outsourcing this task lets firms incorporate cutting-edge technologies into patient care, thereby boosting operational efficiency and clinical outcomes while staying ahead in the market. Mobile health (mHealth) app development Outsourcing mHealth app development taps into the niche yet extensive expertise of vendors to create applications that track health metrics, provide medication reminders, telehealth services, etc.  Since these apps must be intuitive, secure, and adhere to strict healthcare standards, collaborating with experienced healthcare software development companies eases the process and allows for the quick development of apps featuring the latest innovations, (e.g. in AI-driven health monitoring and secure data management), at faster turnaround times and reduced costs. Learn more: Mobile app development outsourcing in 2025: How to make it work Cybersecurity According to a CSO Online Report, healthcare remains the industry with the highest cost per data breach, estimated at $9.77 million in 2024. Cybersecurity is, therefore, a top priority for healthcare businesses. Outsourcing cybersecurity services helps fortify IT infrastructures, implement robust security measures, conduct regular audits, and ensure swift responses to emerging threats. Moreover, companies benefit from the latest cybersecurity technologies and practices offered by outsourced specialists to successfully counter new vulnerabilities. Machine learning and artificial intelligence Healthcare businesses are increasingly adopting AI to improve diagnosis, drug discovery, patient communication, and the transcription of medical documents, among other applications. However, managing these technologies in-house requires significant investment. Outsourcing AI and machine learning services proves to be an affordable solution, enabling organizations to leverage these advanced technologies without the need for extensive in-house resources. What’s more, an AI-focused medical software development firm can manage a wide range of tasks, from health data collection and medical transcription to implementing self-service solutions like chatbots and automated systems. Augmented & virtual reality in healthcare Augmented reality (AR) has redefined the healthcare industry by combining digital information with the real-world environment. This technology plays a pivotal role in patient treatment, surgery planning, and medical education. In 2023, the global AR and virtual reality (VR) healthcare market was valued at $3.4 billion and is expected to grow at a CAGR of 16.8% by 2030. While the hardware segment leads the industry, software applications are gaining traction in surgical preparation and minimally invasive surgery. By outsourcing AR and VR development, healthcare organizations can effortlessly catch up in this ever-evolving field, effectively providing clients with affordable and advanced treatment options.  Partnerships, such as the collaboration between GE Healthcare and MediView XR in 2022, showcase the growing trend of outsourcing to improve treatment affordability and accessibility. Also read: IT outsourcing trends by industry in 2025  How Much Does It Cost to Outsource Healthcare Software Development? Now, let’s uncover the financial investment required for outsourcing medical software development. It’s worth noting that the cost largely depends on the specific software development services for healthcare needed, team composition, and the regions/ countries outsourced. How Much Does It Cost to Outsource Healthcare Software Development So first things first, here’s a breakdown of 4 essential components within a typical outsourced software development team: Project managers (PMs) oversee the entire development process, from inception to launch, making sure the project meets deadlines and objectives. Front-end developers focus on the user-facing aspects of the software, while back-end developers build the internal systems that power the solution’s functionality. UI/UX designers craft intuitive and visually appealing interfaces, making the software accessible and easy to navigate. Quality assurance (QA) engineers are present throughout the development process to rigorously test the software to identify and resolve all bugs and malfunctions. Particularly, offshore outsourcing custom healthcare software solutions brings substantial cost savings, although these vary across regions and countries. The table below displays average rates for healthtech software development services, thoroughly researched and validated by LTS Group. Region Country Hourly rate Southeast Asia Vietnam, Malaysia, Philippines $18 – $71 South Asia India, Bangladesh, Sri Lanka $24 – $71 Latin America Mexico, Brazil, Colombia, Peru, Chile, Argentina $30-$96 Central & Eastern Europe Poland, Romania, Hungary, Bulgaria, Belarus, Czech Republic, Austria, Slovakia $26–$95 Pricey Destinations: The US, Australia, Western Europe United States, North Australia, UK, Germany, France, Denmark, Finland $62–$209 Digging deeper into specific roles in offshore software development, we have the hourly rate ranges in each region based on seniority and tech stack as follows. Healthcare software outsourcing hourly rates by skills and seniority From the table, we can see that Southeast Asia is the most economical choice. Especially, in Vietnam, a key player in the international IT outsourcing arena for nearly three decades, offshore development rates are among the lowest, ranging from $14 to $45 per hour. For those interested in learning about the IT services sector in Vietnam, feel free to download our comprehensive ebook: Vietnam’s IT services industry: Landscape, challenges, opportunities. Learn more: Offshore software development rates by country A Cheat Sheet to Find the Right Healthcare Software Development Outsourcing Partner Choosing custom healthcare software development services providers can make or break healthtech projects. Here’s a cheat sheet to guide companies in selecting a reliable partner: A Cheat Sheet to Find the Right Healthcare Software Development Outsourcing Partner Domain experience and expertise When outsourcing custom healthcare software development, prioritize vendors with a solid understanding of healthcare processes and compliance regulations such as HIPAA. They should also be familiar with healthcare-specific technologies and interoperability standards. LTS Group, for instance, has been providing healthcare software development services since 2016, successfully delivering telehealth solutions like EHRs, e-prescribing software, healthcare CRMs, and more. Portfolio Equally important is examining the custom healthcare software development company’s portfolio to gauge their experience with similar projects in terms of complexity and scope. Customer reviews Client testimonials provide insight into the partner’s performance and client satisfaction. Therefore, don’t hesitate to contact their previous clients to learn about their experiences. Communication policy An ideal healthcare software development company should have a clear communication policy in place, which outlines the frequency of updates, meetings, and issue resolution processes. Transparent and effective communication is of great importance for keeping the project on track and addressing challenges promptly. Patients’ data security approaches Since patient data is highly sensitive, make sure potential partners have a robust security protocol. They should comply with the latest healthcare data security standards, for example by incorporating encryption, access controls, regular security audits, etc. Documentation Last but not least, thorough and proper documentation throughout the project lifecycle is a crucial criterion. Well-documented project requirements, design specifications, change requests, and testing procedures not only guarantee project clarity but also help with future updates and maintenance. Also read:  Top 15 IT outsourcing companies in the world in 2025 12 questions to ask before hiring a software development company Why outsource healthcare software development to LTS Group? LTS Group is an excellent choice for healthcare software development outsourcing. With a strong track record in healthcare software development, LTS Group is equipped with extensive knowledge of healthcare processes, regulatory compliance (such as HIPAA), and the critical importance of data security. Our team of medical software developers, designers, and project managers is ready to tackle the challenges faced by healthcare organizations, making sure that software solutions meet the highest standards in functionality, security, and usability. On top of that, we are known for our client-centric approach, prioritizing communication and collaboration during the development process. From defining project objectives to providing regular updates, we work closely with our clients to guarantee that the solution aligns with their vision and goals. LTS Group has successfully delivered many healthcare software projects, including: An e-doctor platform that connects doctors and patients with audio/video calls, real-time messages, service bookings, and online purchases from care providers such as lab test centers and pharmacies. A comprehensive healthcare system developed for a leading US-based healthcare company, managing clinics across web, mobile, and desktop platforms, covering everything from product and service management to booking, POS, and patient/staff management. A healthcare platform connecting clients seeking services (e.g., music therapy, physical therapy) with qualified providers, featuring account creation, service searching, scheduling, video calls, streaming, and online payments. For more case studies showcasing our healthcare software development expertise, check out our portfolio. Why Is It Better to Outsource Custom Healthcare Software Development? A recent Deloitte survey found that 65% of businesses outsource to focus on core tasks, while 33% do so for greater global scalability. And of course, there are many more reasons why businesses today prefer to outsource custom healthcare software development. Below is a quick look at 6 key benefits of healthcare software development outsourcing. Key benefits of healthcare software development outsourcing Effective risk management: Outsourcing mitigates risks related to technology failures and data breaches. Experienced vendors are experts at maintaining operational continuity and complying with security regulations to safeguard patient data. Cost efficiency: 44% of startups fail due to cash flow issues. Outsourcing reduces overhead costs such as payroll and office space, enabling businesses to invest in more pivotal areas. Specifically, offshore software development provides quality solutions at lower costs than Western countries. Access to global skilled talent: Outsourcing, offshore outsourcing in particular, connects businesses with diverse, skilled professionals worldwide, providing expertise that may not be available locally, thereby boosting medtech projects’ success. Faster time-to-market: Outsourcing speeds up development with established workflows and expertise, making it easier to navigate regulatory hurdles and deliver faster software launches. Greater focus on core business processes: Delegating development tasks frees up in-house teams for what healthcare organizations do best, such as patient care and research, ultimately boosting efficiency, customer satisfaction, and revenue. Flexibility: Outsourced teams are highly adaptable, allowing for easy scaling and project adjustments to meet changing needs. Common Challenges of Outsourcing Medical Software Development and LTS Group’s Solutions Despite its many advantages, healthcare IT outsourcing holds some drawbacks to be aware of: Common Challenges of Outsourcing Medical Software Development and LTS Group’s Solutions Regulatory compliance The healthcare industry is governed by strict laws like HIPAA (US) and similar regulations globally. Non-compliance with these standards can result in penalties and reputational damage. LTS Group’s approach: We guarantee compliance with HIPAA, GDPR, and FDA standards, backed by our HIPAA-certified experts who design and develop solutions tailored to regulatory requirements. Vendor reliability Healthcare organizations need reliable IT systems for patient care and data management. Poor performance from an outsourcing partner can cause major issues. LTS Group’s Approach: We establish trust through detailed SLAs and contracts, outlining the project scope, deliverables, and performance expectations. Regular meetings are held to report progress and address feedback. Data security and privacy Handling vast amounts of protected health information (PHI) and personally identifiable information (PII) demands stringent security measures to prevent breaches and unauthorized access. LTS Group’s Approach: We adhere to industry standards with important certifications such as GDPR, PCI DSS, SOC-2, ISO 27001, ISO/IEC 27701:2019, and ISO 9001. Our security measures include data encryption, access controls, and regular audits to safeguard patient data. Communication issues Remote collaborations can create difficulties in conveying specific product requirements, risking misunderstandings. LTS Group’s approach: We use reliable communication tools such as Slack, Trello, and Jira, along with structured communication plans and regular meetings, to facilitate a clear understanding of clients’ needs. Quality monitoring Supervising a remote development team can be quite a challenge, potentially running into missed deadlines and workflow delays. LTS Group’s approach: We define work scopes clearly and conduct regular check-ins. Our project managers hold demo calls, prepare detailed delivery reports, and consistently update on project progress to maintain quality control. FAQs What is healthcare software development outsourcing? Outsourcing healthcare software development refers to the collaboration with external providers, often experts in healthcare technology, to craft tailored software solutions such as electronic health records and telemedicine systems. These solutions seek to elevate patient care, streamline operations, and improve efficiency within healthcare establishments. How can outsourcing healthcare software development lead to cost savings? Outsourcing healthcare software development can bring significant cost savings in several ways. By choosing regions with attractive rates, organizations can lower development costs. Offshore developers in Vietnam, in particular, provide highly skilled expertise at more affordable rates than their counterparts in Western countries, making healthcare software development way more budget-friendly. Additionally, outsourcing eliminates the need for continuous training of in-house teams and reduces overhead expenses such as payroll, office space, insurance benefits, and vacations. All these savings can be redirected to more critical areas of the business. What are the best practices for outsourcing healthcare software development? To successfully outsource healthcare software development, choose vendors with extensive domain experience, a strong portfolio, positive client reviews, transparent communication policies, robust data security approaches, and thorough project documentation. How much does it cost to outsource healthcare software development? The cost of outsourcing healthcare software development ranges from $75,000 to $250,000, depending on the complexity and scope of the project. However, outsourcing to Southeast Asia, particularly Vietnam, considerably lowers costs. Final Thoughts The COVID-19 pandemic has accelerated the healthcare industry’s digital transformation process, making it increasingly reliant on advanced technologies like remote monitoring and patient health record management. If organizations are considering developing a medical tech product, now is the perfect time to start. With the flexibility and cost-effectiveness of outsourcing, even those with limited budgets can achieve their goals. Just remember to follow the best practices outlined in our cheat sheet to establish a successful outsourcing partnership. And for those seeking a reliable and compliant tech partner for healthcare IT needs, LTS Group, with over 8 years of expertise, is here to fuel their success. { "@context": "https://schema.org", "@type": "FAQPage", "mainEntity": [{ "@type": "Question", "name": "What is healthcare software development outsourcing?", "acceptedAnswer": { "@type": "Answer", "text": "Outsourcing healthcare software development refers to the collaboration with external providers, often experts in healthcare technology, to craft tailored software solutions such as electronic health records and telemedicine systems. These solutions seek to elevate patient care, streamline operations, and improve efficiency within healthcare establishments." } },{ "@type": "Question", "name": "How can outsourcing healthcare software development lead to cost savings?", "acceptedAnswer": { "@type": "Answer", "text": "Outsourcing healthcare software development can bring significant cost savings in several ways. 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Hiring a dedicated software development team offers a powerful solution for organizations looking to overcome challenges and achieve their business goals with maximum efficiency and cost-effectiveness. But what exactly is a dedicated team model, how does it operate, and how to hire dedicated software development team? Let’s dive into this article to discover the answers!         Table of Contents Toggle What Is a Dedicated Software Development Team?Advantages of a Dedicated Development Team Access to specialized skill sets Cost efficiency Enhanced focus on core businessFaster time to marketWhen to Hire and When Not to Hire Dedicated Development Teams?When dedicated software teams are the optimal choice:When dedicated teams might not be the best approachA Dedicated Development Team vs an In-House Team: Key DifferencesHow to Manage a Dedicated Software Development Team Effectively?Setting the stage: Define clear project scope and objectives Building a cohesive team: Fostering a strong team dynamic Embracing Agile: Prioritizing Agile development methodologies The power of communication: Ensuring effective communication and collaboration Building a solid foundation: Maintaining code quality and best practices Finding the right fit: Selecting the suitable dedicated software development team Safeguarding your assets: Managing security aspectsWhat Is the Structure of a Dedicated Software Team?Cost of Hiring a Dedicated Development TeamFrequently Asked Questions About Dedicated Software Development TeamFinal Thoughts About Dedicated Software Development Team What Is a Dedicated Software Development Team? A software development dedicated team is a group of skilled professionals, including software developers, project managers, quality assurance specialists, and other relevant roles, hired to work exclusively on a specific project or a series of projects for a client. Unlike in-house teams or freelance developers, dedicated teams are sourced externally but work closely with the client’s organization, often becoming an extension of the client’s internal team. What Is a Dedicated Software Development Team? Key characteristics of a dedicated development team: Exclusive focus on the client’s project: The team is solely dedicated to the client’s project, ensuring complete focus, alignment, and commitment to meeting the client’s specific goals and objectives. This exclusive attention helps in developing more cohesive, efficient, and customized software solutions. Outstaffing model: Also known as IT outstaffing, this collaboration model involves the client hiring dedicated development team from a software development company. This company handles all aspects of recruitment, administrative support (such as salaries, PTO, and sick leaves), equipment, and other necessities. This setup allows the client to access specialized talent without dealing with HR complexities. Cost-effective solutions: By hiring a dedicated team, clients can often find cost advantages by leveraging lower development rates available in regions like Eastern Europe, Asia, and Latin America. This approach provides access to highly skilled professionals at a fraction of the cost compared to hiring locally. Comprehensive skill set: A dedicated team typically includes a diverse mix of professionals, such as software developers, project managers, QA testers, and UX/UI designers. This range of expertise ensures that all aspects of software development are covered, leading to more robust and well-rounded solutions. Long-term collaboration: Dedicated teams are usually engaged in long-term projects. This ongoing collaboration fosters a deeper understanding of the client’s business needs, leading to more innovative and tailored solutions. As the team becomes more familiar with the client’s objectives, they can align more closely with the client’s strategic goals. Flexibility and scalability: One of the significant advantages of a dedicated software development team is its flexibility. The team can be scaled up or down based on the project’s requirements, offering a level of adaptability that is hard to achieve with fixed-size in-house teams or individual freelancers. In summary, a dedicated software development team offers a focused, specialized, and scalable approach to software development, making it a preferred choice for businesses seeking long-term, collaborative, and customized solutions. This model contrasts with the broader scope of in-house teams and the fragmented approach of freelancers, providing a tailored, cohesive, and efficient way to achieve specific business objectives.   Advantages of a Dedicated Development Team What advantages does the dedicated team offer? A dedicated software development team offers a range of benefits that are pivotal for the success of any software project. Understanding these advantages can help businesses make informed decisions when considering their development strategies. Advantages of a Dedicated Development Team Access to specialized skill sets Hiring a dedicated development team provides access to specialized skill sets that might be difficult or expensive to find in-house.  These teams often have deep expertise in specific technologies, frameworks, and languages, allowing you to build the right product for specific needs. This is especially valuable for complex projects requiring specialized knowledge.    Cost efficiency IT outsourcing to a dedicated team can be a more cost-effective solution than building an in-house team, particularly for short-term or specialized projects.  You avoid the overhead costs associated with hiring, training, and managing an in-house team, such as salaries, benefits, office space, and equipment. Instead, you adopt a pay-per-use model, only paying for the resources you need. This allows for greater budget control and eliminates the risk of carrying fixed costs for an in-house team.   Enhanced focus on core business Another compelling advantage is that hiring a dedicated software team allows you to focus on your core business while a specialized team handles the complexities of software development. This frees up your internal resources to focus on your core business operations, such as marketing, sales, and customer service. By concentrating on your strengths, you can achieve greater efficiency and faster growth, leading to higher revenue and market share.   Faster time to market Hiring dedicated software development teams can significantly accelerate your time to market, allowing you to gain a competitive edge. Experienced development teams have established processes and workflows that allow them to deliver projects quickly and efficiently.  Teams can work concurrently on different aspects of the project, enabling faster development and deployment. Agile development methodologies, often employed by dedicated teams, further accelerate the process through continuous feedback and rapid iterations, leading to faster product releases. Hiring a dedicated development team offers a range of advantages that can significantly benefit your business. By carefully selecting the right team and establishing effective management strategies, you can harness the power of dedicated development teams and unlock your project’s full potential. When to Hire and When Not to Hire Dedicated Development Teams? The decision to build an in-house team or hire dedicated team is a strategic one, and there’s no one-size-fits-all answer. This guide outlines when a dedicated development team is the ideal choice and when alternative approaches might be more suitable. When to Hire and When Not to Hire Dedicated Development Teams? When dedicated software teams are the optimal choice: Long-term, complex projects: Projects with ambitious scopes and extended timelines often require a committed team that can adapt and evolve alongside the project’s needs. The inherent complexity and ongoing nature of such endeavors benefit from the dedicated focus and expertise of a specialized team. A dedicated team becomes a trusted partner, guiding through every step of the journey. Specialized expertise is essential: Projects demanding specialized technical capabilities, such as blockchain, artificial intelligence, or complex data analysis, can significantly benefit from teams possessing in-depth knowledge and experience in these domains. Engaging a dedicated team with specialized skills ensures a deeper understanding of the technical challenges and a higher probability of achieving project objectives. Scaling up quickly: Companies experiencing rapid growth or requiring swift operational scaling often find dedicated teams highly advantageous due to their inherent scalability and flexibility. Dedicated teams can easily adjust their size and expertise to meet evolving demands, providing the agility required to adapt to changing market conditions and respond quickly to new opportunities, ensuring that the organization remains competitive. Global talent is needed: Projects requiring diverse perspectives, multilingual support, or access to specialized skills not readily available locally benefit from dedicated teams with global talent. A team with members from various cultural backgrounds and expertise can bring fresh ideas and perspectives, resulting in more comprehensive and innovative solutions. Requirements are constantly changing: Projects with frequently changing needs, such as those driven by user feedback or market trends, benefit from a dedicated team’s ability to adapt and incorporate new requirements seamlessly. A dedicated team fosters a culture of continuous improvement, actively seeking feedback and incorporating changes to enhance the project’s effectiveness. Prioritizing core business functions: Outsourced development teams free up internal resources, allowing organizations to focus on core areas like marketing, sales, and customer service, enhancing efficiency, leading to faster growth, increased profitability, and a more competitive edge.   When dedicated teams might not be the best approach Short-term Projects with clear scope: Projects with a clear scope and a short timeline might not require the long-term commitment and extensive communication involved in managing a dedicated team. Fixed-price arrangements or freelance contracts can be more cost-effective for short-term projects, as they eliminate the ongoing costs associated with dedicated teams. Budget and time are constrained: Projects with limited budgets may find fixed-price arrangements or contract-based hourly rates more suitable for managing expenses. Projects with demanding deadlines might benefit from more flexible engagement models that allow for quick adjustments to meet tight timelines. Choosing the right team is crucial for success. Leaders should carefully assess project needs, consider available resources, and weigh the benefits of a dedicated development team. Make an informed decision that will propel the software project towards success.   A Dedicated Development Team vs an In-House Team: Key Differences Let’s compare the concept of a dedicated development team vs. in-house development across various criteria. Criteria Dedicated development team In-house development team Location Can be located anywhere globally, offering access to various talent pools Typically located in the company’s physical location, limiting access to local talent Cost Lower initial investment, predictable costs based on contract Higher initial investment, ongoing salaries, and benefits Team control Outsourced management, requires effective communication Direct management control, easier oversight Expertise & skill availability Access to diverse skills and expertise globally Relies on the local talent pool, potentially limited expertise Communication Needs effective communication tools and time zone management Direct, real-time communication is possible without barriers Speed of deployment Quick setup, can start projects sooner Dependent on local hiring and onboarding timelines Risk & compliance Contractual agreements define responsibilities and liabilities Direct control over compliance and risk management   How to Manage a Dedicated Software Development Team Effectively? Effective management is paramount whether you’re building an in-house team or outsourcing to a dedicated development company. Let’s go through the crucial steps to unlock a dedicated software team’s full potential, ensuring your project is delivered on time, within budget, and exceeds expectations. How to Manage a Dedicated Software Development Team Effectively? Setting the stage: Define clear project scope and objectives Imagine embarking on a journey without a map or destination. That’s what a software project without a clear scope and objectives feels like. A well-defined roadmap ensures everyone understands the purpose, target audience, and desired outcomes. This eliminates ambiguity and fosters a shared understanding of what “success” looks like. This first and foremost step includes: Dive deep into market research: Understand the target audience, their needs, and the competitive landscape. This knowledge forms the foundation for building a truly valuable software product for the whole team. Craft detailed user stories and product requirements: These are the blueprints of every software product. The critical outline includes the app’ functionality, features, and technical specifications with meticulous detail. Define success metrics: Don’t just aim for “good” – define measurable goals like user engagement, revenue generation, or technical performance. These metrics become your benchmarks for a truly successful project. Actions to take to make this step right: Collaborate with stakeholders: Involve all relevant departments and individuals in defining the project scope and objectives. This creates buy-in and ensures everyone is aligned. Leverage project management tools: Tools like Jira, Asana, or Trello are your allies in documenting requirements, tracking progress, and managing tasks efficiently. Regularly review and refine the scope: The world changes, and so do needs. Ensure the project scope remains relevant and aligns with evolving business demands. Expert tips: Be realistic: Don’t set unrealistic timelines or promise features that are beyond the project’s scope. This sets the stage for disappointment and frustration. Prioritize features: Focus on delivering the most valuable features first, ensuring a minimum viable product (MVP). This allows for early user feedback and iteration. Document everything: Keep a comprehensive record of all project requirements, specifications, and decisions. This ensures everyone is on the same page and provides a valuable reference point throughout the project lifecycle.   Building a cohesive team: Fostering a strong team dynamic A software development team is not just a collection of individuals; it’s a symphony of talents, each contributing their expertise to create a harmonious whole. A strong team dynamic is essential for effective communication, collaboration, and problem-solving. Here are the tasks needed to complete this step: Invest in team bonding activities: Organize team outings, workshops, or social gatherings to foster camaraderie and build lasting relationships. Promote open communication: Encourage regular team meetings, brainstorming sessions, and feedback channels. This fosters a culture of open dialogue and active listening. Establish clear roles and responsibilities: Define each member’s role within the team, ensuring clear accountability and responsibilities. This promotes efficiency and eliminates confusion. Regularly evaluate team performance: Conduct periodic team feedback sessions to identify areas for improvement and foster growth. Encourage cross-functional collaboration: Allow team members to work across different disciplines to gain diverse perspectives and build stronger connections. Celebrate successes: Recognize and acknowledge individual and team achievements to boost morale, motivation, and a sense of accomplishment. Expert tips: Embrace diversity: Build a team of dedicated software developers with diverse skills, backgrounds, and perspectives to encourage innovation and problem-solving. Facilitate conflict resolution: Provide a safe space for healthy debate and create a process for resolving conflicts effectively. Empower team members: Delegate tasks, provide autonomy, and encourage individual initiative. This fosters a sense of ownership and responsibility.   Embracing Agile: Prioritizing Agile development methodologies In the ever-changing world of software development, rigidity is a recipe for disaster. Agile development methodologies, with their focus on iterative development and continuous feedback, are the antidote to rigid planning and outdated approaches. To bring the Agile mindset to the dedicated software development team, here’s what to do: Implement Scrum or Kanban: Select an agile framework that aligns with your team’s needs and project complexity. Both have their strengths, so choose wisely. Conduct daily stand-up meetings: Briefly discuss progress, identify blockers, and align priorities. This ensures everyone is on the same page and keeps the project moving forward. Run sprint planning and review sessions: Plan sprints, review work completed, and adjust plans based on feedback. This allows for flexibility and adaptation throughout the development life cycle. Utilize project management tools for agile: Leverage tools like Jira or Asana to track sprints, manage tasks, and visualize progress. Encourage continuous integration and deployment: Automate builds and deployments to accelerate the development process and minimize delays. Prioritize user feedback: Incorporate user input throughout the software development process to ensure the software meets their needs and solves real problems. Expert tips: Train the Agile team: Provide training to ensure everyone understands the agile methodology and its benefits. Keep sprints short and focused: Ideally, sprints should last 2-4 weeks to facilitate faster iteration and feedback. Maintain a collaborative working environment: Encourage open communication, active listening, and teamwork throughout the development process.   The power of communication: Ensuring effective communication and collaboration Imagine a team trying to build a skyscraper without any communication. Chaos, right? Communication is the glue that holds a dedicated software development team together. How to communicate and collaborate well? Follow these tricks: Establish communication channels: Define clear methods of communication, such as daily stand-up meetings, team chats, and email. This ensures everyone knows how to reach each other. Hold regular project meetings: Schedule meetings to discuss progress, address challenges, and make decisions collectively. This keeps everyone informed and aligned. Encourage feedback and open dialogue: Foster a culture where team members feel comfortable sharing their ideas and concerns. This promotes transparency and fosters a collaborative spirit. Utilize communication tools: Leverage tools like Slack, Microsoft Teams, or Zoom to facilitate communication and collaboration. Document decisions and progress: Maintain a record of project decisions, tasks, and progress updates for transparency and reference. Expert tips: Active listening: Encourage active listening during meetings and conversations to ensure clear understanding. Clear documentation: Utilize documentation tools like Confluence or Google Docs to capture project requirements, decisions, and knowledge. Regularly review communication practices: Periodically assess communication effectiveness and identify areas for improvement.   Building a solid foundation: Maintaining code quality and best practices Just as a well-built house stands the test of time, robust software relies on high-quality code. This ensures the application is reliable, maintainable, and scalable. In order to achieve this, make sure that the in-house team and the dedicated development team are on the same page when it comes to the following aspects: Coding standards and guidelines: Define clear code formatting, naming conventions, and style guides for the team to follow. This promotes consistency and simplifies collaboration. Code reviews: Conduct regular code reviews to identify potential issues, improve code quality, and ensure adherence to standards. Frequent testing process: Implement functional tests and non-functional tests frequently to ensure code functionality and stability. Promote knowledge sharing: Encourage team members to share their coding knowledge and best practices. Expert Tips: Focus on simplicity: Prioritize writing clear and concise code that is easy to understand and maintain. Adopt Test-Driven Development (TDD): Write tests before writing code to ensure functionality and prevent regressions. Encourage code ownership: Empower team members to take ownership of their code and actively contribute to its improvement.   Finding the right fit: Selecting the suitable dedicated software development team Choosing the right dedicated development team is crucial for project success. Here are the essential aspects to consider while evaluating a vendor: Assess technical expertise: Evaluate the team’s experience and skills in the relevant technologies and platforms for your project. Consider communication and collaboration: Choose a team that demonstrates strong communication skills and a collaborative approach. Evaluate project management capabilities: Look for a team with a proven track record in managing projects effectively and delivering on time. Check references and portfolio: Review previous work and client testimonials to assess the team’s quality and reliability. Discuss engagement models: Choose an engagement model that aligns with your budget, timeline, and project requirements. Expert tips: Don’t solely focus on cost: While budget is important, prioritize expertise and experience over the lowest price. Build a personal connection: Schedule calls or meetings to get to know the team members and assess their personalities and communication styles. Trust your gut: If you don’t feel comfortable or confident with the team, it’s best to look elsewhere.   Safeguarding your assets: Managing security aspects In the digital age, data privacy and security are vital. Protecting your data and ensuring a secure development process is essential: Define security requirements: Clearly outline data security requirements, including data encryption, access control, and vulnerability management. Establish security protocols: Implement strong security protocols for data storage, transmission, and access. Conduct security audits: Regularly audit the development environment and codebase to identify and address vulnerabilities. Sign security agreements: Draft and sign comprehensive security agreements with your development team, outlining responsibilities and liabilities. Expert tips: Stay informed about security best practices: Continuously update your knowledge of industry best practices and emerging security threats. Use robust security tools: Invest in reliable security tools for vulnerability scanning, penetration testing, and intrusion detection. Train your team: Ensure your development team is trained on data privacy, security protocols, and best practices. Conclusion: Managing a dedicated software development team requires a blend of technical expertise, strategic thinking, and a human touch. By following these steps, you can create a dynamic, collaborative, and highly productive team capable of delivering exceptional software solutions that drive your business forward. What Is the Structure of a Dedicated Software Team? The structure of outsource dedicated software development teams is shaped by your specific technical requirements. There isn’t a one-size-fits-all approach, as the team’s composition will vary depending on the project’s particular goals and needs. However, here are some common roles and responsibilities typically found within dedicated software development teams: What Is the Structure of a Dedicated Software Team? Project Manager (PM)  A PM is a professional who guides the software development process and supports the dedicated development team throughout the project lifecycle. The PM is responsible for overseeing the project’s timeline and budget and ensuring that the team achieves its milestones and objectives. They help keep the project on track and provide regular progress reports to you. Expertise required: Project planning, team coordination, risk management, and communication skills.   Business analyst (BA) The BA’s role is to align the software development process with your business objectives. Acting as a bridge between stakeholders and the dedicated development team, the BA’s main task is to translate your business needs into technical specifications. Expertise required: Analytical skills, requirement gathering, and stakeholder management.   Software Architect The software architect plays a key role in ensuring that the project is scalable, maintainable, and aligned with business goals. They design the overall architecture and guide the development team in building and integrating various components of the software product. Expertise required: In-depth knowledge of software architecture, scalability, and system integration.   UX/UI designers UX (User Experience) and UI (User Interface) designers are responsible for crafting the design and usability of the software product. Their goal is to create an intuitive, user-friendly, and visually appealing interface that enhances user engagement and satisfaction. Expertise required: Skills in UX/UI design, an understanding of user behavior, and strong design principles.   Software engineers Software engineers, including front-end and back-end developers, form the core of the development team. These roles are critical and typically represent the highest costs within a dedicated development team. Expertise required: Proficiency in relevant programming languages and frameworks, with a solid understanding of both front-end and back-end development.   Quality Assurance (QA) QA specialists are responsible for ensuring the software meets high standards of usability, security, and performance before it is launched. They rigorously test the product to identify and resolve any issues. Expertise required: Attention to detail and expertise in various testing types, and test case designs,  including both manual and automated testing.   DevOps  DevOps engineers focus on automating and optimizing processes to improve speed, efficiency, infrastructure management, and quality throughout every stage of the software development lifecycle. Expertise required: Knowledge of cloud services, CI/CD (Continuous Integration/Continuous Deployment) pipelines, and automation tools. These roles collectively ensure that a dedicated software development team can deliver high-quality, tailored solutions that meet the unique needs of the client’s project.   Cost of Hiring a Dedicated Development Team Calculating the investment needed to hire dedicated remote development team can be challenging. The cost typically depends on various factors, including: Team size Developers’ location Level of expertise and role of team members Scope and duration of the project By analyzing salary information from Clutch, Salary.com, Indeed, and Talent.com, we have made some approximate calculations to give you a general idea of what to expect. We discovered that the average hourly rates for dedicated specialists vary widely depending on the country. The table below compares the average hourly rates for hiring various roles across different regions. As you can see, opting for a skilled development team in Southeast Asia over one based in the US or Europe offers several advantages: This choice ensures an ideal balance between cost and quality The difference in time zones can be leveraged to provide 24/7 operations, enhancing project productivity. Despite the time zone difference, both the in-house team and the dedicated team can still coordinate by finding common times for regular meetings and daily project updates. Many Southeast Asia countries, including Vietnam, have emerged as prominent IT outsourcing destinations thanks to their highly educated and skilled workforce with strong technical expertise.    Frequently Asked Questions About Dedicated Software Development Team What is a dedicated software development team? A dedicated software development team consists of experienced professionals such as developers, project managers, and quality assurance specialists, who are brought on board to work exclusively on a specific client’s project. Unlike in-house or freelance teams, these specialists are entirely focused on the client’s objectives, functioning as an integrated part of the client’s team to ensure seamless collaboration and alignment with business goals.   What are the benefits of hiring a dedicated team? Hiring a dedicated team offers numerous benefits, including full-time commitment to the client’s project, access to a wide range of expertise, and the ability to scale resources up or down as needed. This approach enhances project quality, speeds up development time, and reduces overhead costs associated with recruitment and employee management.   Why do you need a dedicated development team? A dedicated development team is essential for projects that require specialized skills, long-term engagement, and a focused approach. This model is ideal for companies looking to accelerate development, maintain high-quality standards, and stay agile while avoiding the complexities and expenses of building and managing an in-house team.   How much does it cost to hire dedicated software developers? The cost of hiring a dedicated software development team varies based on factors such as team size, the location of developers, expertise level, and project duration. Generally, rates are higher in the US and Western Europe, while offshore teams in regions like Asia offer high-quality work at more competitive rates.   How to hire a dedicated software development team? To hire a dedicated software development team, start by clearly defining your project requirements, including the skills and expertise needed. Next, research and shortlist potential outsourcing partners or agencies with proven experience in your industry or technology stack. Evaluate these companies based on their portfolios, client reviews, and communication practices. Once you’ve identified a suitable vendor, discuss your project scope, timelines, and budget to ensure alignment. Finally, establish a contract outlining the terms of engagement, including confidentiality agreements, and begin onboarding the dedicated team to kick off your project.   Final Thoughts About Dedicated Software Development Team In conclusion, opting for a dedicated software development team can be a game-changer for businesses, especially when handling large-scale projects that require a dependable and skilled partner. Whether you are a growing startup or an established company, having a dedicated team that works closely with you throughout the project lifecycle significantly enhances your chances of success. This collaboration model offers a strategic and cost-effective way to leverage specialized expertise and maintain a high level of quality and efficiency. When searching for the right partner, exploring the global talent pool is a great strategy, as there are numerous reputable outsourcing firms worldwide. At LTS Group, we offer top-tier dedicated development services ready to accelerate your product development and support your business growth. Don’t hesitate to reach out to us to discuss how our team augmentation services can help you achieve your goals.   —- Website: https://ltsgroup.tech/   Tel: (+84) 96-238-7474 Linkedin: <https://www.linkedin.com/company/lts-group-vietnam/> { "@context": "https://schema.org", "@type": "FAQPage", "mainEntity": [{ "@type": "Question", "name": "What is a dedicated software development team?", "acceptedAnswer": { "@type": "Answer", "text": "A dedicated software development team consists of experienced professionals such as developers, project managers, and quality assurance specialists, who are brought on board to work exclusively on a specific client’s project. 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In the race to deliver top-tier software products under tight deadlines, an effective strategy on how to measure technical debt has become critical to software development. According to the Consortium for Information & Software Quality (CISQ), the cost of technical debt in the United States surpassed $2.41 trillion in 2022, up from $1.31 trillion in 2010. Technical debt can cause so much frustration and burnout to development teams. And the only way to overcome it is to manage it proactively. In this article, we will explore essential metrics for identifying and measuring technical debt, examine its primary types, and outline best practices for proactive management. Let’s dive in!   Table of Contents Toggle Metrics for Measuring Technical DebtHow to identify technical debt?Technical debt: How to measure?What Is Technical Debt?Main Types of Tech DebtRequirements debtDesign and architecture debtImplementation debtTesting debtDeployment debtDocumentation debtHow Does Technical Debt Impact Business?The consequences of tech debtThe benefits of technical debtManage Tech Debt With LTS GroupHow to take the good out of a tech debt?Frequently Asked Questions About Technical DebtFinal Thoughts About Technical Debt Metrics for Measuring Technical Debt To measure and improve technical debt, you first need to identify it. Here’s how to identify technical debt: How to identify technical debt? Managing technical debt begins with creating a “technical debt list”. This list includes various technical debt “items,” each representing an unfinished task that could lead to future problems if not addressed. Examples of technical debt items include: Modules in need of refactoring Pending tests Required inspections or reviews Documentation updates (including comments) Architectural compliance issues Known latent defects that need resolution Each item on this list should include a description of where the debt item is in the system and why that task needs to be done and estimates of the principal and the interest: Principal: The effort required to complete the unfinished task. Interest: Consists of two components: Interest probability: The chance that leaving the debt unresolved will increase the cost of future work. Interest amount: The extra work needed if the debt is not addressed. For instance, the interest probability for a testing debt item is the likelihood that latent defects, which could have been caught during testing, will cause issues later. The interest amount is the additional effort required to fix these defects in the future compared to if they had been identified during initial testing. The technical debt list should be regularly reviewed and updated after each release, with items added and removed as necessary. Different types of debt are added at various stages of the release process: Testing debt items: Added when tests or reviews are skipped for a particular release or module. Defect debt items: Added when a defect is found but not fixed in the current release. Documentation debt items: Added when software modifications are not reflected in the corresponding documentation. Design debt items: Generated when code deficiencies, such as poor practices or architectural violations, are identified. Metrics for Measuring Technical Debt Technical debt: How to measure? Initially, technical debt items are given broad estimates (high, medium, or low) for principal, interest probability, and interest amount. These rough estimates are sufficient for tracking and initial decision-making. More precise estimates are made later during detailed planning when more information is available. For accurate technical debt measurement, specific procedures are followed for each metric, depending on the type of technical debt item and the historical data available. A complete technical debt evaluation will look like the following table: A comprehensive technical debt evaluation involves detailed estimates for principal, interest amount, and interest probability. This quantification allows the software development team to make analytical comparisons and create data-driven plans. A 2018 study found that only 7.2% of organizations systematically track technical debt, and only 26% use tools for it. However, those who actively manage and reduce technical debt achieve at least 50% faster service delivery times and other benefits. Therefore, measuring tech debt and selecting the most useful metrics based on your business’s needs and objectives is crucial. After defining the estimation of all 3 metrics principal, interest amount, and interest probability, more detailed metrics will be calculated. Some metrics we suggest to monitor are defect ratio, debt index, lead time, code coverage, tech debt ratio, change failure rate, and the number of failed Continuous Delivery (CD) and Continuous Integration (CI). The table below provides a better understanding of all metrics and how to calculate each one: Metric What it is? Why need this? How to calculate? Defect ratio The defect ratio metric compares new bugs to closed bugs during a specific period A low ratio indicates effective issue resolution. A high ratio suggests quality or development process issues, as new bugs outpace fixes Defect Ratio = Number of New Bugs / Number of Closed Bugs Lead time Lead time measures the time between task commitment and its release Long lead times can lead to obsolescence, increased costs, and reduced customer satisfaction. Identifying and automating bottlenecks can improve lead times The metric measured in units of time (hours, days, weeks) from task commitment to release Debt index This metric is the ratio of total tech debt to the system’s scale (e.g., codebase size). It provides a relative measure of technical debt per unit of code size or complexity A lower debt index indicates better debt management relative to codebase complexity The debt index is calculated by dividing the total tech debt by some measure of the system’s scale, such as the size or complexity of the codebase.   Debt Index = Total Technical Debt / Codebase Size (e.g., lines of code, function points)   The specific formula for calculating the debt index may vary depending on the methodology or tool used Code coverage The metric that assesses the percentage of code tested by automated tests Higher coverage indicates more of the code has been tested, reducing the likelihood of bugs. A target of around 70% coverage is often considered good. Code Coverage = (Number of Executed Code Lines / Total Code Lines) * 100   It is calculated by dividing the executed code lines or blocks during testing by the total code lines or blocks, expressed as a percentage of test coverage Technical debt ratio (TDR) This ratio measures the effort required to address technical debt vs. developing new features A lower TDR indicates a better balance between addressing debt and developing new features. High TDR suggests a significant portion of effort goes to fixing debt TDR = (Remediation Cost / Development Cost) * 100 Change failure rate (CFR) This metric assesses the quality of change management processes High CFR indicates frequent disruptions or failures due to changes. Low CFR suggests effective change management and higher success rates for changes CFR = (Number of Failed Changes / Total Number of Changes) * 100 Number of failed CD and CI events This number counts instances where automated Continuous Delivery (CD) and Continuous  Integration (CI) processes fail The high number of failures points to issues with code quality, testing, or deployment infrastructure. Indicates areas needing improvement for reliable delivery. Count of failed CD and CI events during the software development lifecycle   By consistently monitoring these metrics, organizations can gain a comprehensive understanding of their tech debt, identify areas needing improvement, and implement strategies to enhance software quality and efficiency.   What Is Technical Debt? Technical debt is a widely recognized term in the software development industry, acknowledged as a critical issue affecting organizations. In a recent McKinsey survey, CIOs reported that 10 to 20% of the technology budget dedicated to new products is diverted to resolving issues related to tech debt. More troubling still, CIOs estimated that tech debt amounts to 20 to 40% of the value of their entire technology estate before depreciation. This translates into hundreds of millions of dollars of unpaid debt for larger organizations. And things are not improving: 60% of the CIOs we surveyed felt their organization’s tech debt had risen perceptibly over the past three years. Although Ward Cunningham introduced the tech debt metaphor two decades ago, it has gained substantial attention from researchers only in recent years. Various definitions of technical debt have emerged in academic and industry literature: According to Gartner, tech debt refers to work owed to an IT system when teams prioritize short-term gains over long-term quality, impacting system performance, scalability, or resilience. This includes taking shortcuts or delaying system maintenance, ultimately leading to software instability and increased support costs. Ward Cunningham coined the term “technical debt” in 1992, likening it to financial debt in the securities market. He explained that shipping initial code is like taking on debt: while it can expedite development, it must be promptly repaid with a rewrite to avoid accumulating interest. This interest accrues with every moment spent on imperfect code, potentially stalling entire engineering efforts, especially in complex, object-oriented implementations. The concept has since evolved from Cunningham’s original notion of “not-quite-right code” to encompass any delayed internal software development tasks that risk causing future issues if left unresolved, emphasizing short-term gains over long-term software health. In an academic research, tech debt is broadly defined as immature or incomplete artifacts within the software lifecycle. Carolyn and Yuepu describe it as artifacts that persist within a system, increasing long-term costs and diminishing software quality. Similarly, “A systematic mapping study on tech debt and its management” study highlights tech debt as compromises made during development that offer short-term benefits but may undermine the software’s long-term health. McKinsey categorizes tech debt into two components: the principal and interest. The principal involves deferred maintenance, necessary upgrades, and bespoke software modifications that exceed original vendor support. Interest represents ongoing complexities and productivity losses resulting from initial compromises, such as nonstandard data harmonization and workaround solutions. What Is Technical Debt? Based on the definitions provided, here’s a synthesized definition of technical debt: “Technical debt is the cumulative consequence of expedient software development decisions that prioritize short-term benefits over long-term sustainability.  It encompasses deferred maintenance, incomplete artifacts, and compromises made during development, all of which pose risks to system performance, scalability, and resilience.  Left unaddressed, tech debt leads to increased software instability, higher support costs, and diminished overall software quality. Effective management is essential to mitigate these risks and ensure the long-term health and efficiency of IT systems.”   Main Types of Tech Debt We often equate technical debt solely with bad code, but there is more to it. There are various types of tech debt. In 2007, Steve McConnell proposed that tech debt can be categorized into two main types: intentional and unintentional. Intentional debt is deliberately taken on as a strategic decision, whereas unintentional debt results from poor practices and is not part of a deliberate strategy. McConnell further categorizes technical debt based on time frames: Nondebt: This includes a feature backlog, deferred features, and cut features. Not all incomplete work constitutes debt, as these do not incur interest payments. Debt: Unintentional debt: Incurred deliberately for specific reasons Intentional debt: Debt incurred intentionally Short-term debt: Typically incurred reactively, for tactical reasons Focused short-term debt: Individual, identifiable shortcuts (like a car loan) Unfocused short-term debt: Numerous small shortcuts (like credit card debt) Long-term debt: Generally proactive for strategic reasons   The paper Towards an Ontology of Terms on Technical Debt cites 13 distinct types of tech debt, including: Architecture debt Build debt Code debt Defect debt Design debt Documentation debt Infrastructure debt People debt Process debt Requirement debt Service debt Test automation debt Test debt. Main Types of Tech Debt However, this article will only choose the 4 main types of tech debt to analyze.   Requirements debt Requirements debt arises when prioritizing features that do not add value to the product. Often, this results from inadequate requirements elicitation or accepting unnecessary customer requests without proper analysis. There are two main types of requirements for debt: Poor requirements engineering: Inadequate stakeholder engagement leading to low-quality requirements. Ignorance of requirements: Misunderstanding actual customer needs, resulting in poorly implemented features.   Design and architecture debt Design and architecture debt stems from compromises and suboptimal decisions affecting a software system’s overall structure and integrity. Key characteristics of design and architecture debt include: Nonlocal concerns: Issues like security or performance impacting multiple system parts. Entropy: Gradual degradation of design integrity over time. Cyclic dependencies: Complex interdependencies among system components. There are several causes of design debt: Improper separation of concerns: Combining multiple responsibilities within a single class. Clone and own: Copying and modifying code without understanding dependencies. Tangled dependencies: Lack of architectural planning leading to a disorganized structure. Unplanned evolution: Adding features without considering the system-wide impact.   Implementation debt Implementation debt refers to tech debt within the source code due to shortcuts and suboptimal coding practices. Common causes include: Prototypes becoming products: Unrefined prototype code becoming permanent. Outdated technology choices: Using old technologies that no longer meet current needs. Implementation debt manifests in various forms, such as poor coding style, inefficient or deprecated code, and code duplication.  Maintaining good code is like sustaining good health through regular exercise and a balanced diet; it requires consistent adherence to best practices. Neglecting this can lead to the buildup of implementation debt, ultimately affecting the software’s quality and maintainability.   Testing debt Testing debt accumulates from deficiencies in the software testing processes, leading to increased bugs and issues during the software delivery period. Causes of testing debt: Inadequate testing: Key functionalities lacking proper tests. Testing the wrong things: Misplaced testing priorities. Needless testing: Wasting resources on known correct parts. Unreliable tests: Tests that do not consistently yield accurate results. Focusing on happy paths: Neglecting error cases in testing. Mismatch with specifications: Tests not align with system requirements.   Deployment debt Deployment debt relates to all the shortcuts, errors, or mistakes that occur during the deployment and operation of a software system. Deployment debt arises when software is deployed in an ad hoc, often labor-intensive manner, making it challenging to deploy quickly and efficiently with minimal human involvement. This can create chaos since manual operations are prone to errors. For example, in 2012, Knight Capital experienced a $400 million loss due to a manual deployment error, ultimately leading to the company’s bankruptcy.   Documentation debt Documentation debt refers to shortcuts taken in documenting a software system, such as outdated design specifications and missing code comments. Documentation debt occurs when proper documentation practices are neglected, leading to incomplete, outdated, or missing documentation. This is different from documenting tech debt, which involves practices for capturing and describing existing technical debt.   How Does Technical Debt Impact Business? Tech debt might affect businesses in both negative and positive ways. How Does Technical Debt Impact Business? The consequences of tech debt The business impact of technical debt can be significant, affecting various aspects of operations and growth: Increased costs: Technical debt results in higher costs for businesses due to increased time and resources needed to fix issues stemming from development shortcuts or underinvestments. This applies to both operational systems and product development. Lower quality of service: Tech debt can significantly impact service quality by increasing the likelihood of software malfunctions and errors. This leads to challenges in maintaining and updating systems, which can result in unhappy customers, higher churn rates, and a diminished reputation. Reputation damage: Reduced service quality from tech debt can harm the reputation of SaaS businesses. Service disruptions or other issues caused by technical debt may lead to negative reviews and a loss of customer trust. Difficulty in scaling: Accumulated technical debt can hinder the scalability of SaaS businesses. As software complexity grows, maintaining and updating tools becomes more challenging, potentially limiting operational expansion. Reduced innovation: Technical debt limits the ability of SaaS businesses to innovate by diverting developer resources towards fixing backlog issues rather than developing new features. This results in missed deadlines, stagnant roadmaps, and decreased morale among developers. Longer time to market: Tech debt prolongs the time needed to launch products to market, diminishing a company’s competitive edge. Developers spend considerable time addressing technical debt, slowing down the development process and delaying product releases.   The benefits of technical debt Technical debt can be strategically leveraged in software development plan. When incurred deliberately for strategic purposes, the underlying rationale is that today’s development costs are perceived as higher than future costs. Several reasons can justify this approach: Time to market: When speed to market is crucial, spending an additional $1 on development today might prevent a $10 revenue loss. Even if the future development cost increases to $5, incurring the $1 debt now is a wise business decision. Preservation of startup capital: A startup operates with a finite amount of seed funding, making every dollar critical. Delaying an expense for a year or two allows the startup to cover that expense with more substantial funds later rather than using valuable startup capital immediately. Delaying development expense: When a system is retired, all its technical debt is effectively eliminated. After a system is decommissioned, there’s no practical difference between a meticulously crafted solution and a quick, less refined one. Unlike financial debt, technical debt is absolved upon the system’s retirement. Therefore, as a system nears the end of its service life, it becomes harder to justify investing in anything other than the most expedient solutions.   Manage Tech Debt With LTS Group The most effective way to handle tech debt is through proactive management. This involves making intentional and well-justified decisions to take on debt, implementing a sound strategy for measuring and tracking it, and planning for its future repayment. In order to manage technical debt, tech leaders can follow these steps: Step 1 – Analyze the development process and codebase: This includes conducting a thorough review of the current development processes and examining the codebáe to identify bottlenecks and areas of concern. Step 2 – Create a tech debt map: In this step, tech leaders document the indtìied technical debt in a visual map as in the picture below. This map includes all areas of the system affected by tech debt. Step 3 – Review and identify causes: With the Tech Debt Map in hand, the team should proceed to review each identified piece of technical debt to uncover its underlying causes. Step 4 – Assess the impact of inaction: Evaluating the potential consequences of neglecting each piece of technical debt is essential to understand if it might worsen over time. How To Manage Technical Debt Effectively At LTS Group, drawing on our 8 years of experience in software development solutions and over 300 projects, we’ve developed effective strategies for handling tech debt: Transparency and alignment: Begin by openly discussing development challenges and the need for speed. Summarize these discussions in a way that all stakeholders, from engineers to management, share a common understanding, aided by visualizations. Ownership and responsibility: Ensure clear ownership of all system components. Address parts of the system that lack ownership to prevent neglect and accumulation of technical debt. Impact-based prioritization: Prioritize tech debt items based on their impact, as illustrated in our Tech Debt Map, to focus efforts effectively. Empowerment and integration: Empower teams to tackle problems and address technical debt as part of regular product development. Strive for a balanced approach between reducing technical debt and adding new functionality, dedicating 10–20% of development time to this effort. Refactoring as you go: For smaller technical debts, refactor code during routine updates to maintain code quality (“Good Boy Scout” principle). Focused efforts for medium debt: Allocate specific times, like “Tech Debt Fridays,” or prioritize tech debt as a feature to dedicate focused attention to medium-sized issues. Dedicated time for significant debt: Schedule fixed periods, such as allocating two days to a story or forming a dedicated task force, to address larger technical debt items over weeks or months. Utilize metrics for insight: Utilize metrics such as code issue counts from tools like SonarQube and lead times to inform decisions on addressing technical debt effectively. Tracking technical debt can be facilitated through various tools without introducing unnecessary complexity or cost: Project management tools: Utilize tools like Jira, Asana, GitHub issues, or Azure DevOps Board for tracking technical debt within project management workflows. Automated code analysis tools: Implement automated code analysis tools such as SonarQube to detect and manage code issues, security vulnerabilities, and other technical debt indicators. Manual tracking methods: Employ manual tracking methods such as Excel or customized approaches tailored to specific needs, ensuring accessibility and ease of updates.   How to take the good out of a tech debt? As discussed earlier, technical debt can be strategically managed in software development. But how can this be done? Here are some recommendations from LTS Group’s experts: Enhance transparency of technical debt One issue with technical debt is that project teams often incur it intentionally, yet it remains invisible and untracked. Here are two methods to improve transparency in tracking technical debt: Maintain a dedicated debt list within the defect tracking system: Every time debt is accrued, log the necessary tasks to resolve it, along with estimated effort and timelines. Track the debt backlog closely, flagging any unresolved items older than 90 days as critical. Integrate the debt list into the Scrum product backlog: Treat each debt as a Scrum “story,” estimating the effort and scheduling for each debt similarly to other Scrum tasks. How to take the good out of a technical debt? Strengthen the ability to pay off tech debt Teams vary in their ability to repay technical debt, often reflected in their “technical debt credit rating.” The key to effectively managing technical debt is minimizing unintentional debt arising from subpar work quality. The less debt accrued through such means, the more strategic debt a team can safely handle. In some projects, experts advise monitoring debt vs. team velocity. If servicing technical debt impacts a team’s velocity negatively, prioritize reducing debt until velocity stabilizes. Alternatively, track rework to gauge the cumulative debt accumulation.   Communicate about tech debt  The use of technical debt terminology facilitates communication with non-technical stakeholders, historically challenged by opacity. Transitioning from technical jargon to financial terms provides a clearer framework for discussions: Use the organization’s maintenance budget as an indicator of technical debt servicing: Distinguish between maintenance that sustains system operation versus enhancing system capabilities—only the former qualifies as technical debt. Frame debt discussions in financial metrics rather than technical features: For instance, “40% of our current R&D budget supports past releases” or “We allocate $2.3 million annually to service technical debt.” Ensure the nature of debt aligns with strategic goals: Not all debts are equal; some stem from prudent business decisions, while others result from inadequate technical practices or miscommunication regarding intended debts. Approach debt discussions as ongoing dialogues: It may take several conversations for stakeholders to fully grasp the nuances of technical debt.   Making informed decisions with techn debt When confronted with the choice to incur tech debt, teams typically weigh two paths: the “costly but superior” approach versus the “quick and makeshift” route. Thoroughly estimating both options informs the optimal decision at that juncture. Besides, these are the three issues that the development team should also take into account: How much it will cost to backfill the good path after you’ve already gone down the quick path? The interest payment on the tech debt: If you choose the quick path now, how much does that slow down other work until you’re able to retrofit the good path? Is there a path that is quicker than the good path and that won’t affect the rest of the system? By adopting these strategies and leveraging appropriate tools, LTS Group ensures efficient management and reduction of technical debt across its projects.   Frequently Asked Questions About Technical Debt How to measure technical debt in Agile? Unlike traditional waterfall approaches that aim for final product delivery, Agile emphasizes continuous evolution and adaptability of systems. Over time, technical debt in Agile software development increases the cost of maintaining and evolving software systems, potentially affecting reliability, scalability, and overall productivity. By integrating technical debt management into Agile practices—through backlog integration, collaborative efforts, sprint planning, ongoing management, and adaptation to external factors—you can effectively measure and mitigate technical debt while maintaining the agility and responsiveness required for continuous software improvement.   What is technical debt? Technical debt refers to the accrued cost resulting from expedient development choices that prioritize short-term benefits over long-term sustainability. It encompasses various compromises in code quality, architecture, documentation, and testing practices that accumulate during software development.   How do we measure tech debt? Measuring technical debt involves conducting a comprehensive evaluation that includes detailed estimates for principal, interest amount, and interest probability. Key metrics recommended for monitoring include defect ratio, debt index, lead time, code coverage, tech debt ratio, change failure rate, and metrics related to Continuous Delivery (CD) and Continuous Integration (CI) failures. These metrics collectively provide insights into the extent and impact of technical debt, enabling proactive management strategies to enhance software quality and maintainability.   What is a good technical debt ratio? The Technical Debt Ratio (TDR) assesses the relationship between the effort needed to resolve existing technical debt and the effort required for new feature development in a software project. This ratio is computed using the formula: (Remediation Cost ÷ Development Cost) × 100 = TDR. A favorable technical debt ratio is typically characterized by a balance between strategic debt incurred for short-term gains and the team’s ability to manage and repay this debt over time.   Final Thoughts About Technical Debt Neglecting technical debt can result in disruptions in business operations, drain budgets, diminish productivity, lower work quality, compromise security, and more. Prioritizing the measurement and improvement of technical debt metrics is crucial for mitigating these risks. This article has provided a comprehensive guide to identifying key metrics for measuring technical debt and implementing effective strategies to combat it. If your software development team is seeking a skilled external vendor with extensive experience in managing diverse software projects and technical debt, LTS Group is ready to help achieve your goals. Contact us today to discuss your business requirements. — Website: https://ltsgroup.tech/   Tel: (+84) 96-238-7474 Linkedin: <https://www.linkedin.com/company/lts-group-vietnam/> { "@context": "https://schema.org", "@type": "FAQPage", "mainEntity": [{ "@type": "Question", "name": "How to measure technical debt in Agile?", "acceptedAnswer": { "@type": "Answer", "text": "Unlike traditional waterfall approaches that aim for final product delivery, Agile emphasizes continuous evolution and adaptability of systems. Over time, technical debt in Agile software development increases the cost of maintaining and evolving software systems, potentially affecting reliability, scalability, and overall productivity. By integrating technical debt management into Agile practices—through backlog integration, collaborative efforts, sprint planning, ongoing management, and adaptation to external factors—you can effectively measure and mitigate technical debt while maintaining the agility and responsiveness required for continuous software improvement." } },{ "@type": "Question", "name": "What is technical debt?", "acceptedAnswer": { "@type": "Answer", "text": "Technical debt refers to the accrued cost resulting from expedient development choices that prioritize short-term benefits over long-term sustainability. It encompasses various compromises in code quality, architecture, documentation, and testing practices that accumulate during software development." } },{ "@type": "Question", "name": "How do we measure tech debt?", "acceptedAnswer": { "@type": "Answer", "text": "Measuring technical debt involves conducting a comprehensive evaluation that includes detailed estimates for principal, interest amount, and interest probability. Key metrics recommended for monitoring include defect ratio, debt index, lead time, code coverage, tech debt ratio, change failure rate, and metrics related to Continuous Delivery (CD) and Continuous Integration (CI) failures. These metrics collectively provide insights into the extent and impact of technical debt, enabling proactive management strategies to enhance software quality and maintainability." } },{ "@type": "Question", "name": "What is a good technical debt ratio?", "acceptedAnswer": { "@type": "Answer", "text": "The Technical Debt Ratio (TDR) assesses the relationship between the effort needed to resolve existing technical debt and the effort required for new feature development in a software project. This ratio is computed using the formula: (Remediation Cost ÷ Development Cost) × 100 = TDR. A favorable technical debt ratio is typically characterized by a balance between strategic debt incurred for short-term gains and the team's ability to manage and repay this debt over time." } }] } { "@context": "https://schema.org/", "@type": "HowTo", "name": "How To Measure Technical Debt?", "totalTime": "PT30M", "estimatedCost": { "@type": "MonetaryAmount", "currency": "USD", "value": "0" }, "step": [{ "@type": "HowToStep", "text": "The first step in measuring technical debt is identifying it by creating a "technical debt list." This list includes tasks that are incomplete or insufficient, such as missing tests, refactoring needs, or documentation gaps. Each item on the list should specify its location, importance, and provide an estimate of the effort (principal) and risks (interest) involved.", "name": "Step 1: Identify Technical Debt" },{ "@type": "HowToStep", "text": "Next, estimate both the principal and interest for each debt item. The principal represents the effort required to complete the task, while the interest includes the likelihood that neglecting the task will increase future costs and the additional effort needed to address those future issues.", "name": "Step 2: Estimate Principal and Interest" },{ "@type": "HowToStep", "text": "Once identified, the technical debt list should be regularly updated after each software release. New debt items—such as testing or documentation debt—are added when corners are cut during development, while resolved items are removed to keep the list relevant and actionable.", "name": "Step 3: Regularly Update the Technical Debt List" },{ "@type": "HowToStep", "text": "After compiling the list, initial estimates for principal and interest are given in broad terms (e.g., high, medium, or low). More precise estimates can be determined later when planning in detail, but the rough values are useful for tracking and prioritization in the short term.", "name": "Step 4: Provide Initial Estimates" },{ "@type": "HowToStep", "text": "Organizations then need to measure technical debt through key metrics. Metrics such as defect ratio, lead time, debt index, and technical debt ratio (TDR) provide insights into software quality and productivity. For example, a lower defect ratio indicates effective issue resolution, while a high TDR suggests excessive time spent addressing technical debt instead of new features.", "name": "Step 5: Apply and Track Technical Debt Metrics" },{ "@type": "HowToStep", "text": "The data from analyzed metrics should be analyzed to identify trends and areas requiring improvement. High levels of failed tests, long lead times, or high change failure rates may indicate bottlenecks or poor processes. Based on this analysis, teams can prioritize solutions to reduce debt and improve software efficiency.", "name": "Step 6: Analyze and Optimize" },{ "@type": "HowToStep", "text": "Finally, technical debt metrics must be monitored continuously. Organizations that actively track and address technical debt achieve faster delivery times and better quality. Adjusting strategies based on these insights ensures that both software development and debt management stay aligned with business goals.", "name": "Step 7: Monitor and Adjust" }] } { "@context": "https://schema.org", "@type": "BlogPosting", "mainEntityOfPage": { "@type": "WebPage", "@id": "https://ltsgroup.tech/blog/how-to-measure-technical-debt/" }, "headline": "How to Measure Tech Debt Metrics: A Comprehensive Guide", "description": "How to measure tech debt? Let's explore essential metrics, examine primary types, and outline best tips for proactive tech debt management in this article!", "image": "", "author": { "@type": "Person", "name": "Ashley Nguyen" }, "publisher": { "@type": "Organization", "name": "LTS Group", "logo": { "@type": "ImageObject", "url": "https://ltsgroup.tech/_next/static/media/logo.962a51ed.png" } }, "datePublished": "" }