6 Causes of Software Development Cost Overruns

1. Customer urgency and short-term vision

When developing software, it’s common to have priority modifications and customer requests, often formulated as a matter of urgency.

However, the success of a development lies in understanding the need from the outset and proposing the right solution to the customer.

Constant modification and short-term focus hampers the overall vision of the project, leading to solutions conceived in several directions. The need must have been identified, and the team must have had time to evaluate possible solutions from a technological point of view, cost vs. customer budget, maintainability, and whether the solution really meets the user’s needs.

In addition to increasing technical debt, always being in emergency mode means constantly shifting priorities, never completing the tasks in hand.

The customer knows best his expectations and business model, so it’s important that he is integrated into development projects and is assiduous throughout the collaboration.

A lack of attendance and commitment on the part of the customer can lead to delays and sub-optimal use of resources. The customer’s availability, involvement and feedback are essential to ensure effective project progress.

Grey areas need to be clarified during meetings to ensure optimum velocity. The time spent by customer-side teams should be seen as an investment, because the more they are present, the more they will be able to express their expectations, and the better the software will respond to their processes and needs.

There’s a difference between experimentation and testing. The technical team is responsible for testing functionalities to avoid bugs. The customer, on the other hand, needs to experiment to confirm that it really does meet his needs in the way he had imagined.

Experimentation also enables him to confirm with his team that his hypothesis about how they were going to use the software is confirmed.

Experimentation enables the customer to come back immediately with essential elements that he may have forgotten in the initial drafting of the functionalities. They will then need to quickly adjust the functionality while they are at this stage of the project, rather than finding out at the end when they may need to rework part of the application to make these adjustments.

Neglecting this step can result in additional costs, as modifications are more complex once the project is complete.

For every project, there’s always a velocity that’s picked up along the way.

Ongoing modifications and repetitive adjustments have an impact on development velocity. Stopping and restarting project development can lead to significant delays. Each project restart requires a new immersion in the project, consuming time and resources, and it’s complex to set aside a dedicated team in this context with other projects underway.

During the collaboration between the customer and the development partner, it is important from the outset to define a single person who has the overall vision of the project and who will be responsible for making decisions.

The presence of two (or more) decision-makers involved in the project, making divergent decisions, can lead to complications.

Differences in understanding of needs or priorities can lead to cost overruns, so clear communication between stakeholders is crucial to avoid these pitfalls.

In order to make the software their own, and to check that it meets the customer’s expectations, teams need to be trained in the new software.

Failure to train the user team can lead to under-utilization of the software, representing a loss of investment and productivity.

A poorly trained team can also confuse execution problems with bugs, resulting in unnecessary costs.

If you don’t train your teams perfectly, they won’t use the software properly, and it will be difficult to see the real return on investment.

In short, when we analyze and evaluate a project, we assume that all these points will be respected. If they aren’t, every little situation that adds up can quickly create major overruns, so it’s important to understand this and work as a team to prevent it from happening.

Long-term vision, transparent communication and rigorous management of customer urgency are essential to avoid cost overruns.

By working as a team and anticipating these challenges, we can ensure project success without compromising the initial budget. Vigilance in each of these areas is the key to avoiding unforeseen costs and ensuring successful software development.

Download our tool that will help you avoid the 8 behaviors (2 bonus) likely to push your software development budget over the top.

By understanding the common causes of software development cost overruns, you can take proactive steps to manage your budget effectively and keep your project on track. However, simply avoiding overruns is only part of the equation. To truly maximize the value of your investment in custom software, it’s essential to allocate your budget wisely and measure the return on investment (ROI).

For a deeper dive into how to strategically plan your software development budget and evaluate the ROI, we recommend reading our article Cost of Custom Software Development: How to Allocate Your Budget & Measure ROI. This guide will help you make informed financial decisions that align with your business goals, ensuring that every dollar spent contributes to the success of your software project.