Key Performance Indicators (KPIs) for Monitoring ODC Success

Introduction

Businesses are increasingly turning to setting up offshore development centers to access the diverse talent pool and gain a competitive edge.

While offshore software development offers significant benefits, just setting up the offshore software development centers is not enough. It's crucial to measure their success. 

However, achieving this relies on establishing the right key performance indicators (KPIs), which are essential for ensuring that the software development process is efficient and aligned with the company's defined business goals.

A well-structured KPI framework can empower companies to make informed decisions. According to a report from the Harvard Business Review, companies that effectively use KPIs are 3.5 times more likely to be successful than those that don't. 

Therefore, It's important to find the key performance indicators (KPIs) that can effectively measure the success of offshore development centers.

Want to understand the KPIs that can help you measure the success of your ODC? This blog provides detailed insights on the KPIs to measure your ODC success. Read on to learn.

KPIs for monitoring offshore development project success

While the advantages of leveraging the capabilities of offshore development services are undeniable, their successful management and integration may pose unique challenges in driving and measuring the project's success. 

That is where measuring the performance based on the KPIs defined helps!

Let us explore the Key performance indicators tailored specifically to measure the performance of offshore teams. 

1. Quality of work 

Offshore software development teams are often evaluated based on the quality of the deliverables because this directly affects customer satisfaction and long-term business success. 

Therefore, to assess the work quality delivered by the offshore teams, the following KPIs can be helpful:

Defect density

Defect density measures the number of defects experienced per unit of the tasks completed. This provides detailed insights into the overall quality of the delivered services or products. 

Code review metrics

By conducting the evaluation for thoroughness and effectiveness of the code reviews, the businesses can actually have an idea about the robustness of the developed software. 

Customer satisfaction scores

Customer satisfaction score KPI measures the client satisfaction level with the offshore development project. Businesses must gather feedback from end users or clients regarding the performance, usability, and quality of the delivered solutions. This feedback can act as a valuable indicator for assessing the offshore development center performance. 

2. Time taken vs. expected time

Setting an estimated deadline for any project is crucial, and that can be a huge key performance indicator in measuring the project's success. 

Clients often prefer to work with reliable offshore development companies that can deliver projects on time. Since India is one of the top destinations for offshoring, businesses choose to work with a reliable offshore software development company in India. 

A single delay can have a significant financial impact on the company's brand and its image as well. Therefore, measuring success by comparing the overall time taken for development with the defined delivery time is a key indicator. 

3. Efficiency and productivity 

Maximizing operational efficiency and productivity are two primary objectives of offshore development teams. Therefore, measuring these two can provide a clear picture of the project's success. 

However, to evaluate this, businesses must check the following parameters as KPIs. 

Throughput

Throughput provides deeper insights into the productivity levels of offshore teams. It represents the rate at which a task is completed over a specific period. It is often measured by the features delivered, tasks, and even share points. 

Utilization rate

The utilization rate is the percentage of time that offshore team members spend actively working on the project tasks compared to the total available working time. 

Cycle time

Cycle time represents the amount of time required to complete a task. It's like an efficiency measuring tool for the software development lifecycle process. 

It is the time taken to complete a unit of task from initiation to delivery. Through cycle time, businesses can also acquire valuable insights into process inefficiencies and workflow bottlenecks. 

Measuring cycle time also provides details on objective quantification of team performance, detection of inconsistencies that may hinder the speedy workflow, and estimation of future task completion speed. 

4. The deliverables vs project scope

A clear project scope is essential for efficient project management. Everything you need to do for the project falls within the project scope, so it's crucial to have a clear understanding of it. This may include:

• The overall project goal
• Specific objectives of a team
• Project budget and costs
• The project roadmap to achieve objectives
• Monitoring mechanism to check the project progress as per the defined timelines
• Quality assurance

Every aspect of a project, including its progress and deliverables, is crucial, especially quality assurance. It's important to constantly evaluate whether the defined project scope aligns with the project's goals. After all, 88% of customers say that good customer service makes them more likely to purchase again. Therefore, delivering quality outcomes is a top priority.

5. Compliance and risk management 

When offshoring, it's crucial to comply with regulations, manage operational risks, and stick to project timelines. Businesses can effectively monitor compliance and risk management by using these KPIs. 

Make sure the offshoring company understands the security standards and compliance requirements. Once shared, ensure that the offshore team follows the data security protocols, industry-specific standards, and privacy regulations. 

By effectively measuring this KPI and ensuring compliance, businesses can mitigate potential security risks.

6. Communication and Collaboration 

Effective communication and collaboration are the two essentials of any project. It is imperative for the project's success. 

According to a Gartner report, organizations that prioritize effective communication around KPIs see a 50% improvement in team performance. 

So, measuring this could be one of the crucial parameters. Therefore, to evaluate communication and collaboration effectiveness, businesses must assess the following KPIs:

Cultural integration metrics

This includes evaluating how well the offshore team members integrate with the company culture, collaborate with the onshore members, and align with the organizational values. 

Response time

Response time is a key indicator of the offshore team's communicational efficiency and responsiveness. It refers to the time taken by the offshore development team to respond to requests, queries, or feedback. 

It is basically the amount of time it takes between sending requests to the server and getting a revert for the same from the server.

Engagement levels

Another important aspect of assessing communication and collaboration effectiveness is evaluating the engagement levels of the offshore team. This involves their active participation and contribution in discussions, meetings, and other collaborative sessions. 

Along with these metrics, the KPIs for measuring project success are further categorized into 6 types that can help businesses choose from a wide variety of parameters. Below is a complete overview of the same. 

Categorization of KPI metrics

Here, we have compiled the KPI’s metrics categorization. However, businesses must choose the one that actually aligns with their business goals and offshore software development projects. 

1. Software developer productivity metrics
2. Software performance metrics
3. Test metrics
4. Defect metrics
5. Operational metrics
6. Customer satisfaction metrics

Software developer productivity metrics 

The software developer productivity metrics evaluate the efforts and time needed to complete a project. The following parameters can be considered for this evaluation of key performance indicators (KPIs).

• Measure of the development team’s work

Formally known as ‘Velocity’, it is defined as a measure of work a development team can perform in a single sprint. This can provide clarity over how productive the offshore development team is. 

"The higher the offshore team's velocity, the more effective it is."

To evaluate the average velocity of the offshore development team, you will require a minimum of three sprints, as shown in the graph above. 

• Sprint burnout 

Sprint burnout is a particular type of statistic that measures the volume of work done in a specific iteration or sprint. It provides more detailed information than just a velocity estimate, which is based on a series of average values. 

It is basically a software metric that helps teams adjust their performance when the measurement doesn't align with the predictions. Businesses can easily use the sprint burnout charts to represent data that measures time against the story point. 

{Story Point- It is an evaluation of a software project size and the required time to complete it}

Release burnout

Release burnout is an essential KPI that measures the release progress of a project. It facilitates development teams in identifying if they are ahead of the plan, on-time, or falling behind schedule. 

Release burndown charts are similar to the sprint burndown charts, with the y-axis representing the story points and the x-axis representing the sprints, as shown below.

It provides valuable information on the development process that can help businesses plan and update clients about any early or delayed releases. 

Code coverage

Code coverage refers to a quality metric that supports test-driven development and continuous delivery. It defines the extent to which the source code is executed, thereby validating the effectiveness of the testing process.

"The higher the code coverage, the better the development progress."

It is also known as test coverage, which measures the amount of source code that is executed during the testing phase.

Code stability

A stable code means that a software product has very few changes. By using the code stability metric, businesses can understand how small changes to the software impact their goals. Making a few changes to the code should not affect the entire program. Code stability represents the percentage of deployed code that causes downtime.

Code churn

Code churn is a KPI metric used to evaluate code stability. It reflects how frequently the developed code undergoes modifications within a particular period.

The graph below shows the lines of code that were modified, added, and deleted, providing insight into the code churn.

If the software development team frequently needs to change the code to fit the new features, it may result in a high-maintenance software system. This, in turn, can pose significantly higher risks, making it crucial to manage code churn effectively. 

Code simplicity

Simple, successful code is more valuable than complex code. A complex code needs a lot of testing and refining, while a simple code is completely the opposite. The number of independent paths in the code measures code simplicity.

Software performance metrics 

Several parameters must be measured in the offshore software development process for software quality assurance. Along with the response time and cycle time as mentioned above, the below-mentioned KPIs fall under the software performance metrics. By measuring the below-mentioned KPIs, software teams can detect and resolve issues as soon as possible.

Availability

The software's availability shows how likely it is to be working when needed. It indicates how much of the software is actually working compared to the total time it should be. 

The software's key features help it continue working even when there are errors. They typically isolate the issue and allow the software to keep working, although at a reduced capacity.

Reliability 

The reliability measure indicates how likely the software will produce the expected result at any time. It includes tools to prevent, find, and fix software errors. 

A reliable software development program should not consistently generate incorrect data. Instead, it should address the issue or, at the very least, isolate and report it.

Serviceability 

Serviceability means how easily and quickly a software system can be serviced or repaired. This measurement helps to find problems quickly and accurately. It ensures that the right repairs are done with as little impact on normal service as possible.

Test metrics

Test metrics are used to evaluate the overall quality of a software product developed by the dedicated offshore development center. These tests are assessed based on how well they cover everything. When evaluating test metrics, certain key performance indicators (KPIs) can help make a decision:

• Percentage of overall test coverage
• Whether or not the software passed all the tests
• Lines of source code that have been reviewed
• Number of statements in a program that have been executed
• Branching control structures that have been executed
• Defined functions used

Defect metrics 

Dealing with issues promptly is a crucial part of the software development process. It's important to track and remove these issues quickly in order to maintain high software quality standards. Here are some metrics to evaluate the efforts of odc offshore development centers to handle these problems effectively.

Vulnerability

Vulnerability measures the extent to which an attacker can exploit a software development system's deficiencies to perform illegal operations. 

“The more vulnerable the software is, the greater the security issues it experiences.“

Percentage of software defects discovered

Defect detection in code assesses how well the testing team is performing. To measure the percentage of software defects found, divide the number of errors detected before the software release by the total number of errors.

Mean time to detect defects

The mean time to detect defects is the amount of time it typically takes to find a bug in the software. It is the time between when an issue occurs and when the DevOps team notices it. A longer mean time indicates a longer downtime.

Mean time to repair

Mean time to repair (MTTR) is an important measure that shows the time between finding an issue and fixing it. 

“The lower the MTTR value, the better the team's ability to fix security issues.”

Operational metrics

Operational metrics of software help assess the stability and effectiveness of maintenance for their systems.

Customer satisfaction metrics

Businesses can use customer satisfaction metrics to understand how happy their customers are with their software. This measurement assesses how satisfied clients are with offshore development projects. It helps determine if the project meets the client’s expectations and identifies areas for improvement.

By now, we have explored all the KPIs to measure an offshore development project’s success. Although, setting a KPI is an excellent way to figure out the success of your ODC success. Below are some of the common pitfalls to avoid when setting up the KPIs to measure the success of your projects.

Common pitfalls to avoid when KPI selection and implementation

Despite setting any of the above KPIs to monitor performance, it is essential to take note of common pitfalls that must be avoided. Eliminating the possibility of such pitfalls can help increase the likelihood of achieving the desired ROI of the software development project. Below are some of the pointers to be taken care of:

Setting too many or irrelevant KPIs

There are some specific KPIs that might be a good and measurable fit for one project but not for another. So, in short, the “no one size fits all" principle works here!

When setting KPIs for your offshore software development project, it's essential to be mindful. This can significantly impact the overall time and effort. Focus on setting KPIs that measure success and prioritize quality delivery over quantity. 

Neglecting employee engagement

No one understands the nature of the development team's work better than the team themselves. Setting up the milestones without understanding their work appropriately can affect overall productivity and efficiency. 

Therefore, the employees should be involved in setting up the KPIs. This provides the employees with a sense of ownership and commitment to attaining the desired outcomes. 

Neglecting data quality and accuracy

Overlooking data quality can lead to higher risks in running businesses with flawed and inaccurate information. This can result in a complete waste of resources and missed opportunities. 

Since the company's major decisions rely on data-driven insights. Therefore, establishing data governance to ensure data accuracy and quality can help businesses make more informed decisions. 

However, avoiding common pitfalls can help measure the success of projects aptly. But it is essential to note here that setting realistic and measurable KPIs is already at the top of the list. To select the KPIs, you must follow any of the below two approaches:

S.M.A.R.T: The acronym SMART stands for Specific, Measurable, Attainable, Relevant, and Time-Bound. This indicates that your key performance indicators should be specific, easily measurable, achievable, relevant, and timely.

6 A's: The 6 A's method, similar to the SMART criteria, serves as a checklist for selecting the right indicators. According to this method, KPIs should be aligned, attainable, acute, accurate, actionable, and alive. This means they should be aligned with your goals, realistic, easy to understand and measure, and adaptable.

Conclusion

Measuring the success of offshore teams is a multi-dimensional task. It involves assessing work quality, productivity, communication, compliance, and employee satisfaction. 

Tailoring specific measurements to the unique needs and goals of offshore initiatives provides organizations with valuable insights and areas for improvement. This continuous optimization helps organizations enhance their offshore teams. 

At Your Team In India, we understand the complexities of creating, managing, and measuring the success of offshore teams using appropriate KPIs. This can help you make more data-driven and informed decisions. Get in touch with the pioneers today.

Frequently Asked Questions (FAQs)

How to measure offshore productivity?

To measure offshore development center productivity, you must set KPIs like velocity, cycle time, code coverage, code churn, code simplicity, and release burnout. These can appropriately share insights about offshore teams' productivity and how well they are aligning with business goals.

How can I evaluate the performance of the software developed by the offshore team?

To evaluate the performance of software developed by an offshore team:

1. Focus on key KPIs like code quality, measured by defect density and adherence to standards.
2. Assess timeliness by comparing delivery dates against the project timeline.
3. Evaluate cost efficiency by analyzing the budget adherence and ROI.
4. Measure user experience (UX) through user feedback and usability tests.
5. Track performance metrics such as speed, scalability, and reliability.
6. Ensure compliance with security standards and industry regulations.
7. Consider post-deployment maintenance ease and the offshore team’s responsiveness to support and updates.

These KPIs provide a comprehensive software performance assessment.