4 reasons to justify an investment in software development
One of the reasons companies use external software development companies is to increase capacity around application maintenance. Still, they are also effective in doing project-based work where you can scale up and then down when the project is over. Many CFOs like this type of work because it is possible to capitalize on the effort and amortize it over time. When existing employees work on these projects, it is often difficult to “capitalize” the cost.
GAAP accounting notwithstanding, good development teams work on validating the work and ensuring that it is possible to measure success. One methodology is called “between the lines.” Let’s unpack this methodology. First, consider a financial statement – revenue is also known as “the top line.” Gross margin is also known as the “middle line” and net income is the “bottom line.” Finally, risk can affect all three elements. Every software development project needs to create value for the enterprise, otherwise, you should not be doing the work.
Revenue – does the project you are suggesting increase revenue for the company?
Gross Margin – does the project you are suggesting lower the cost of goods sold, thereby increasing gross margin?
Net Income – does the project you are suggesting lower Selling, General & Administrative (SG&A) costs so net income goes up?
Risk – is the software development project help the company manage risk, thereby improving operations?
When you have the discipline to determine the value proposition before you begin, your application development projects will be tied to potential results. This methodology ensures that your development projects generate value.
Give us a call or contact us at www.pri.solutions.com to see how we can deliver this kind of software outsourcing project for you.