Development cost optimization: tackling technical costs effectively

12 Jul 20236 min read

Cost optimization through effective engineering is a core task behind many projects we build as a technical partner. Because cost-efficiency directly impacts our client’s business achievements, we pursue it in all phases of the product development cycle. In this blog, we share our knowledge in this domain and offer a framework for development cost optimization analysis in modern realia.

Cost optimization is a continuous process, yet according to Gartner research, only 11% of organizations maintain cost savings for three consecutive years. The ideas from the post should help approach cost optimization more strategically. We’ll share our view toward building and operating cost-aware development workloads that achieve business goals while minimizing tech costs and, at the same time, maximizing ROI.

If you have further questions, please, contact us.

Development cost optimization framework

While cost management focuses mainly on removing unused resources and getting rid of old data, cost optimization is a more complex, comprehensive, and, most importantly, continuous process that ensures a company pays for things that bring the maximum business value and receives maximum return on investment.

We believe development cost optimization should be analyzed from the following three verticals: product rationalization, cost reduction, and development efficiency. Each of these has separate points we are going to discuss further. This is not a roadmap to cost efficiency but rather three perspectives on how you can look at it taking into account the business development lifecycle, product specifics, and its tech context.

development cost optimization

Product rationalization

Product rationalization vertical includes analysis of the product’s functionality or company’s product/service offerings to determine the strategic alignment, profitability, and overall business value. The goal at this step is to eliminate underperforming products or product parts on the UX and focus resources on things that have the most impact or have the highest potential to do so.

Business value

The main idea at this point is to look at the product development roadmap and move things that have the highest impact to the top. At the same time, projects that are nice to have or have low potential should be better put on hold.

To define this, one needs a detailed customer journey worked out. It will show the critical points of taking a user from point A to point B. Usually, this is a common practice while MVP scoping, and as the project progresses, many unnecessary things are added. At this step, it is time to take a moment to recognize what means what for the customer and where you invest more than needed.

Tech stack

Tech stack optimization is a holistic approach that should go beyond cost efficiency and also include growth and business goals focus. When assembling a tech stack for the project or analyzing the current one, we take into account:

  • Scalability and flexibility
  • Future-proofing
  • Skill availability
  • Risk of vendor lock-in
  • Integration capabilities (if required)

We deal with the requests for tech stack optimization and modernization in every second project we start to build. Check out a case study on technology stack optimization, where we helped our client to scale the product without blocking the engineering team.

Product architecture

Important aspects to remember when analyzing product architecture for cost optimization:

  • Embracing Cloud-Native Architecture principles, such as containerization and serverless computing, helps to optimize resource usage and reduce costs. Containers provide lightweight and portable environments, while serverless computing allows companies to pay only for the actual usage of functions or services.
  • Transition to Microservice Architecture helps to scale services independently based on demand. This approach enables organizations to allocate resources more efficiently and handle high-traffic loads effectively. Microservices support agility by enabling continuous development and deployment of individual services, allowing teams to work independently and deliver features faster.
  • The Service-Oriented Architecture (SOA) allows building business functions as collections of loosely coupled and interoperable services that can be reused across different applications. This reduces duplication of efforts and enables cost savings through service reuse.

Cost reduction

After looking at the product organization from a more broad perspective, you can move towards direct cost reduction. This includes reducing and eliminating lazy spending, review of unused licenses, analysis of the third-party integration you’re using or about to integrate.

Streamlining cloud spend

The main goal at this point is to eliminate inefficiencies, reduce costs, and improve performance by aligning the infrastructure with the actual needs of the organization. This includes tasks such as:

  • Rightsizing resources for each workload or application.
  • Tagging resources with meaningful metadata, сost allocation mechanisms development.
  • Leveraging serverless computing, such as AWS Lambda or Azure Functions.
  • Setting up continuous monitoring performance metrics and adjustment of resources, identifying and addressing any new instances of overprovisioning or underutilization.
  • Adopting an Infrastructure-as-Code approach.
  • Optimizing storage utilizing storage classes. Data lifecycle policies development and implementation.
  • Data transfer costs optimization. Integration of content delivery networks (CDNs).
  • Reserved instances and savings plan utilization.

3rd-party integrations

While the effectiveness and importance of different integrations vary depending on industry, business size, and specific requirements, some general perspectives can be applied across domains. When we analyze the efficiency of the integration portfolio we assess:

  • Value and need
  • Prioritization for the whole project and profit
  • Free or low-cost alternatives, their pros, and cons
  • Possible licensing optimization

Buy vs build ratio

The idea behind the build vs buy decision is figuring out whether a business will achieve better results by developing a custom solution or simply purchasing an off-the-shelf tool for a given use case. We always analyze each situation and the requirements separately, but here are some factors that might influence our final choice.

decision points to build vs buy

Development efficiency

From our point of view, the product roadmap, tech stack, architecture, infrastructure, and other optimizations should be further integrated with the efficient development processes and form what your tech departments do on a temporal basis. As opposed to the chaotic separate initiatives that might bring some immediate improvements but have no positive impact in the long run.

Right team

Optimized product engineering team composition plays an important role in the development process efficiency. Having a clear understanding of who best fits wherever you go with your business is not easy, but essential. The qualities of an effective engineering team include:

  • Business orientation and growth mindset
  • Backgrounds diversity relevant to business goals
  • Data-driven decisions and focus on customer experience
  • Knowledge-sharing and open communication
  • Initiating and driving change even when not asked
  • Blameless postmortems and thorough fault analysis

At Wise, we have expertise in building dedicated engineering teams for different projects across many domains and industries. Each time we start assembling a team, we start with a detailed audit of the tasks ahead. Learn what business value dedicated teams can bring from our recent blog post.

Agility and prioritization

Agility in technology, culture, and processes is a direct response to constantly changing market demands. Rapidly flexing, changing, and continuously evolving has become fundamental for organizations that want to succeed.

When development is moving in small and well-planned steps, it allows us to adapt and pivot whenever it is needed. For us, user feedback has always been a driver that defines our next moves as a development team. An iterative approach to development saves lots of engineering time and, therefore, costs.

As for prioritization, we have experience using the following framework to balance and budget engineering resources and find it very helpful. Matt Eccleston describes it in his article in more detail, but here are the highlights:

  • Engineering time is divided into 4 buckets (1 mandatory and 3 elective).
  • Keeping the lights on is a mandatory bucket and involves the work associated with tasks that help maintain the current level of service in the eyes of our customers.
  • For 100% of the elective buckets, the investment is split in the following proportions: Building new stuff (~60%), Improving existing stuff (for customers) (~20%), Increasing development productivity (not customer visible) ~20%.
  • The buckets are mutually exclusive and collectively exhaustive of the work engineering is doing.

engineering resources budgeting

DevOps as a culture

From our experience, DevOps helps to create an engineering culture that prioritizes cost optimization and improves cost efficiency in a number of ways:

  • Minimizes time-to-market and helps teams to develop and deliver new software faster.
  • Gives product engineering teams flexibility to react to the changing market requirements and customer expectations.
  • Eliminates the waste in the software development process and improves resource utilization efficiency.
  • Reduces the need to maintain legacy systems and improves software quality.
  • Creates the foundation for efficient cross-team communication.
  • Promotes continuous learning, shared responsibility, and creates a feedback loop for improved collaboration.

Next steps

Development cost optimization is a continual process of refinement and improvement over the span of business development lifecycles. A good starting point for technical costs optimization would be:

  1. Analysis of the currents state of cost control and governance.
  2. Tech stack, architecture, and cloud spent evaluation.
  3. Products development roadmap analysis.
  4. Identifying cost optimization priorities and potential cost savings.
  5. Preparing implementation plan for cost optimization.

At Wise Engineering, we collaborate with companies who want to achieve business goals while minimizing development costs and maximizing their return on investment. We use our cross-industry expertise to build cost-effective solutions, reduce tooling investments, and optimize the development processes for each specific business case. Let’s talk about yours.

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