Skip links

Coronavirus and what it means for your software development budget

Everyone has been impacted by the coronavirus.

In all likelihood, we are now heading for a global recession, a prolonged period of economic uncertainty, stalled transactions and lower revenues. High unemployment and crushed consumer confidence will translate into lower consumer spending and delayed purchases while investors and corporate risk aversion may mean it won’t be easy to raise another round of funding.

So what can you do?

Prepare for a decline in your revenues and cost structure

The majority of business activity has come to a grinding halt. Even if you are still able to provide products or services to your customers, they probably already reduced their spending and postponed purchases of non-essential items indefinitely. If you are a B2B business the current situation may mean you won’t be able to close a deal, get a new client anytime soon and that most of your clients will be extremely price and cost-conscious for many months to come.

Create a lean cost structure

You should assume it is going to take many months for the normal economic activity to restart. So it’s high time to take a closer look at your cost structure and make sure it’s lean and appropriate for the current economic environment. Be more disciplined and focused on doing more with less. 

For many technology-driven businesses, one of the biggest cost elements is software development payroll. At Railay, during the last couple of weeks, we have been dealing with a huge increase in international clients exploring various options to cut those costs by adding new hires in Vietnam as opposed to the US or the UK or building entire cost-efficient teams in cheaper locations.

Regardless of the stage of development, many businesses are facing the same issues: huge uncertainty, lower revenue, liquidity issues and pressure on costs.

Here is some advice on what you can do about your software development costs:

Scale-ups

During the last financial crisis of 2008 and 2009, the funding environment changed dramatically for Series A, B and C, which fell by 40%, 41% and 46%, respectively. Investors are becoming risk-averse again and we should be prepared for the same situation this time round.

Assume that your next funding round might be delayed or difficult to close. Reduce cash burn, make investor money last longer, preserve liquidity and make sure you are in a strong position to take advantage of cheaper user acquisition costs when things stabilize.

For tech-driven businesses, software development payroll is often the biggest cost element so try to optimize it. Focus on building more for less and make sure you get to the next milestone with the money you have left so that raising the next funding round is possible.

Here is what you can do:

  • Revisit your team structure – which positions are core, and which aren’t
  • Delay hiring until it hurts
  • When it hurts, consider adding new hires in cheaper locations vs. your home market (everyone is working remotely these days anyway)
  • Outsource non-critical tasks to cheaper locations (testing, maintenance etc). We all like having everyone in the same office, and in good times we can….but not now
  • Replace people you were forced to make redundant with employees in cheaper locations

At Railay, we can help you build a functional team in Vietnam that will cost a fraction of your software development costs in the US or UK or simply move non-critical tasks to Vietnam.

This will help you improve margins, make investor money last longer, maintain liquidity and strengthen your competitive position. 

Start-ups

It shouldn’t come as a surprise that pre-seed and seed rounds might be challenging now. Investors are reluctant to part with cash for an idea that hasn’t been proven yet during times like these. Does it mean you need to put your business idea on hold? Not necessarily.

We can help you build an MVP in Vietnam for a fraction of a price. Over the years, we have worked with several start-ups helping them build MVP in a very cost-efficient manner and prepare everything they needed to get the funding. We provided part-time CTO, oversaw the product and once the idea was proven we helped them build their team in Vietnam.

Mature businesses

Some of our established clients have put new, non-critical development projects on hold. To cut costs, many have almost immediately streamlined their software teams in their home markets and froze new hires.

They decided to move some positions to Vietnam so that parts of testing and maintenance can be done from a more cost-efficient location.

Overall, during the last few weeks, we have seen a huge increase in the number of international clients seeking to make their cost structure leaner and making sure they can survive the prolonged period of economic uncertainty and downturn.

At Railay, we can help you optimise your software development costs and move tasks, projects or entire software development teams to Vietnam.

We are a trusted software development partner to a number of well-known international clients for whom we have built great, functional teams in Vietnam.

Please get in touch if you need any advice!