How to Sustainably Improve Profit Margin at Your Software Development Agency
Improving your margin is an exercise in balancing costs against the tactics you are using to generate revenue while continually working to make your team more efficient.
Gartner predicts that 70% of new software applications will be built using low-code or no-code platforms over the next three years. Adoption will have surged by almost 45% when compared to 2020 data. What’s driving this growth?
Along with the high demand for new applications, the global developer shortage and resource costs are undoubtedly playing a role. In response, digital agencies, consultancies, and other software development firms need cost-effective ways to create software while reducing complexity and risks.
Low-code platforms like 8base deliver significant productivity boosts while enabling developers to configure many common elements of modern software applications without code — while not inhibiting their ability to infuse code wherever needed. This flexibility allows agencies and their staff to design, develop, deploy, and run applications more effectively and efficiently.
Low code simplifies the architectural work required to build new applications. Technical architecture and an application’s underlying architecture are eliminated using these tools. The focus often becomes data and integration architecture. However, low-code tools provide simple ways to iterate on both options, minimizing the need for up-front or waterfall architecture. These time savings can then be passed on to clients.
Rather than designing every single screen and user interface interaction, you can build a style guide and a few key screens. These can then be implemented into the low-code platform, and detailed design can happen inside the low-code application rather than in the design tools.
Low-code tools infuse improvements into the development process. Developers work differently, configuring pre-packaged components whenever possible and creating custom code when necessary. The best low-code platforms are fully extensible — providing the ability to import external code libraries and user interface components.
Although the development process is faster and different, it does not negate the need for a professional software development lifecycle that includes different development environments and capturing versions in repositories such as Github, Gitlab, etc. For client projects and to satisfy compliance requirements, utilize low-code tools that accommodate these version control and environment capabilities.
Quality assurance processes should be greatly simplified because of the more iterative nature of low-code development. That said, each new change to an application can break existing functionality, so the best low-code platforms offer regression testing capabilities. Beyond regression, unit and integration tests should be conducted by your team and managed using existing software development lifecycle tools.
While programming languages and frameworks have evolved, software development is still done the same way it was 20+ years ago. We have witnessed productivity gains in other functional business areas due to software efforts focused on process improvement and digital transformation. Unless you believe software development is immune to disruptions — highly specialized and customized to each scenario — logic will dictate that it is a business process that can be radically transformed.
Low code presents a financial opportunity for digital agencies while highly disrupting existing business models.
The benefits of low code for digital agencies are realized in an enhanced ability to scale the business, reduced staffing complexity and cost, increased client satisfaction, and delivery of projects with far higher profit margins. On the flip side, a reluctance to adapt to this new paradigm introduces risks as competitors transform their businesses.
Implementing a low-code practice can transform your team’s productivity. A low-code platform — and its out-of-the-box components and capabilities — can eliminate errors, save time, prevent headaches, and improve project delivery.
Digital agencies are poised to reap the benefits delivered by using low-code tools. Here’s how:
ZDNet recently cited a report in which engineering managers and HR professionals said backend developers were the most in-demand hires. Instead of searching for more developers, consultancies have learned they can use a low-code platform to maximize their existing staff.
Once your team is up to speed on 8base and low code, they’ll work like full-stack developers. You can focus talent more on where value is added, resources can move easily across projects, and you’ll be able to address career paths and upskilling in new and compelling ways.
“The feedback has been that it's very easy for the new devs to understand the core concept of 8base. It takes about a day or two for them to really get up to speed.” - Mihir Shah, Co-Founder, ITWox
Low-code platforms help agencies take on more client work with the same — or fewer — resources. 8base has seen its low-code platform dramatically cut the amount of manual coding typically required, which can increase developer productivity by 3-5X.
Smaller teams mean fewer friction-laden hand-offs and a reduced project management burden.
As digital agencies consider acquiring tools or developing their repeatable capabilities to deliver client projects more rapidly and consistently, low code may provide the biggest return on internal transformation efforts. According to 451 Research, switching to low code reduces development time by 50% to 90%.
By using a low-code platform to configure and customize application development, project scope, cost, time, and quality shift in your favor. A low-code option is faster and less expensive than a traditional custom app. Your firm will have the edge over competitors that haven’t yet explored low-code solutions.
Code is a liability. Reducing the amount of manual coding means introducing fewer errors. This can prove significant at scale, especially considering a Harris Poll survey that found developers spend at least 42% of their time maintaining and debugging code. With low-code platforms, visual development, configuration, automated code generation, and platform automation contribute to massive productivity gains. These capabilities bring an application’s features to life faster, making them far more maintainable.
When a digital agency can tell a prospective customer they can reliably deliver in a shorter amount of time, at a lower price point and more rapid rate of iteration, the prospect is thrilled.
By presenting a low-code option that’s faster and less expensive to execute, your firm will have the edge over competitors that haven’t yet explored low-code solutions. You’re also better positioned for repeat wins, allowing you to become more entrenched as a vendor. Once you’ve successfully delivered your first low-code application, you’ll likely have the opportunity to discuss your client’s application backlog and present similarly priced bids for additional work.
In short, leveraging a platform that reduces the time and complexity of delivering a client’s project enables repeatable success.
Given the benefits of low code, why wouldn’t all digital agencies utilize these platforms? Prevailing low-code platforms simply weren’t built with agencies in mind:
The intuitive “a-ha” about a low-code platform like 8base is that it lets developers spend more time writing the code that truly differentiates instead of working on the non-unique elements of an application.
These productivity-minded developers tend to be as effective and efficient as possible. They prefer to avoid repetitive tasks, focusing on the work and the code that truly matters. Since the 1950s, developers have built tools to help other developers be more productive. They understand a low-code platform is the next generation of productivity — especially if it lets them add code wherever needed.
Of course, some developers are “purists.” They have a strong tendency for control and choice over the tech stack while coding everything from scratch. They constantly keep up with libraries and frameworks to improve productivity, but the complexity and maintainability can cause headaches and add cost.
Low code reduces development time by 50% to 90% - 451 Research
Low code-driven transformation impacts every step of the value chain. Below are considerations as you begin to strategize and plan for building a low-code practice:
Embracing low code is a strategic decision for your agency. Creating alignment amongst key principals is as important as selecting your low-code partners.
It’s also important to bring key stakeholders from the low-code evaluation phase into the platform selection process. There are various dimensions for evaluating which low-code platform is suitable for your agency and your customers; some include:
P&S Intelligence predicts a low-code compound annual growth rate (CAGR) of 31.1% through 2030. Plan how to capture a slice of the $187B low-code market revenue predicted over this period.
Here are several helpful activities for new go-to-market motion in sales:
CAGR predicted for low code through 2030: 31.1% - P&S Intelligence
Once you’ve successfully executed your first project, weave this new mindset into the rest of your agency. Continue the virtuous cycle of low-code education, template development, talent development, and sales to transform the business with higher profit margins and greater client satisfaction.
With low-code tools, agencies have the opportunity to move past conversations. Imagine showing a client how their project comes to life rapidly rather than simply discussing it. That’s because the right low-code tools can provision many of the building blocks in real time.
Organizing for low-code sales takes a slightly different approach. You will want to include sales engineers capable of rapidly embracing a client’s requirements and building a mock-up of the application using the low-code platform and perhaps a template library built by your agency in anticipation of such opportunities. Lastly, the low-code company’s marketing and sales support can often bolster your agency’s efforts.
Thanks to low code, you can offer clients more frequent CX iterations, decrease complexity, and accelerate time to market. This edge can lead to more wins, lower risk for your agency, and higher client satisfaction.
8base is redefining the way software is built. If a conversation about this is interesting to you, we'd love to chat and help you think through your approach. Contact us.