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.
The only way to have a sustainable competitive advantage in the market is through the use of better technology. Other approaches cannot be sustained in the long run.
All agencies have very similar value propositions, and distinguishing them is hard. After the basics are covered, like software quality, good communication with the clients, delivering on time, etc. - the only variable that remains is price.
Since all agencies have access to the same developer pool, they will unlikely find a significant salary difference.
This leaves only two unsustainable levers an agency can pull:
Neither of these strategies will work long-term.
Another thing that all agencies have the same access to (at least in theory) is technology. However, human psychology prevents them from using it. And this is where the biggest opportunity hides.
Have you ever heard of "early adopters"? They are living proof that even though we all have access to the same technology, some people embrace it sooner than others.
And this creates an advantage.
Because people feel more comfortable using technology after everybody else already uses it. But by that point, the advantage and opportunity is gone.
So the real barrier that creates this inequality is not a physical one. Instead, it's psychological. But forward-thinking agencies will be glad this barrier exists because it allows them to create a sustainable competitive advantage.
Low code technology is a game changer. It allows software developers to 3X their productivity after only 1-2 days of learning it.
This means over 17 million JS developers could see a 3X boost in their productivity after 1-2 days.
Will all 17 million do that? -No.
Will all agencies start using low code technology like their future depends on it ? -No.
The agencies that start using low code now will have a significant advantage over those that don't. And this advantage will result in a lower cost of development.
And all other things being equal, clients will ultimately decide based on price.
Here is what makes low code development faster, whether you're developing the frontend or backend.
In the case of backend development, it is enough just to define a data model, and the entire backend is done. You can achieve this by simply creating database tables through a graphical interface inside your browser.
All the necessary API/GraphQL endpoints are created for you. And you can immediately store and retrieve all the data from your backend.
Building the frontend is very similar in efficiency. With the most common components available, building an interface is easy by using drag-and-drop functionality.
With technologies as powerful as low code, usually, all this productivity comes at the cost of customization. Meaning you can find amazing technology that can do awesome things, but up to a point.
After you reach 80% of your desired result, it is nearly impossible to customize it in more detail. That is not the case with this low code technology.
The additional benefit of low code is removing the need for the DevOps team. This provides a permanent advantage over traditional development, where someone needs to manage the architecture even if the project is completely done.
And having a DevOps team leads to never-ending costs in order to keep the architecture running. In both cases, you need to pay for computing resources, but in the case of low code, architecture management is automated.
Additionally, web apps built with low code technology are automatically scalable. They can support everything from one to a million users (and beyond). And the app owners only pay for the resources that are used and when they're used.
Faster adoption of emerging technologies is the best way software development agencies can achieve sustainable competitive advantage. The most prominent among them is low code technology.
Aside from cost savings, clients can enjoy 3X faster development and drastically shorten their time to market.
The key to faster adoption is identifying technology trends early. To help you with that, let's make this blog a place where you'll hear this info first - low code is a game-changing technology that will define this decade.
By 2030 most web app projects are going to use low code. However, agencies that will profit the most are the ones that start using it now.