You can lower development costs, get access to top talent, and you don’t have to deal with huge time zone differences like with offshore development.
You can’t afford to fly blind, however.
Without the right metrics and KPIs, it’s easy to lose track of progress and overspend.
In this article, we’ll cover the 10 essential metrics and KPIs you should track in nearshore software development that will help you stay on budget and meet deadlines.
Let’s dive in!
Table of Contents
Sprint velocity
Sprint velocity measures how much work a team completes in a sprint.
It’s typically measured in story points, tasks, or hours.
You use it to estimate future workloads and improve sprint planning. This will help your nearshore team set realistic goals and avoid overcommitting.
Here’s what a typical sprint velocity chart looks like:
You can also use sprint velocity to identify bottlenecks and inefficiencies, especially if it drops suddenly.
So, how do you calculate it?
First, sum up story points at the end of each sprint. For example, if your team completes three stories worth 5, 8, and 3 points, the sprint velocity is 16.
Then, average the total story points over the last 3 to 5 sprints to get a reliable benchmark you can use going forward.
Key tips for better sprint velocity
Keep sprint lengths consistent – Changing sprint lengths makes tracking sprint velocity unreliable, so make sure your sprints are always the same length.
Prioritize well-defined user stories – Well-defined user stories and requirements will keep things on track and help you avoid guesswork.
Don’t inflate estimates – Overestimating story points creates a false sense of productivity and leads to poor planning.
Lead time
Lead time measures the total time from when you make a request to when it is delivered.
It includes waiting, development, testing, and deployment phases.
Unlike cycle time, which tracks active work, lead time captures the entire process from start to finish.
But, why does lead time matter? And how do you track it?
Well, for starters, shorter lead times mean faster project delivery.
And if you need to get your product to market quickly, that’s invaluable.
Also, tracking lead time can help you identify blockers and inefficiencies on both ends, whether they’re in your internal processes or your nearshore team’s workflow.
Here’s how to track it:
Measure from request to deployment – Start tracking as soon as you request a feature/bug fix and stop when it goes live.
Break it into phases – Identify how long tasks spend in backlog, development, testing, and deployment.
Compare planned vs. actual time – Spot delays by checking estimates against actual completion times.
Review trends – Track lead time over multiple sprints to identify roadblocks and inefficiencies.
Then, if your lead time is too long, your next step is fixing and refining your processes.
Work with your nearshore partners to adjust your team’s workflows and improve collaboration.
Key tips for reducing lead time
Automate testing and deployment – A robust CI/CD pipeline will help you significantly cut down lead time.
Improve backlog prioritization – Clearly defined and well-prioritized tasks will help you prevent delays.
Limit approval steps – Unnecessary reviews and endless approval loops slow down decision-making and delivery.
Cycle time
Cycle time measures how long it takes your team to complete a task from the moment work begins to when it is finished.
While it’s similar to lead time, it’s more granular since it only focuses on the active work and doesn’t include waiting periods.
Cycle time is a good way to measure your team’s efficiency and can help you find areas for improvement.
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And the shorter it is, the more value your team delivers.
Also, it’s an important metric to track for another reason – predictability.
Stable cycle times will help your team better estimate delivery timelines and improve future sprint planning.
In a nutshell, a short and stable cycle time means you have a highly efficient development team.
And that’s why you should track it.
Key tips for reducing cycle time
Limit work in progress – If your team has too many open and ongoing tasks, cycle time will inevitably rise. So, limit work in progress as much as you can to avoid overwhelming them.
Automate repetitive tasks – Automate as much as you can, including doubling down on automated testing and CI/CD pipelines.
Encourage fast feedback loops – Quick code reviews and approvals speed up decision-making and reduce cycle time.
Deployment frequency
Deployment frequency measures how often your nearshore team releases new code to production.
And it shows how fast, efficient, and stable their development process really is.
High-performing teams deploy frequently and reliably – without sacrificing quality.
Faster feature delivery – More frequent deployments means your users get access to new features quicker.
Better risk management – Small, incremental releases reduce the risk of large-scale failures.
Higher team efficiency – Frequent deployments are a good indicator that you have an optimized development pipeline.
To track deployment frequency, you just count the number of deployments per sprint, week, or month, depending on your preferences.
CI/CD and DevOps tools log deployments automatically and most come with built-in analytics, so tracking it is a breeze.
Key tips for increasing deployment frequency
Use feature flags – Feature flags allow your team to deploy code without immediately releasing new features, so you can push updates to production safely and enable features when they’re ready.
Prioritize smaller releases – Smaller, frequent updates minimize risk, improve stability, and increase deployment frequency without sacrificing quality.
Improve code review efficiency – Slow code reviews can create bottlenecks that delay deployments. Faster, more focused code reviews will ensure that changes move through the pipeline quickly and safely.
Cost variance
Cost variance measures the difference between the budgeted cost and the actual cost of a project.
And it’s one of, if not the most important metrics you should track in nearshore development.
Helps you keep costs in check – Tracking cost variance will help you stay on budget and catch overspending before it becomes a problem.
Improves budget forecasting – Having historical data will help you better plan costs for future projects.
Improves financial decision-making – Helps you identify areas for cost optimization.
If you keep cost variance in check, you’ll have more predictable spending and get a better ROI from nearshore software development.
And that’s exactly what you should be looking for.
Key tips for controlling cost variance
Define a clear project scope – Uncontrolled changes and scope creep drive costs up and cause budget overruns, so a well-defined scope is essential for controlling costs.
Break down costs per sprint – Proactively tracking costs for each sprint will help you stay on top of your budget and avoid last-minute surprises.
Use a time and materials contract – Fixed-price contracts, especially if you have to change the scope mid-development, can balloon costs. With a time and materials contract you pay for the actual work done, which helps keep costs under control.
Mean time to resolution (MTTR)
Mean time to resolution (MTTR) measures the average time it takes to fully resolve an issue from the moment it is reported.
This includes:
Detection
Diagnosis
Fixing the issue
Testing
Deployment
So, why is this an important metric to track?
A lower MTTR indicates faster recovery and better system reliability.
This minimizes downtime, which means fewer disruptions for users.
In a nutshell, a low MTTR means you have better uptime, happier customers, and your nearshore team has a more resilient development process.
And that’s why it’s a key metric you should always take into account.
Key tips for reducing MTTR
Set up automated monitoring and alerts– Catch issues early with APM and error-tracking tools like Dynatrace, New Relic, and Datadog.
Simplify incident response – Make sure there’s a clear process for escalation and resolution so the right people get notified as soon as an issue happens.
Learn from past incidents – Run post-mortems to spot patterns and prevent repeat failures. Focus on improving processes, not blaming people.
Code coverage
Code coverage measures the percentage of your source code that’s executed by automated tests.
It’s a key metric that shows which parts of your codebase are being tested and which aren’t.
And this helps your nearshore team understand how well their tests cover your application’s functionality.
Higher code coverage means there are fewer untested edge cases and bugs, which improves your product’s quality.
But, there’s no magic number here.
You can have 90% code coverage, but if the remaining 10% is a critical part of your product, that’s a problem.
A good rule of thumb is to aim for 70-80% coverage – aiming for a higher number is usually not worth the effort.
Key tips for improving code coverage
Test what matters most – Prioritize core features and business logic over low-impact code. A high coverage percentage means nothing if key features aren’t tested.
Automate testing in CI/CD pipelines – Run tests before every deployment to catch issues early. Automate unit, integration, and end-to-end tests to keep releases smooth.
Don’t chase 100% coverage – Some code isn’t worth testing, like logging or simple getters/setters. Aim for meaningful coverage, not an arbitrary number.
Defect density
Defect density measures the number of defects per 1,000 lines of code (KLOC).
It will help your nearshore team assess software quality and identify problem areas.
Improving it comes with a bunch of benefits, such as:
A lower defect density means you have a more stable and reliable codebase.
Now, there’s no one-size-fits-all benchmark for defect density. Industry standards depend on the type and complexity of your software:
Critical systems (aviation, healthcare) – Less than 0.1 defects per KLOC.
High-quality enterprise applications – From 1 to 3 defects per KLOC.
Typical consumer-facing software – Up to 10 defects per KLOC
Still, your nearshore team should keep it as low as possible.
Lower defect density leads to better performance and reduced downtime, which should always be your priority.
Key tips for reducing defect density
Automate testing wherever possible – Run automated unit, integration, and regression tests to spot defects before they hit production. The more you automate, the fewer surprises you’ll deal with later.
Consistently refactor your code – Clean, modular code is easier to maintain and less prone to bugs. Small, regular improvements will also prevent technical debt from piling up.
Test high-risk areas first – Not all bugs are equal. Prioritize fixing defects in critical features and high-traffic areas to make sure they don’t impact your product’s key functionality.
Time to market
Time to market (TTM) measures how long it takes for your product to go from an initial concept to product launch.
A faster TTM means you’ll be well-placed to seize market opportunities. Here’s a couple of reasons why:
First-mover advantage – If you launch early, you’re more likely to capture market share.
Early monetization speeds up growth– The sooner your product is out, the sooner you start generating revenue.
Avoiding delays keeps costs down – Long development cycles drive up expenses and eat into profits.
Being slow to market really can cost you a lot, too.
The sooner you get your product in your user’s hands, the more money you’ll earn.
So, make sure your nearshore team can actually deliver your product quickly.
Key tips for reducing time to market
Use Agile methodologies – Agile methodologies like Scrum or Kanban will help your team work faster. Working in short, iterative cycles helps them release updates faster and speeds up development in general.
Prioritize core features – Focus on building core features that solve user problems. Extras can wait, getting your product in your users’ hands as soon as possible should be your top priority.
Reuse existing components – You don’t need to reinvent the wheel. Use proven libraries, APIs, and templates instead of building everything from scratch.
Bug resolution time
Bug resolution time measures how long it takes to fix a reported bug
It starts when the bug is logged and ends when the fix is deployed.
Faster bug resolution is important because it:
Minimizes user frustration – Quick response times and fixes will prevent customer churn.
Reduces security risks – Faster patches and security updates protect your product from exploits
Improves development efficiency – Your team will spend less time firefighting and more time building new features.
You should make sure your nearshore team segments bugs by severity – critical bugs should have the shortest resolution time.
All in all, a low bug resolution time means your product is more reliable and your users have a better experience.
And that’s why it’s important you track it.
Key tips for reducing bug resolution time
Efficiently triage bugs – A well-defined bug triage process is essential. Prioritize fixes based on urgency and impact so critical issues get resolved first.
Improve code documentation – Clear, structured documentation speeds up testing and debugging. Future developers shouldn’t have to guess how things work.
Break silos between teams – If your developers, QA engineers, and DevOps engineers work together, they’ll fix bugs faster.
Nearshore software development metrics: FAQs
Tracking these metrics helps you ensure your nearshore team is delivering on time, within budget, and at the expected quality level.
Without them, you’ll have a hard time spotting inefficiencies or measuring their progress.
And you need that if you want successful collaboration.
Focus on your business goals.
If speed is key, then you should track deployment frequency, sprint velocity, and time to market.
But, if you want quality above all else, then track code coverage, defect density, and bug resolution time.
The biggest mistake is just relying on one metric in isolation.
A high sprint velocity looks great on a chart, but if it results in a higher defect density, that’s a sign your team is prioritizing speed over quality.
Remember, context is king – you need more than one metric to get the full picture.
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A seasoned software engineering executive, Marin’s role combines his in-depth understanding of software engineering processes (particularly mobile) with product and business strategies. Humbly boasting 20+ years of international experience at the forefront of telecoms, Marin knows how to create and deliver state of the art software products to businesses of all sizes. Plus, his skills as a lifelong basketball player mean he can lead a team to victory.
When he’s not hopping from meeting to meeting, you’ll find Marin listening to indie rock, or scouring the latest IT news.
