The Engineering Leadership Playbook: The importance of tracking costs and expenses

How much money does your application need per month to give users the services they need at the right standards of performance and reliability? And what is the least amount of money your team would need when scaling the system down and just keeping the lights on during challenging and off-peak times?

Although these are some of the most important questions any team should be able to answer, a significant number of software engineers and teams ignore the financial aspect of their day-to-day activities, overlooking it as a crucial factor in their decisions or post-implementation plans.

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It’s always wise to have a detailed and up-to-date expense report providing financial insights into areas and services your company pays for, such as:

1. Servers, hosting (cloud or on-premises), and storage.

2. Database servers and instances, including replicas and backups.

3. Development, testing, and staging (and, of course, production) environments. This includes deployment and third-party integrations as well.

4. Bandwidth, support, maintenance, and ongoing operational costs.

5. Security, monitoring, and observability tools and platforms.

6. Licenses and subscriptions.

7. On-call and incident management tools and platforms.

With access to such information, engineering teams can gain visibility and control over their operations and spending. This can help support the following decisions:

1. Enable the team to develop plans for scaling up or down based on current needs and the company’s growth stage.

2. Assist in maintaining a prioritized backlog of technical projects focused on either cost optimization or scalability and growth, preparing the product and company for the next stages.

3. Consider platform upgrades, evaluating alternative cloud providers, or exploring partnership opportunities. These financial insights are crucial for initiating discussions and conducting thorough cost-benefit analyses.

4. Facilitate collaboration between the team and other functions, like finance, product, and business teams, with important metrics like CAC and cost per service provided to users.

5. During challenging times, teams can make sound decisions about where to cut costs while ensuring the continuity of core functionalities and foundational operations.

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“Nearly one third of startups that fail do so because they run out of cash.”

As a manager, one of your primary responsibilities is to keep track of all your team's expenses in the areas listed above. Your team is definitely owning a variety of services, databases, tools, and other assets that are operational and cost money. Always encourage your team to consider the cost factor and take it seriously during technical scoping and planning. They should also be familiar with and understand your business domain's success metrics and see the impact of their decisions on these metrics. Many engineering teams and startups have found success by creating a culture where people own everything from their technical decisions to running and paying for them to make it work.

Final Thoughts

Your team will be amazed by the amount of low-hanging fruit that will come your way when you first work on such an exercise. I have witnessed many teams identify substantial areas for development and cost optimization by conducting this exercise. Common findings include less-important features that excessively drain resources, unused servers, terabytes of storage that store data that is no longer valid or needed, millions of logs that are getting indexed every month but no one even wants them, or components of POC/MVP projects that started but the team has never managed to complete and integrate.

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“The Engineering Leadership Playbook” is going to be a series of articles designed to shed light on some aspects and responsibilities needed for running any engineering management or leadership role. Hopefully, this could be of value to anyone who plays the role or is willing to do so someday.