Standard : ROI of Engineering Investments

Description

ROI of Engineering Investments measures the return generated from engineering time, resources, and effort relative to the business value delivered. It connects technical output to financial or strategic outcomes, ensuring that engineering is seen as a value-driving function—not just a cost centre.

This metric supports outcome-driven prioritisation and transparent decision-making across product and technology.

How to Use

What to Measure

  • Compare the cost of engineering investment (e.g. team time, infrastructure, opportunity cost) against the tangible business outcome (e.g. revenue, savings, customer growth).
  • May be scoped per initiative, feature, platform investment, or quarter.

Formula (example)

ROI (%) = [(Business Value Delivered – Engineering Cost) / Engineering Cost] x 100

Instrumentation Tips

  • Tag engineering initiatives to outcomes tracked by business KPIs.
  • Use time-tracking, resource allocation, or velocity data for engineering cost.
  • Work with finance, product, or strategy teams to estimate business value.

Why It Matters

  • Strategic alignment: Helps align tech investment with organisational goals.
  • Transparency: Builds credibility with execs, stakeholders, and finance.
  • Prioritisation: Informs where to double down vs. scale back.
  • Empowerment: Demonstrates the impact of engineering decisions on outcomes.

Best Practices

  • Co-define value metrics at the start of initiatives.
  • Quantify value across revenue, retention, cost savings, or risk reduction.
  • Track ROI over time, not just one-off initiatives.
  • Tie ROI discussions into quarterly reviews and product planning.
  • Combine quantitative ROI with qualitative impact (e.g. customer trust, tech strategy).

Common Pitfalls

  • Measuring cost but not value—or vice versa.
  • Using overly simplistic value proxies that miss the real outcome.
  • Focusing only on short-term ROI instead of strategic contribution.
  • Ignoring cross-functional value or shared infrastructure returns.

Signals of Success

  • ROI is calculated consistently and informs investment decisions.
  • Low-ROI work is deprioritised or re-scoped.
  • Engineering has a seat at the table in strategy and planning.
  • Engineering initiatives show measurable, sustained impact over time.
  • [[Time to Value]]
  • [[Feature Usage Rate]]
  • [[Cost of Delay]]
  • [[Customer Satisfaction (NPS/CES)]]
  • [[Hypothesis Validation Rate]]