Hello team! Hope you all are well.
Question: What expense nature do you put your platform teams in
Let me elaborate the question further:
I’m a CTO for a company that has a few products now. We are starting to calculate the P&L for each of these products.
So I need to classify my platform teams as part of CoGS, R&D, or G&A.
Have any of you ever faced something like this? Or do you have any idea how I can proceed?
09/15/2022, 12:31 PM
this depends how big your company is and how you approach your DevOps. Do you see your DevOps platform as a product itself, of which you are internal customers? It’s likely CoGS. Do you have a traditional operation team which “just keeps things afloat”? Sounds like G&A
09/15/2022, 12:33 PM
🤔 Thank you for the response Lennard!
It’s ~100 people in tech (engineers, PMs, designers, data). We have now 3 products, and we have a platform team that help on things like DevXP, Reliability, Observability, Costs, …
Right now I put them on R&D. But there are tradeoffs…
How to split the costs on the 3 products is also a challenge…
09/15/2022, 12:39 PM
The difference is, if you label the DevOps platform as a product by itself, you will operate differently, and will need to start reducing loss (or even turning profit), even if in reality that means the spending just happens “on your books”. This way you can compare your platform to an external contractor and evaluate efficiency. If you put your platform into G&A you accept the premise that you always run at a loss. Of course the first is preferable, but it only works if you run at scale, because it adds levels of complexity, bureaucracy etc
I would really avoid spending R&D capital on DevOps, because the ROI is extremely slim, if it exists at all
09/15/2022, 12:52 PM
Why would you think the ROI is low? I would think that investments to improve R&D efficiency are massive!
09/15/2022, 1:35 PM
I don’t know what it’s like elsewhere but in Australia the government provides tax incentives for R&D work with definitions being pretty loose. In the platform team we would classify any new service or new features we were creating as CapEx then at the end of the year we would work with a consulting group like EY to evaluate if the CapEx fit the criteria of R&D. Taking a platform as a product approach made it really easy to distinguish between what was OpEx and what was CapEx. If you work with customer facing product teams you can understand the ROI based on the revenue opportunities it unlocks for those teams. Hope that helps.