How to double your money?

In this article I am not talking about doubling your revenue or profits, I am going to focussing on doubling your costs. Why? Because nothing is for free: if you want to earn more, you need to pay more. And because you have direct control over your costs, not over your earnings. Like in darts or archery: you have control only until you release the arrow.

Suppose you are managing a small racing team. You are spending 1 million on the car and 5 million on the driver. If you double the money on the car to make a better car you will win more races, and if you double the money on hiring a better driver you will win more races too. Which one would you choose? I would choose doubling the money on the car. It will cost you 1 million extra, not 5 million.
Now suppose you are running a production factory. You are spending 1 million on machines and robots and 5 million on workers. If you can increase your production, where would you double your money? Again, I would double the amount of money on machines and robots. In fact, most car manufacturers are spending over 90% on equipment.

Well it is not always that obvious. System and software development is a knowledge industry. People are the most valuable assets, but also the most expensive. It is no exception when 10% of the costs are spent on tools, such as licenses, servers and support and maintenance, while 90% is going to the engineers, architects, testers and project managers. No development manager will approve doubling the costs on tooling. It is considered as “overhead” costs and overhead should be minimized, not increased. But he is willing to spend even more money on better training, process improvement initiatives, metrics programs and new methodologies. Workers in projects are allowed to spend a considerable amount of their time on implementation and deployment of better processes and tools, time they do not spend on actually developing the system or software.

Why is that? Why is a factory manager willing to spend over 90% on equipment to maximize productivity of the factory, while a development manager is not willing to go beyond 10%. If people cost 10 times more than tools, an increase of 10% on the people would be equivalent of an increase of 100% (doubling the money) on tools. Which one would ultimately be more effective for the organization?
I argue that if you spend 90% of your development costs on tools, tool integration and automation, and 10% on the best possible teams that you can buy, where the people can fully focus on the intellectual work that cannot be done by tools, the organization would be far more effective in speed and delivering quality than any organization with the reverse ratio.

Of course, you should not double the costs of tools and equipment blindly. But in system and software development there seems to be a taboo on doubling the “overhead” costs even if that would be more effective than spending even more money on improving the capabilities of people.

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About Frank Schophuizen (fschop)

Hi, my name is Frank Schophuizen and I am working as a consultant in CM, Agile and ALM for TOPIC Embedded Systems. I have over 30 years experience in software development in the technology industry, with the last 15 years mainly in process improvement, deployment and integration of methods and tools in the area of CM, Agile development and ALM. I am strongly interested in the complexities of collaboration and integrations in multi-project and multi-site organizations. I have worked with various technology companies such as Philips, ASML, NXP and Vanderlande, and with various tool vendors such as IBM Rational (e.g. ClearCase, Synergy, Jazz products) as well as open source tools (e.g. SVN, Git, Jenkins, Trac, Eclipse). I am living in Eindhoven, the Netherlands, with my wife. We have 3 adult children. My main hobbies are classical music and photography.
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