Development costs

As explained in Think Like a CTO

Development costs are expenditures required to create, test, and improve a company's product or software.

Development costs are the expenditures required to produce what a company considers its product. They form one of three practical expenditure buckets: development, production, and support. section 2.2.1

Track development costs across:

• Staff salaries plus ancillary overhead for benefits, equipment, furniture, and other costs; a 120%–130% salary factor provides a more useful estimate. section 2.2.1
• Software tool and runtime licenses, including development tools, databases, and libraries. section 2.2.1
• Development and testing hardware or cloud services, third-party contractors, and training such as courses, books, and conferences. section 2.2.1

Turning salaries into project costs

A developer earning $100K becomes a $120K annual estimate after 20% overhead, or approximately $500 per working day. A 14-day project allocation therefore costs $7,000. section 2.2.1

Figure 2.5 Expenditure buckets

Use the expenditure-bucket figure to distinguish development from production and support costs. section 2.2.1

How Think Like a CTO covers it

How deep it goes

Defines cost categories and demonstrates daily-rate estimation, while stopping short of detailed accounting treatment.

Examples

Uses a developer salary calculation, a 14-day project allocation, and expenditure categories including licenses, cloud, vendors, and training.

What it assumes

Assumes basic familiarity with departmental spending and teaches cost tracking through a simple spreadsheet.

What you can do after

Apply daily development rates to produce more informed project budgets and explain expenditure to business leaders.

How it connects

Connects development costs with burn rate, production costs, support costs, and budget planning.

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Related concepts

• burn ratepart of · Burn rate is the rate at which an organization or service consumes a finite resource, such as cash reserves or an error budget, over a specified period.

This explainer was generated by Manning's knowledge graph from the text of Think Like a CTO. The section links point to the parts of the book it draws on.