Why Financial Thinking Makes You a Better Software Engineer
Engineering with Impact: How Financial Awareness Amplifies Your Technical Decisions
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In an era of rising cloud costs and shrinking tech budgets, the most valuable engineers combine technical excellence with understanding the business impact of their decisions. You don’t need to become an accountant, but in today’s ROI-driven tech landscape1, financial awareness acts as a powerful multiplier for your technical impact.
Return on Investment (ROI) is a performance measure used to evaluate the efficiency of an investment or compare the efficiency of several different investments. It directly measures the amount of return on a particular investment, relative to the investment's cost.
Introduction: Engineering with Real Impact
As engineers, we often focus on performance, scalability, and shipping value fast. But behind every commit is something most of us rarely think about: a price tag.
I learned this lesson the hard way. Eight years ago, while working at a startup, I led the development of an end-to-end chatbot configuration platform. Microservices were generating lots of buzz at the time, and I eagerly jumped onto the trend. In my enthusiasm for building “modern” architecture, I designed every configuration step as its own microservice.
While the accidental complexity was off the charts anyways, it also turned out that AWS Fargate was quite expensive, in comparison to our startup’s runway. With that realization I just had to merge the services together. The preferable architecture was a simple, monolithic application, deployed on AWS Elastic Beanstalk. What would have been 6 Fargate instances, became a single service, much cheaper, much less accidental complexity.
Boring and simple—usually the best choice anyways.
Where This Fits: Financial Thinking for Every Engineer
While discussions of engineering economics exist in various forms—from specialized FinOps resources2 to leadership books to platform-specific optimization guides3—there’s a noticeable gap in practical guidance for everyday engineers. Most resources either target specialized roles or focus narrowly on technical optimizations without developing the underlying financial mindset.
This article addresses that gap by focusing on how individual engineers at any career stage can develop financial awareness as a core competency that amplifies their technical impact. Rather than treating financial thinking as a specialized discipline or a leadership-only concern, I argue it’s a fundamental skill that belongs in every engineer’s toolkit.
The Financial Foundations of Engineering
Every technical decision carries financial implications—whether visible or hidden. Before we dive into specific practices, let’s explore the fundamental financial principles that underpin effective engineering. These core concepts will provide the foundation for everything that follows, helping you think more holistically about the true costs and returns of your technical work.
Every Engineering Decision Is a Business Investment
Your time is expensive. Your infrastructure is expensive. Your complexity is expensive.
Engineers are hired to generate value through code that exceeds their cost. When an engineer consistently delivers work costing more than the value produced, it signals a fundamental misalignment in priorities—unsustainable for both engineer and company.
I’m sharing this to create transparency, not anxiety:
When you refactor, quantify the return: “This will reduce our debugging time by 5 hours per sprint”
When you add a dependency, calculate the maintenance burden: “This saves us building in-house but adds complexity to our update cycles”
When you provision infrastructure, right-size it: “This instance is 40% cheaper and meets our performance requirements”
At my current company, we use a internal tool called “Cost Finder”. It analyzes our infrastructure and gives you notifications, if there’s under-utilized resources and presents you the calculated savings. Convenient downsizings like these, save significant monthly costs with zero impact on performance. A nice demonstration of engineering maturity and finesse.
Think of every technical choice as a small investment. When you develop the habit of weighing cost against return, you’ll naturally make better decisions.
Beyond Code: Mastering Opportunity Cost
The most common mistake I see engineers make goes beyond technical issues—they often work on things that feel productive but create minimal actual value.
You might spend a week polishing an internal library that saves each developer five minutes per month. But what if that same week could have gone into fixing a critical user-facing bug affecting thousands of customers? We call this opportunity cost, and your ability to recognize it often separates good engineers from great ones.
Polishing internal libraries to perfection was something I did in the past. You want to become more conscious recognizing when good-enough is good-enough? Have a read here:
Before starting any significant work, ask yourself:
Does this eliminate effort, prevent outages, or meaningfully accelerate delivery?
Will this directly help the company make money or save money?
Can I explain this investment to a non-technical executive in terms that would make sense?
Try framing even technical debt in business language. Rather than saying, “We need to refactor this module because the code is messy,” try something like: “Our team currently spends approximately 8 hours per month debugging issues in this module. This refactoring would reduce that to 1 hour per month, saving us a full engineer-week per quarter.”
I know, it’s hard and feels quite unintuitive at first, but this thinking will ground your decision-making further by transforming technical concerns into quantifiable business investments. When you start attaching concrete financial metrics to your technical initiatives, your decisions become more accurate, data-driven, and the outcomes more predictable and measurable, rather than relying on intuition and proxy metrics alone. Weighing off opportunity cost will get much easier.
When you communicate in these terms, product teams and leadership begin to view your technical judgment with greater credibility. You transform from being seen as merely a technical person into a true business partner.
The Compounding Cost of Technical Debt
You won’t find technical debt on any financial report, but make no mistake—it extracts a real price that compounds over time.4
We’ve all seen it happen. Teams ship fast without proper engineering investments, creating a temporary illusion of velocity and “making that deadline”. Then six months later, the reality hits: you struggle to integrate new features, tests become increasingly flaky, onboarding new engineers drags from days into weeks, and delivery timelines keep stretching longer.
I’ve found these costs are surprisingly quantifiable:
If features take 30% longer to implement due to tech debt, you’re effectively losing 30% of your engineering time to inefficiency—looking at you, opportunity cost.
When an outage occurs due to accumulated technical debt, calculate the cost: engineer time to fix it, lost revenue, and potential brand damage (e.g. bad press)
When onboarding engineers takes three weeks instead of one because of complex, undocumented systems, that’s two weeks of salary with zero productive output
Especially as a staff engineer or engineering leader, your job goes beyond just identifying technical debt—you need to translate it into business impact. This approach moves you from merely pointing out problems to practicing genuine ownership of both code and organizational success.
While technical debt represents the “hidden costs” in our codebase, cloud infrastructure often constitutes the most visible and immediate financial impact of our engineering decisions. As we move from examining the costs embedded in our code, let’s explore how modern cloud environments make financial awareness both more urgent and more actionable for engineers:
Financial Awareness in Modern Tech Environments
The shift to cloud computing and consumption-based models has fundamentally changed how engineering decisions impact finances. This new landscape creates both challenges and opportunities, making financial awareness more urgent and actionable than before. Let’s study how modern tech environments have transformed the financial implications of engineering work.
Understanding Cloud Economics: The FinOps Advantage
The public cloud has fundamentally transformed how we build software. It has also made costs much more visible and immediate, creating both new challenges and valuable opportunities.
Enter FinOps (Financial Operations)—a practice that gives engineers both the tools and mindset to take ownership of infrastructure costs. At its core, FinOps brings financial accountability to the traditionally separate worlds of engineering, finance, and business.
The waste can be substantial:
Development environments with expensive loads that run 24/7 when they’re only used during business hours or a sprint.
Services that were scaled up for Black Friday but never scaled back down
Redundant storage containing duplicate or outdated data that no one reviews
Gartner research shows that organizations typically waste 30-70% of their cloud spend due to idle or improperly managed resources.5
Engineers with FinOps awareness naturally understand that resources spent in one place can’t be invested elsewhere—making opportunity cost a constant consideration. In practice, they:
Monitor and question infrastructure spend
Design with cost-efficiency patterns from the start
Identify quick wins that reduce waste without compromising quality
The Impact of Consumption-Based Pricing
The rise of serverless and consumption-based pricing models has fundamentally changed the financial calculation for engineers.6 Unlike traditional fixed infrastructure where overprovisioning was the primary concern, these models put costs "in your face" with direct correlation to usage patterns. This creates both challenges and opportunities:
Costs become more variable and less predictable
Optimization shifts from capacity planning to usage efficiency
Performance and cost become even more tightly coupled
Small code inefficiencies can quickly compound into significant expenses
The upside is that consumption models push us toward higher resource utilization and create immediate feedback loops between engineering decisions and costs—reinforcing the financial thinking mindset.
While FinOps principles apply broadly across tech organizations, their adoption becomes particularly crucial—and often mandatory—in certain business contexts. Private equity ownership represents perhaps the clearest example of how financial awareness shifts from optional to essential, with FinOps practices becoming a cornerstone of engineering operations rather than just a nice-to-have capability:
Private Equity, Cost Pressure, and Strategic Engineering
At my current employer, we experienced a significant shift when we were acquired by private equity. Suddenly, the focus on return on investment and operational efficiency became much more pronounced.
Many PE firms define specific target operational models with clear financial parameters. Department sizes are often strictly managed with headcount targets that expect net-zero growth—any new role typically needs to be balanced by efficiency gains elsewhere. It directly impacts your ability to staff projects and address technical challenges.
These ownership structures amplify the visibility of opportunity costs, as limited resources mean any technical investment directly affects another potential initiative. This leads to fundamental shifts in engineering approaches:
Product priorities become explicitly ROI-driven, requiring to clearly articulate the business case for technical investments
Engineering initiatives needed clearer justification tied to business outcomes
Cost-awareness transformed from a "nice to have" to a core expectation
This transition is rarely smooth. Many engineers are accustomed to optimizing primarily for technical quality and throughput—not cost. But the best engineers adapt quickly, recognizing that constraints often drive innovation.
The stakes become quite personal: While revenue growth remains the expectation, the key success metric shifts to ensuring this growth outpaces operational costs. If not, margin pressure can trigger uncomfortable consequences like reduced merit increases, limited growth opportunities, or in worst cases, layoffs. This isn't abstract corporate finance—with performance bonuses often directly tied to revenue and EBITDA targets, engineers suddenly find financial awareness impacting their own compensation.
EBITDA stands for Earnings Before Interest, Taxes, Depreciation, and Amortization. It measures a company's operational profitability without accounting for financial decisions or tax environments.
Managing cultural transformations require deliberate change management strategies to bring the entire organization along. Have a read on this blog article, showing practical approaches for software engineers:
Let me be clear: this shift focuses on sustainability, not penny-pinching. Under PE ownership, having ROI top-of-mind isn’t optional—it becomes a non-negotiable requirement for engineering teams to maintain credibility and influence. The reality of today’s economic climate means engineering organizations must connect technical decisions to business outcomes or they’ll increasingly struggle to justify their existence.
Having explored how ownership structures like private equity and cloud economics intensify the need for financial awareness, the obvious question arises: How do we maintain our innovative edge while operating within these financial constraints? While reducing costs is a important challenge, the actual key is optimizing for the right combination of innovation and efficiency:
Balancing Technical Excellence and Financial Responsibility
Technical excellence and financial responsibility are complementary aspects of engineering maturity. Finding the right balance requires nuanced thinking about when to optimize for cost and when to invest for the future. This section explores how to navigate these tensions and make decisions that serve both technical and business needs.
Finding Balance Between Innovation and Financial Prudence
Wielding the “revenue-sword” as your only tool will quickly earn you disrespect from engineering teams. Similarly, allowing engineers to build overblown “money-burners” without constraints damages your credibility with business stakeholders.
The key is understanding the business context and strategy first, then using that knowledge to shape the solution space collaboratively with engineers. This approach allows you to:
Bring financial perspective without stifling creativity
Help engineers understand strategic priorities that justify certain investments
Focus perfectionism on areas with genuine business impact
Allow exploration within defined guardrails
Navigating these tensions requires both tactical awareness and strategic thinking. Using concepts like a simple value chain or a more sophisticated Wardley Map7 can help—understanding where components sit on the evolution axis helps determine appropriate investment levels. Core infrastructure that supports multiple visible features often justifies higher investment, even if the immediate ROI is less obvious.
Wardley Mapping is a strategic technique that visualizes the evolution of technology components from novel to commodity. It helps engineers prioritize where to invest effort—custom-building components that provide competitive advantage while efficiently standardizing those that don’t.
Penny-Wise, Pound-Foolish: When Cost-Cutting Backfires
Financial awareness becomes harmful when it leads to short-sighted decisions like:
Cutting team events that cost fractionally compared to engineering salaries
Reducing development environments that enable innovation
Postponing maintenance that leads to disproportionately larger issues later
Focusing on trivial costs while ignoring architectural inefficiencies costing orders of magnitude more
True financial maturity means knowing where cost control matters and where investment is essential.
Having explored how ownership structures like private equity intensify the need for financial awareness, the obvious question arises: How do we maintain our innovative edge while operating within these financial constraints? While reducing costs is a important challenge, the actual key is optimizing for the right combination of innovation and efficiency:
When “Overspending” Is Actually Strategic
There are definitely times when spending more is the right engineering choice:
Critical Foundational Work: Investments that support multiple value streams or prevent major outages often justify higher spending, as the cost of failure can far exceed prevention costs.
Emerging Technologies: Areas like AI/ML and generative tools may require higher initial investment to build organizational capabilities and competitive advantages or in some cases, level the playing field.
Innovation Initiatives: Explorations that open new business opportunities deserve protection from excessive cost constraints, as they represent potential step-changes in value.
Research shows that companies maintaining strategic investments during economic downturns often emerge stronger when markets recover.8 The key is distinguishing between wasteful spending and strategic investment.
Critics of financially-driven engineering often argue that excessive focus on costs leads to short-term thinking and technical compromise. There’s legitimate truth here—Organizations optimize themselves into technical corners that ultimately cost far more to escape from.9 However, this represents a misapplication of financial awareness rather than a flaw in the principle itself.
True financial maturity recognizes that some technical investments defy simple ROI calculations. Engineering practices like automated testing, comprehensive observability, and architectural modernization often deliver their value through risk reduction and opportunity creation rather than direct cost savings. These investments require a more sophisticated financial lens that accounts for risk-adjusted returns.
Now that we’ve established why financial awareness matters and explored its various dimensions in engineering decisions, let’s shift our focus to practical application. How can you begin developing this mindset regardless of your current expertise level? The journey from theoretical understanding to practical financial awareness starts with simple but powerful steps.
Implementing Financial Awareness in Your Work
Moving from theoretical understanding to practical application requires specific tools and approaches. Whether you’re just starting to think financially or looking to enhance your existing practices, these implementation strategies will help you integrate financial awareness into your daily engineering work.
Getting Started with Financial Awareness
If you’re completely new to financial thinking in engineering, here’s a practical approach I’ve found useful:
Start with a “somewhat based” architecture costs calculation of what your current architecture costs
Sleep on it, then try to design a completely different approach to the same problem
Calculate the costs of this alternative approach
Compare not just the immediate costs, but maintenance burden, operational complexity, and scalability costs
While maintenance and complexity are topics that us engineers often talk and think through, we rarely do it through a financial eye. This exercise often reveals surprising insights—sometimes architectures with similar functionality have vastly different cost profiles. Even when the differences are minor, this practice builds the muscle of considering financial implications alongside technical ones.
Making Financial Awareness Measurable
Just as we track technical metrics and user impact, engineering teams should integrate financial metrics into their practices:
Sprint-Level Cost Tracking:
Estimate and track infrastructure costs for new features
Document savings from optimization efforts
Calculate the fully-loaded cost (including engineering time) of major initiatives
Quarterly Reviews:
Present engineering investments in terms of business impact
Quantify technical debt in financial terms
Showcase cost efficiency improvements
Post-Mortems with Financial Context:
Add financial impact to incident reviews
Track both user impact and cost impact of outages
Document the cost of fixes vs. preventative measures
My goal here isn’t to create a culture of fear around spending. Instead, I want us to bring the same thoughtfulness to financial impact that we naturally apply to technical decision-making.
Common Pitfalls to Avoid:
Tracking only infrastructure costs while ignoring engineering time costs, creating incomplete ROI calculations
Focusing exclusively on short-term savings while missing long-term infrastructure investments
Over-optimizing stable systems with minimal traffic/cost, instead of focusing on high-growth/high-cost areas
Financial Awareness Self-Assessment:
Do you know the approximate monthly infrastructure cost of your team’s services?
Can you estimate the fully-loaded cost (including engineer time) of your current project?
Have you optimized any resources for cost in the last quarter?
Do you consider cost implications when designing new features?
Can you explain the ROI of your current work to a business stakeholder?
Building Your Financial Engineering Toolkit
To strengthen your financial engineering awareness, consider these resources:
Cost Visibility Tools:
Cloud provider cost management consoles (AWS Cost Explorer, Google Cloud Billing, Azure Cost Management)
Decision Frameworks:
Simple ROI calculations for engineering initiatives
Cost of delay for technical debt prioritization
Good/Better/Best options with cost implications
Communication Templates:
How to present technical investments to business stakeholders
Translating infrastructure costs to business metrics
Building cost-benefit analysis for engineering projects
Financial Awareness Across Engineering Roles
The type of financial awareness needed varies significantly by engineering role:
SRE/DevOps Engineers: These roles typically have direct visibility into what actually costs money—the infrastructure itself. They’re often closest to the resource utilization metrics and spending patterns.
Backend Engineers: Architecture decisions at this level directly influence infrastructure requirements. The data storage patterns, processing approaches, and scalability models they choose drive downstream costs.
Frontend Engineers: While seemingly further from infrastructure costs, frontend decisions about asset sizes, client-side processing, and API call patterns can significantly impact backend resource needs.
Generally, the further down you are in the value chain (closer to infrastructure), the greater understanding you should have of costs, as your decisions will have cascading impacts upstream. But all engineers should have at least a basic understanding of how their work affects the bottom line.
Across all these company types and roles, I’ve found one principle holds true: engineering decisions made without considering financial impact remain fundamentally incomplete. This doesn’t push you toward always choosing the cheapest solution—rather, it empowers you to make conscious tradeoffs with full awareness of cost implications.
Once you’ve begun implementing financial awareness in your own work, the next challenge is extending this mindset beyond your individual contributions. Moving from personal practice to organizational impact requires navigating diverse contexts and sometimes difficult conversations. Even the most financially sound engineering decisions can face resistance, misunderstanding, or competing priorities from different stakeholders. As you develop your technical and financial toolkit, you’ll need complementary skills to advocate for financially responsible approaches across various organizational environments:
Navigating Financial Conversations and Contexts
Financial awareness doesn’t exist in a vacuum—it happens within specific organizational contexts and conversations. Different environments require different approaches, and effectively communicating financial thinking can be as important as the thinking itself. Let’s explore how to adapt these principles to various situations and advocate effectively for financially sound engineering.
Different Contexts, Same Principles: Financial Awareness Across Organizations
The financial awareness needed by engineers varies across organization types, though the principles remain consistent:
Bootstrapped Startups: In organically growing companies, every cent spent on infrastructure directly impacts runway. Engineers in these environments need to be ruthlessly pragmatic, often choosing "good enough" solutions that preserve capital for growth.
Private Equity-Owned Companies: These organizations typically focus on operational efficiency and EBITDA improvement. Engineers need to frame technical investments in terms of measurable returns, often with shorter time horizons.
Enterprise Organizations: Larger companies operate with more complex budget cycles and CapEx/OpEx considerations. Engineers need to understand the difference between capital and operational expenditures and how budget cycles impact project approvals.
CapEx vs. OpEx: Capital Expenditures (CapEx) are major purchases that will be used long-term, while Operational Expenditures (OpEx) are ongoing costs to run the business. This distinction matters for engineering decisions because many organizations budget differently for these categories, often finding it easier to approve OpEx.
Navigating Organizational Tensions
Introducing financial awareness into engineering practices isn’t without challenges. Common resistance patterns include:
The Ownership Barrier: In many organizations, infrastructure decisions are controlled by specialized teams (like SRE) who may restrict technology choices. This can create friction when engineers want to experiment with new approaches.
The Innovation vs. Cost Dilemma: Too much focus on cost can artificially constrain the solution space. For example, I’ve encountered situations where we were discouraged from creating separate development environments due to cost concerns, despite their value for exploration.
The Technical Debt Justification Challenge: Long-term investments in code quality can be difficult to justify when benefits are diffuse and costs are immediate.
Navigating Financial Disagreements with Stakeholders
When you encounter resistance or disagreements about the financial value of technical work:
Always assume best intent from all parties
Gather and present multiple perspectives rather than pushing a single view
Develop several options with different cost/benefit profiles
Present clear trade-offs to decision-makers rather than binary choices
Focus on business objectives first, then show how technical approaches support them
This approach builds trust and positions you as a thoughtful partner rather than someone defending their technical territory.
Engineers who consistently demonstrate this awareness:
Gain outsized influence across functions
Focus on truly impactful work
Build reputations as business-savvy problem-solvers
Most importantly, they future-proof their careers in an increasingly cost-conscious tech economy.
Throughout this article, we’ve explored how financial awareness transforms engineering practice—from individual technical decisions to organizational contexts. Having seen how this mindset applies across different environments, let’s now examine the ultimate impact of financially-aware engineering:
The Wrapup: The Impact of Financially-Aware Engineering
What’s the ultimate outcome of developing financial awareness as an engineer? This section examines how this mindset transforms not just your technical decisions, but your overall impact and career trajectory. We’ll look at both immediate benefits and long-term advantages of approaching engineering with financial awareness.
Engineers Who Understand Money Create Sustainable Value
I want to emphasize this core message: Financial thinking is about making strategically sound decisions, not about cutting corners.
Engineers who consistently demonstrate financial awareness:
Gain broader influence across functions by speaking a language business leaders understand
Focus on high-impact work by evaluating initiatives through both technical and financial lenses
Build reputations as problem-solvers who connect technical excellence to business outcomes
future-proof their careers in an increasingly cost-conscious (and AI powered) tech economy
Key Takeaways
Every engineering decision is an investment that should generate meaningful returns
Technical debt has quantifiable costs that compound over time
Different organizational contexts require different financial approaches, but the core principles remain
Financial awareness varies by role but should exist throughout the engineering organization
Balancing innovation and cost-efficiency requires understanding business strategy
Some strategic “overspending” is actually valuable long-term investment
Engineers who understand financial impact write code that creates sustainable business value.
At any career stage—from junior developer to staff engineer—developing financial awareness will amplify your impact. You don’t need to become an accountant; you simply need to bring business context to your technical decisions.
I’d love to hear how financial thinking shows up in your work? How has your organization bridged the gap between financial and technical thinking? Leave a comment or get in touch with me!
Enjoyed this article? Leave a like and re-stack it, mentioning your favorite financial insight!
Thanks,
Tim
Deloitte Center for Integrated Research (2024). Focusing on the foundation: How digital transformation investments have changed in 2024.
Storment, J., & Fuller, M. (2020). Cloud FinOps: Collaborative, Real-Time Cloud Financial Management. O'Reilly Media.
AWS Well-Architected Framework: Cost Optimization Pillar (2024).
Fowler, Martin. (2003) "Technical Debt." MartinFowler.com.
Gartner (2023). “Cloud Cost Management Research”, cited in Tangoe’s 2023 Cloud Cost Management Guide.
Nicole Forsgren, Jez Humble, and Gene Kim. (2018) "Accelerate: The Science of Lean Software and DevOps.".
Simon Wardley. (2005) "Wardley Maps."
Gulati, Ranjay, et al. (2010) "Roaring Out of Recession." Harvard Business Review.
Raynor, M. E., & Ahmed, M. (2013). Three Rules for Making a Company Truly Great. Harvard Business Review.
Really interesting read on the intersection of finance and engineering! For anyone working on software development financial projects, understanding both the technical and financial perspectives is essential. This resource provides valuable guidance on building robust and compliant financial applications: https://www.cleveroad.com/blog/financial-software-development/