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Advanced KPIs reflecting unit’s financial health; KPIs impacting public companies' financial statements |
Capitalization Rate
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The percentage of total development time that is capitalized as opposed to expensed. This is crucial for understanding how much of the development cost is considered an investment. More about development time capitalization in https://wmdemo.atlassian.net/wiki/spaces/TC
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| title | Capitalization Rate Improvement Strategies |
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Prioritize Long-Term Projects: Focus on projects that yield long-term benefits. This might mean developing new features or platforms that will serve the company for several years rather than short-term fixes. Training & Development: Ensure that the development team is well-trained in identifying tasks that qualify for capitalization. This can be achieved through regular workshops or training sessions. Documentation: Maintain thorough documentation of development activities. This not only aids in the capitalization process but also ensures compliance during audits. Collaboration with Finance: Foster a close working relationship between the development and finance teams. This ensures that there's a mutual understanding of which activities can be capitalized.
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ROI of Software Development
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Measures the return on investment for software development asset or its part: product, version, extension, feature, etc. This KPIs is central for application portfolio management.
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| title | Improvement Strategies for SWDev ROI |
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Market Research: Before embarking on major projects, conduct thorough market research to ensure that there's a demand for the features or products being developed. Feedback Loops: Implement feedback loops with customers to ensure that the software being developed aligns with their needs and can generate revenue. Cost Management: Regularly review and optimize development processes to reduce unnecessary costs. This could involve adopting more efficient development methodologies or tools. Monetization Strategies: Explore various monetization strategies for the software, such as subscription models, licensing, or pay-per-use, to maximize revenue.
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Amortization Schedule
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For capitalized software, understanding the rate at which the software asset will be amortized. The lifetime value of an asset is extended through developing additional features and enhancing existing functionalities.
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Self-sustainability of Development Department: financial metric that gauges the ability of a software development department to support its operations, growth, and innovation through effective financial management and resource utilization. It's an indicator of how well the department can generate value and maintain its functions without requiring additional financial support.
Target example: total revenue from software equals at least double of total FTEs' salaries + bonuses
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| title | Components of Metric |
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Cost Efficiency: The ability to minimize unnecessary expenses while maintaining quality and productivity. Budget Adherence: The degree to which the department sticks to its allocated budget while achieving its goals. Capital Investment Returns: The returns generated from investments in tools, technologies, and training. Revenue Contribution: The direct and indirect revenue generated by the department's projects and innovations. Resource Optimization: Effective allocation and utilization of financial resources.
To quantify the "Self-sustainability of the Development Department" from a financial perspective, a composite index can be created, combining several relevant financial metrics. Here's a formula that incorporates the key components above: |
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