How to build a business case for purchasing a cloud development environment

Andrey Badmaev Finance & RevOps at Gitpod

Jan 24, 2024

When introducing new tools like Cloud Development Environments (CDEs), which impact the entire development lifecycle, clear financial justification is essential. To make a business case for a CDE, consider two main questions:

• What is the company’s cost due to the problem or pain point?
• What is the solution’s return on investment (ROI)?

We’ve developed an ROI calculator to simplify understanding the financial benefits of using a CDE like Gitpod. This tool helps demonstrate Gitpod’s value, supports creating a persuasive business case for decision-makers, and aids engineering leaders in advocating for CDE adoption in their organizations.

Gitpod ROI calculator

Calculator principles

This business case focuses on two main benefits of CDEs:

First, CDEs eliminate common issues such as “works on my machine” problems, lengthy setup times, dependency conflicts, poor local hardware performance, and costly context switches, leading to substantial savings in developer time and productivity.

Second, CDEs allow for faster developer onboarding by providing preconfigured development environments. Second, CDEs allow for faster developer onboarding by providing preconfigured development environments.

Calculator parameters

Inputs

• Number of engineers
• Number of new engineers to onboard per year
• Average engineer salary per year
• Hours spent managing and troubleshooting development environments per week per engineer
• Working days to first pull request for new joiners

When quantifying the last two inputs, it can be helpful to conduct a survey. Below is an example of two questions we usually ask development teams: their engineers about the time spent on onboarding and troubleshooting development environments.

If you’re unsure of these values, retain the default settings in the calculator of 5 hours per week and 10 days of onboarding. These figures represent the average values we’ve seen from customers prior to implementing Gitpod.

If you’d like to use our survey as a starting point, reach out and we can provide you with a copy.

Results

1. Converting Troubleshooting Time into Money:

Let’s see what losing 5 hours per week costs. If developers, among the highest earners, effectively code 70% of the time, each lost hour costs $80 (factoring in taxes and time off). This means a monthly loss of $1,500 per developer, or $1.8 million per year for a company with 100 developers, not counting the missed opportunities such as faster time to market or additional revenue.

2. Money Lost to Onboarding Time:

Given that onboarding time can be reduced by 75% using CDEs (as seen in case 1, 2 and 3), we can estimate time savings for new joiners. With CDEs, 10 days of onboarding are reduced to 2.5 days, saving 60 hours per new developer. A company that annually onboards 30 people, which includes hiring internal developers, employing external ones, and transitioning employees between projects, loses $144,000 per year due to inefficient onboarding.

3. Overall Impact:

By addressing these issues, a company with 100 developers and 30 new joiners a year can save 24,000 hours annually with Gitpod. This boosts engineering capacity by 19% or adds $2 million in value. Even after covering Gitpod and infrastructure costs, the ROI hits 913%.

What’s next?

You can customize calculations in the calculator for your company by inputting these five simple parameters. If you need to expand your business case, our team can assist you by incorporating additional CDE features into the calculator. Some examples of additional features for evaluation:

• Replacing Virtual Desktop Infrastructure (VDI)
• Savings on expensive new laptops
• Avoiding the hiring of additional developers
• Reducing developer turnover costs
• Replacing specific software required for local development environments, which is unnecessary with CDEs
• Security risk reduction

For help, questions or comments, contact our team directly!