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Profit center vs. cost center: How company structure affects engineering
- Understanding the differences between profit and cost centers in engineering teams is crucial for developers, as each operates with distinct mentalities and structures.
- In profit centers, like engineering teams supporting revenue-generating products, investment is seen as beneficial for innovation and revenue growth.
- Profit centers own specific product scopes, with squads led by engineering managers and clear ownership structures to drive continuous improvement.
- However, drawbacks of profit centers include potential team silos and the need for engineers to work on cross-functional projects for career advancement.
- On the other hand, in cost center models, engineers are viewed as resources for projects that support the company's main revenue-generating departments.
- Projects in cost centers may follow a more waterfall methodology, with developers moving to different projects once their current assignment is complete.
- Pros of cost centers include working on diverse projects, slower pace for better work-life balance, modern tech stacks, and greater job security due to risk aversion.
- However, the downsides of cost centers include lower pay, less exciting work, lack of ownership sense, and a slower process for addressing technical debt.
- Choosing between profit and cost centers depends on individual preferences, with stability being a key factor that influences career choices.
- Understanding how engineering teams are positioned within an organization can help developers, whether early in their career or with long-term goals, make informed career decisions.
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