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Using Story Points to Calculate CapEx/OpEx for Software Engineering Teams

Using Story Points to calculate CapEx (Capital Expenditure) and OpEx (Operational Expenditure) in finance involves a combination of project management estimation and financial classification of work efforts. Story Points themselves are abstract units of effort and don’t map directly to dollars, so you'll need to translate them into time and cost first, and then assign them as either CapEx or OpEx based on Generally Accepted Accounting Principles (GAAP).

Usually, CapEx/OpEx applies only to full-time Software Engineers (SWEs) and Quality Assurance Engineers (QAEs). It doesn’t apply to independent contractors or vendor teams. As such, only Story Points completed by full-time SWEs/QAEs should be used in your calculations. Moreover, only “New Development” and "Enhancement" work should be included in CapEx, while all remaining work should be included in OpEx.

How to Classify Work as either CapEx or OpEx

We use the following rough guideline to classify stories into CapEx or OpEx:

Type of Work Typical Classification
Building new features CapEx
Enhancing existing code CapEx (only if value-add)
Bug fixes, support OpEx
Maintenance tasks OpEx
R&D or prototyping Maybe CapEx (but mostly OpEx)

⚠️ Important: The classification process is somewhat subjectivity, especially regarding Enhancements and R&D work.

An Example of Cost Allocation by Classification

Story Points Label Cost (10h/pt × $100/h) CapEx/OpEx
A 5 CapEx $5,000 CapEx
B 3 OpEx $3,000 OpEx
C 8 CapEx $8,000 CapEx

Total CapEx = $13,000
Total OpEx = $3,000

How to Determine a Team’s Conversion

There is no universal conversion for 1 story point to hours, because story points are relative measures of effort, not time. However, many agile teams informally settle on a working estimate for planning and financial tracking. Here are a few widely used benchmarks:

Team Size & Velocity Typical Conversion Notes
2-week sprint, 5 developers 1 SP ≈ 6–10 hours Based on 400 hours per sprint and ~40 story points total
1 SP = 1 developer-day 1 SP ≈ 6–8 hours A common rule of thumb for stable teams
SAFe (Scaled Agile) 1 SP ≈ 8 hours SAFe recommends 1 SP ≈ 1 ideal workday (but still emphasizes relativity)

An Example of Story Points to Hours Conversion

  • Get total hours worked in a sprint
    E.g., 5 devs × 40 hours/week × 2 weeks = 400 hours

  • Get average velocity (story points completed)
    E.g., 40 story points

  • Divide: 400 hours ÷ 40 story points = 10 hours/story point

⚠️ Important: These are only working assumptions. You should calibrate based on your team’s historical data (velocity vs. actual hours worked).

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