In my previous article in the Engineering Leadership Playbook, I wrote about engineering budgets in the AI era. The central idea was simple: Don’t optimize engineering for lower cost. Optimize it for greater human leverage. AI should not simply become a reason to ask, “How many engineers can we reduce?”, rather we ask: “How can we make every engineer more capable?” That naturally leads to the next question: Where do we create that leverage?

Every year, engineering leaders sit around conference tables with finance partners discussing one question: “How should we optimize the engineering budget?” Unfortunately, “optimize” often becomes synonymous with “reduce.” Can we reduce headcount? Can AI replace developers? Can we outsource more work? Can we delay hiring? Can we spend less on learning? These questions may improve the next quarterly financial report, but rarely do they build better engineering organizations. As part of Engineering Leadership Playbook (ELP) I share this article on engineering budget planning.

Over the last two decades, I have had the privilege of working across software development, consulting, architecture, product engineering, IoT, XR, AI, web3, metaverse, embedded systems, and enterprise modernization. During this journey, I have worked with small incubator team of a few engineers, or enterprise projects with 100s of engineers, consulting organizations, product companies, and engineering teams spread across multiple countries. One observation has remained remarkably consistent. Organizations rarely struggle because of technology.

We often hear that times are changing. In the AI era, change is no longer gradual — it is accelerated. Today, AI agents assist us in writing, thinking, researching, and even making personal decisions. Many of us now do something unimaginable a few years ago: We even confirm what our doctors say… with AI. AI explains reports. AI answers late-night doubts. AI reassures us when anxiety grows. It is that second opinion!

Integrated Development Environments (IDEs) have played a crucial role in shaping the way software is developed. Engineering Practices such as Agile development, eXtreme Programming, Test-Driven Development (TDD), became practical largely because IDEs provided a visual and integrated workflow for writing and managing code. In the early days, developers interacting heavily on command-line. Formatting code, navigating files, searching references, and refactoring logic were mostly manual tasks. Over time, IDEs transformed this experience.