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Originally posted on Linkedin, January 29, 2026
Last quarter, one of our Managing Directors showed me their R&D time allocation. The numbers looked acceptable on paper: 45% on new initiatives, 35% on improvements, 20% on maintenance.
Then I asked: "What were these numbers two years ago?"
The silence told me everything.
The Reality Behind R&D Time Tracking
At TSG, we've standardized how our 8 software companies track R&D time across three categories:
Initiatives – New products, revenue streams, or fundamental innovations (what Constellation Software calls "Strategic Interest Groups")
Improvements – Churn mitigation through smaller features and UX enhancements
Maintenance – Bug fixes, infrastructure updates, security patches, migrations
Every SaaS operator wants to believe their team spends the majority of time on initiatives. The data rarely supports this belief.
The 3 categories
The Disneyland Scenario (That Doesn't Exist)
Our business units dream of spending 40-50% on initiatives. This makes sense - we operate in red ocean markets where staying innovative isn't optional. Customers expect "new stuff."
They aim for 30-40% on improvements. Fair enough - customers notice these enhancements and appreciate the continuous refinement.
They budget 20% for maintenance. Here's where reality diverges from fantasy.
The Technical Debt Compounding Effect
Maintenance is largely invisible to customers. Infrastructure upgrades, cybersecurity patches, database migrations - none of this appears in your release notes or generates excitement in customer calls.
But technical debt doesn't care about your roadmap priorities.
I recently listened to an exceptional In Practice podcast interview with a Jack Henry employee who described what happens when maintenance suddenly consumes 60-70% of R&D capacity. It's not a place any operator wants to be.
A Tale of Two Companies
Consider two SaaS companies competing in the same red ocean market:
Company 1: Modern tech stack, 20% maintenance, 30% improvements, 50% initiatives Company 2: Legacy infrastructure, 50% maintenance, 30% improvements, 20% initiatives
Year one? Both companies survive. The difference seems manageable.
But this compounds mercilessly over 3-5 years.
Company 1 consistently ships new features, responds to market trends, and maintains competitive positioning. Company 2 falls further behind each quarter, watching their initiative capacity shrink while competitors accelerate.
In red ocean markets, winning new customers is already difficult. For Company 2, it becomes nearly impossible. Their product roadmap stagnates while their engineering team fights infrastructure fires.
The Rule of 40 Trap
This dynamic creates a vicious cycle for Rule of 40 performance (EBITDA + organic growth = 40).
When new sales decline due to product stagnation, organic growth suffers. Company 2 can still hit Rule of 40 targets through margin expansion, but there are limits to how much you can optimize existing operations while your product falls behind.
Meanwhile, Company 1 maintains growth through superior product velocity, giving them multiple paths to strong Rule of 40 performance.
What We've Learned at TSG
First: Start tracking R&D time allocation immediately. You cannot manage what you don't measure. Whether you use Jira or another tool doesn't matter - consistency matters.
Second: For VC-backed startups especially - be ruthless about initiative ROI. The "feature race" mentality destroys more value than it creates. We tried replicating Constellation Software's Strategic Interest Groups (early customer involvement with clear payment commitments) with mixed success, but the principle remains sound: customers should be willing to pay for "new stuff."
Third: Improvements never stop. Budget accordingly. This 30-40% allocation is structural, not optional.
Fourth: Maintenance is where the real strategic decisions happen. If you're operating in a red ocean market with significant technical debt, you need a concrete plan. Hope is not a strategy.
The Stickiness Question
Your ability to survive as Company 2 depends entirely on product stickiness and churn dynamics.
If switching costs are high and your product is deeply embedded in customer workflows, you buy yourself time. But time is not infinite - eventually, competitive pressure and customer expectations will catch up.
If stickiness is low, technical debt becomes an existential threat much faster.
The Honest Conversation
Every SaaS company has technical debt. The question isn't whether it exists - it's whether you're honest about how much you have and what it's costing you in opportunity.
That Managing Director I mentioned? Their 45/35/20 split two years ago had shifted to 30/35/35. They were becoming Company 2 without realizing it.
We're now having very different conversations about their roadmap, technology investments, and competitive positioning.
What's your current R&D allocation? And more importantly - what was it 12 months ago?