Caveat here is that you need to be a sufficiently large shop for this to pan out. Need the economies of scale on your side.
I've seen several times smaller organizations attempting to adopt this model (because Google does it or whatever), with the result of the tools team being an enormous bottleneck for the organization.
Not really, it depends on the tool. I wrote a lot of tooling at my last job: ISTR there were about 15 people when I started and a bit over 30 when I left five years later.
For example one tool took about 3 weeks to get to a usable state but it sped up a production task that previously took one person 15 minutes to the same task being done in parallel over 5 units and taking a total of 3 minutes and still only required one person. At our typical sales volumes, it was a no-brainer: my time was paid for by the end of the next month.
In pretty much any small manufacturing/processing shop there are lots of little wins like this.
I am an individual contributor, decently paid at a medium size business. I developed warehouse management systems, inventory managers etc. Very small team and projects have been quite successful.
I've run into like "the build system team", where the build system was some patchwork of hacks that never quite worked, and was also completely opaque to those who used it. The cycle was
1. Try to do something
2. Encounter a build problem
3. Talk to the build system guys, they promise to look into it fast
4. Twiddle your thumbs for a week while the entire team is blocked
I've seen several times smaller organizations attempting to adopt this model (because Google does it or whatever), with the result of the tools team being an enormous bottleneck for the organization.