This is part two of seven in our Frugal Architect blog series. Read part one here.
In case you weren’t as giddy as CloudZero was at re:Invent this year, we wanted to recount the seven laws outlined by Werner Vogels, Amazon’s CTO, which he’s bundled into a framework called “The Frugal Architect” (check out the whole framework here).
What is “The Frugal Architect”? A constitution of sorts for how engineers can build high-functioning, cost-efficient cloud software. A roadmap to sustainable innovation — and, we have to assume unintentionally on Vogels’s part, the vision by which CloudZero was founded and operates.
In this blog series, we’re going to run through each of the seven laws in “The Frugal Architect,” going over what they mean and why CloudZero is the optimal platform to power each.
Law II: Systems That Last Align Cost To Business
Thus spake Vogels:
The durability of a system depends on how well its costs are aligned to the business model. When designing and building systems, we must consider the revenue sources and profit levers. It’s important to find the dimension you’re going to make money over, then make sure the architecture follows the money.
For example, in e-commerce, that dimension might be the number of orders. When orders go up, infrastructure and operation costs rise. And that’s okay, because if your system is architected well, you can start to exploit economies of scale. What’s important is that infrastructure costs have a measurable impact on the business.
As builders, we need to think about revenue – and use that knowledge to inform our choices. Because growth at all costs leads to a trail of destruction.
Let’s break it down.
What engineering teams must do: Measure the business impact of their infrastructure costs — and use revenue knowledge to inform building decisions.
Why they should do it: Because cost-efficient systems enable businesses to exploit economies of scale — and because if they don’t, they could put themselves on a “trail of destruction.”
What it takes:
- Align costs to business model
- Calculate and refine unit costs
- Use unit economic data to inform building decisions
How CloudZero Helps
Align costs to business model
The first challenge every cloud user faces is that their monthly invoices show up as more or less a lump sum — a number, typically giant, that represents the cost of their entire organization’s cloud usage.
The main thing it lacks is business context: which customers, products, features, teams, microservices, etc. are driving which costs. Business context is the first step in assessing business impact — without it, it’s impossible to make informed efficiency decisions.
Cloud users need to see 100% of their cloud costs in a framework that mirrors their business model. To quote Vogels, they must “consider revenue sources and profit levers” — i.e., their main money-makers, whether that’s customers, products, features, or all of the above — and understand how much cost each is driving.
CloudZero is the single best platform for organizing costs in a business context. We ingest 100% of your cloud, PaaS, and SaaS data (including up to five years of historical data), normalize it in a common data model, and allocate it in a Dimension Map that mirrors your business structure.
How do we do it? A uniquely architected platform that combines AnyCost™ (data ingestion and normalization), CostFormation® (cost allocation and attribution), and an intuitive user experience, centering around CloudZero Explorer and Analytics. What your engineers get: relevant, real-time data, easily accessible in a single pane of glass.
Read how cost per customer, cost per team, and cost per region enabled Hiya to maintain a -0.6% cloud spend growth rate as they scaled.
Calculate and refine unit costs
Every business — cloud-driven and otherwise — can narrow its value on a north-star unit cost metric. In Law II, Vogels gives the example of an ecommerce company (e.g., Amazon, to pick a totally random example), whose main value comes via orders.
In their case, the north-star unit cost metric would be cost per order — how much it costs Amazon to fulfill orders, and therefore, how much they’re profiting on each order. The lower their cost per order, the higher their profit margin, and the more they can “exploit economies of scale.”
This is exactly what CloudZero’s Unit Cost feature is designed to do. It leverages our unparalleled data model to automatically attribute costs to the proper units. So, whether you’re a B2B SaaS company looking to refine cost per customer or a video game company looking to understand cost per service per game per customer (actual metric we calculated for Beamable), CloudZero has you covered.
Use unit economic data to inform building decisions
Accurate unit costs don’t just give you an accurate snapshot of your business efficiency, they reveal insights you can apply across the rest of your environment to enhance business efficiency — now and going forward.
Whether that’s keeping instance types up-to-date, instituting more cost-effective snapshot policies, managing unit-specific cost anomalies, or refining customer onboarding processes (which saved one CloudZero customer $10,000/new customer), unit economic data fuels a positive feedback loop with engineers.
All of these are examples of how CloudZero fuels more cost-efficient cloud engineering for customers every day.
The Joy Of Frugality
Simran Singh, Assistant Vice President of Cloud Engineering at HighRadius, specifically called out how CloudZero “helps us to be frugal and not cheap.” “Cheap” means spending as little as possible; “frugal” means maximizing the return on every cloud dollar you invest. The frugality mindset “gets us jazzed up for the next sprint,” in Simran’s words.
There’s much more to the Frugal Architect framework, and there’s much more we have to say on the subject. Stay tuned for five(!) more exciting new articles in this series.
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