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What Is Cloud Cost Intelligence and Is It Right for Your Business?

|November 20, 2020|

If your business is growing, your AWS bill is probably growing with it.

Yet, in conference rooms all over the world (or Zoom calls, these days), CFOs are asking “we’re spending how much?!” — while engineering leaders try to explain that the platform is twice as fast and they’ve added some machine learning that is going to absolutely change the game.

The problem is — companies can’t connect their cloud spend with the products they build or the people who build them.

In other words, they have no context for why the bill is increasing and whether or not it’s justified.

So who can blame those outraged CFOs?

Traditional cost optimization and management is focused on making sure companies don’t waste money on the cloud — which is important.

But it’s only a piece of the puzzle. Saving money for the sake of saving money is — a bit short sighted.

If you really want to cut costs, you could also stop stocking your office with coffee. But you’d better be ready for some grumpy and less-than-productive employees.

There’s another way to look at your cloud spend. It’s called cloud cost intelligence.

What Is Cloud Cost Intelligence?

Cloud cost intelligence is cost data that is aligned with your business and stakeholders. Instead of simply telling you to cut costs, it tells you where you’re spending your money and (more importantly) what that means in the context of your business.

Instead of simply talking about the bill being “too high,” cost becomes a meaningful data point as you discuss trade offs you could make — ranging from rewriting a feature to changing which pricing tier it belongs to.

Cloud cost intelligence starts with aligning cloud costs to the metrics that matter to everyone in your business — from an individual engineer to your CEO. This includes answers to questions like:

  • How much does it cost to build and run each product feature? Are our margins stronger on one product line than another?
  • What is the unit cost of different units of value? (e.g., Lyft measures “cost per ride”)
  • How is our cost changing over time across different dev teams and business initiatives?
  • How much did we save by refactoring an application?

There are many ways to achieve cloud cost intelligence, ranging from building your own to using a SaaS solution like CloudZero — but there’s a common set of data that you’ll need for different stakeholders.

Cloud Cost Intelligence for Developers

Developers need to understand the cost of the engineering decisions they make.

No, they don’t need to spend all day thinking about how they can save $5 — but if that $5 is multiplied by every transaction that takes place on the platform they’re building — it could have a massive impact on gross margins.

Engineering leaders need to empower their dev teams with two types of context.

The first is access to cost data in a way that is relevant and understandable to them. It should be aligned with the products and features they are building.

The second is business context. Engineering leaders should pass down relevant context from the c-suite about how the products they’re building are going to be sold. If a product is being built for a self-serve free tier, it will probably have different unit economics than a product that is sold to a handful of large enterprise accounts. Engineering leaders can set non-functional requirements and guide their teams during conversation about tradeoffs such as cost and availability or speed.

Cloud Cost Intelligence for Finance

Finance’s purview is always the financial health of the business, so they care about margins and COGS.

Instead of simply measuring how much was spent in total on AWS, finance needs data about different products, features, and business initiatives. They also need to understand cloud unit economics and how costs align to key business metrics, like transactions made or messages sent.

For SaaS companies, finance should understand how much each customer costs. This can inform decisions like renewals, as well as markets to invest in.

You could ask, for example, "Are we making higher margins off enterprise customers than SMB?

Cloud Cost Intelligence for Engineering Leaders

Engineering leaders should be the center of cloud cost intelligence.

They’re the translators between the business and technical teams — and are responsible for communicating with business leadership and with individual developers and ops engineers about priorities, profit margins, trends in cloud costs and budgets.

They straddle the instant-feedback expectations of the engineering world and the quarterly cycles that are more common in finance, and need access to metrics that reflect those timelines.

With better cloud cost intelligence, engineering leaders can take full control of the cloud spend by empowering individual developers to integrate cost data into their workflow. This will help them to proactively discuss how cost issues fit into technical debt, as well as get full visibility into how much the engineering department spends in cloud costs on professional development, new feature/product development and operating existing offerings.

Breaking Costs Down

We’ve mostly been discussing the importance of understanding how much it costs to run a particular feature or application, but that’s not the only important distinction in cloud costs.

Every organization is going to have cloud costs associated with research and development — they will also have cloud costs related to internal systems that don’t generate revenue.

These are certainly business expenses in the same way that office space and coffee are, but they should be broken out of the unit cost analysis of specific applications and features, because they don’t provide meaningful information about how profitable a certain feature is.

Nonetheless, these background costs shouldn’t be ignored, either.

In one case we saw, the company had a “playground” account for developers to try out new technology.

What they didn’t realize was that certain queries were costing $1,000 each — with a simple adjustment they cut that number in half.

Being able to accurately break costs down is essential when talking with investors — otherwise you risk making the product seem less profitable than it actually is. It’s also important for developing long-term business strategy and making better decisions around pricing and feature offerings.

Start Your Journey With CloudZero

With CloudZero, organizations can bake cost intelligence into the development workflow, shifting cost management left and giving developers the data points they need to find ways to reduce costs — without compromising application speed, resilience, or availability. Try it out now.

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