Businesses both small and large use cloud services to help maintain their data. But managing cloud services — and making sure you stay within your budget — can be a challenge.
To maximize your money, you need to focus on one thing: efficiency.
If you can be efficient with your time and finances, getting your cloud services up and running will be a breeze.
As a guest on CTO Connection Podcast, CloudZero founder and CTO Erik Peterson shared his tips for monitoring cloud costs so you can make the most of your budget.
1. Organize Your Spend
Organization is the first step toward understanding what your features cost and where your budget is going.
“If you can’t understand what your features, your products, your components, what those things are costing, how are you even going to get your arms around this in the first place?” Erik said.
Once you know exactly where your money is going, you can then determine where the holes are in your programs and what it will take to fill them.
“Think about how you’re organizing that spend,” Erik said. “And if you have to go out and build something or do it outside, your cloud providers are not going to answer the question for you. You’re going to have to uplevel it a little bit.”
Whether you need to use multiple cloud servers or just find the one that fits your needs best, organizing your spend is a great way to make sure you’re capitalizing on the value your products deliver.
Here’s a recent step-by-step guide we put together on how to conduct a cloud cost analysis.
2. Watch Your Money
It can be hard to estimate how much you’ll need to spend on a given product before it comes time to pay the bill. While most platforms can give you an estimated cost, that number will fluctuate depending on how much you use the service.
“The reality is a lot of the costs are tied up in usage,” Erik said. “What’s your bandwidth costs? How are people actually going to use this thing? Is there any component that actually is somehow variable with the load?”
To make sure you stay within your budget, a person or program needs to monitor your spend so they can sound the alarm when you start overspending.
“You need something watching what you’re spending, what you’re doing, tying the engineering activity with the work that you’re deploying, tying that to customer activity, tying all this stuff together so that you can break it down and understand what it costs to deliver value,” Erik said.
Catch price or usage fluctuations early on so they don’t negatively impact your budget.
3. Know Your Metrics
Engineers used to struggle to build systems that could scale. Now, everyone operates in an environment with almost infinite scaling abilities — they just don’t have an infinite wallet to go along with it.
When you have budget limitations, it’s important to be efficient with your products, and the best way to maintain efficiency is by keeping track of your spend.
“What is one of the number one metrics that can help you as an engineer understand if you’re building top-notch efficient software?” Erik said. “Well, it’s what you’re spending to deliver value.”
To keep track of your metrics, you need to think about the unit costs of what you’re doing.
“If you’re an email company, do you know what it costs to deliver an email? If you’re a scanning company, do you know what it costs to deliver a scan?” Erik said. “Because that is a metric that your board and your CEO and your CFO can understand.”
If the people making engineering decisions have the proper data and metrics, it will be much easier for them to keep their costs in check.
4. Don’t Forecast From The Past
It’s tempting to use data from previous quarters to determine what your budget needs to be in the upcoming months. But the past doesn’t always hold answers for the future.
“Right now, the state-of-the-art people will look at the past spend data and try to forecast out what you’re going to spend,” Erik said. “But it is wildly inaccurate because it doesn’t take into account the things that are actually driving the spend.”
And what is actually driving your spend?
According to Erik, the number one thing that drives spend isn’t how many engineers you hire, but how many customers you have. If you can bring that data into the system, you’ll create a much more accurate estimate of your needed budget.
“I think the future is in modeling this stuff and getting out ahead of it before people actually spend the money,” Erik said. “And the secret to getting there is building out the data.”
Don’t look to the past to determine your budget. Instead, focus on your future customers and transactions; that will offer you a realistic estimate for your upcoming spend.
5. Focus On Your Profits
If your company is successful and growing, your spend will increase right along with it. But when it comes to looking at the big picture, you can’t just focus on the amount of money you’re spending.
“The question, when your CFO comes calling, or somebody comes to you and says, ‘Okay, why?’ is to immediately change the conversation and not talk about what you’re spending, but talk about what you’re making,” Erik said.
Your return on investment is vastly more important than how big your budget is, so when your CFO wants to know how things are going, focus on the scale of your team’s success.
“Talk about the return on that investment and say, ‘Oh, well look, the work that my team has done over the last three months has increased our margins for the company by 20 percent,’” Erik said. “Any CFO or CEO who hears that when they’re talking to their engineering leader is going to go, ‘Okay, this person speaks my language.’”
Articulate your team’s success in a way your CFO will understand by concentrating on profits instead of spend. Most businesses use some kind of cloud service, but to find the one that’s right for you, first you need to learn how to navigate your budget.
Once you know what kind of program your business needs (and can afford), you’ll be able to find a cloud service that’s right for your company.