We’ve seen the same story play out time and time again in numerous SaaS companies:
The problem often begins when engineers — with a technical understanding of cloud costs and a deep understanding of how to build robust products — struggle to communicate the actual business impact of their efforts to company leaders. (These days, all company leaders, from individual team leads all the way up to the C-suite, need to be involved in cloud cost conversations in order to keep SaaS products afloat.)
This communication breakdown affects a majority of companies, so if this sounds familiar, you’re not alone.
Below is your guide to opening up communication lines with company leadership so everyone, from new hires to company founders, can be on the same page when it comes to cloud costs.
Cloud Cost Communication Is More Critical Than Ever
We see something called the “AI Innovator’s Dilemma” happening in a lot of companies that come to CloudZero for help.
At the beginning of a new project, teams are excited. They race forward, eager to build, innovate, and get ahead of the competition.
But at some point, the first couple of cloud bills hit an executive leader’s desk and then bill panic begins to set in.
Company leaders begin to take an interest in the project’s budget — and not in a good way. Innovation falters, and what was once an exciting product with massive potential gets sent to the back burner while the budget is reined in.
Eventually, innovation restarts. But it’s only a matter of time until those cloud bills climb too high again and progress has to come to another screeching halt until the problem is addressed.
It’s no wonder company leaders worry about snowballing cloud bills. In the average company, they are the second biggest expense, behind personnel salaries. Most employees know this, at least on an intuitive level; 75% of survey respondents in our State of Cloud Cost Report said they worry their jobs would be cut if cloud costs spiked by 50%.
Failing to communicate cloud cost expectations (and realistic outcomes) from day one not only stifles development, but it also puts the health of the whole company at risk.
On the opposite side of the coin, going into projects with strong communication regarding costs actually drives innovation rather than impeding it, as CloudZero founder Erik Peterson explains:
How To Talk To Your Company’s Executives About Costs
The key to a successful conversation about cloud costs is to know your audience:
⇒ CEOs want to know how a project will give the company a competitive edge and how it furthers the company’s overall mission and strategy.
In some cases — as our client Skyscanner discovered — reducing costs may have a bigger impact on the bottom line than launching a new product. Be prepared to field questions that can help your CEO decide whether it’s best to pursue aggressive development, scale back costs, or find a middle ground.
⇒ CFOs want to understand the impact the product will have on margins and unit economics.
Prepare beforehand
Before you talk to your CFO, prepare answers to the following questions:
- “Is the cost of this project too high? Or is it proportional to the success of our business and the revenue the product will bring in?”
- “Which costs are fixed, and which costs scale up when we add new customers or as users interact with our products?”
- “What is our cost per customer? How does that cost change when broken down by demographic, geography, product package, and other categories?”
- “Which features drive the biggest increases in spend? Are they worth it when we factor in the revenue they earn?”
- “What is the opportunity cost of optimization? If we chose to optimize X feature, how much money, time, and effort would we need to spend on that?”
These questions can serve as entry points into deeper conversations between leaders about big-picture moves like budget cuts and new product launches.
⇒ Board members like to see cloud cost data presented in a way that connects to growth, sustainability, and the overall resilience of the company.
They want to know where the business is heading over the long term and what the profit or loss potential could be for major course changes.
Back it up with data
The conversations you have with each executive will only be productive if you have the data to back up your claims.
No CFO or board member wants to hear your gut feeling about how a new product would be a game-changer or how a certain feature has become too bloated to continue. They want to see hard proof:
- What are you spending on each resource for the product or feature?
- Was the latest infrastructure change cheaper or more effective than the last one?
- What is the projected margin based on past data?
- Which customers are most profitable and why?
Answering these questions with default cost monitoring tools is difficult (or even impossible), which is why so many people don’t bother. Plenty of folks don’t even realize they can answer these questions if they have the right tools to break down cloud costs into granular detail for analysis.
If you’re struggling to dive into your company’s detailed cost data, reach out to CloudZero and let us show you how to achieve total cost transparency with little effort on your part.
Focus on business outcomes
To make the most compelling case, you’ll want to lead with the business outcomes you expect to see. Don’t get bogged down in technical metrics; your executives want to know how the move you’re suggesting will benefit the company in real-world terms.
For example, the CloudZero team used its own software to detect an anomaly: one of the file processing libraries they were using was soaking up memory and scaling inefficiently. By switching to a more efficient choice, the team saved $34,000 per month (over $400,000 per year!) and increased performance.
Similarly, CloudZero client Forcepoint approached the top five biggest contributors to cloud spend in the entire company and asked those engineers to explain their workflows. Forcepoint implemented CloudZero to show these engineers how to make more efficient build decisions and achieved a monumental improvement in efficiency over just two months.
These business outcomes — $400,000 in savings every year and a dramatically more efficient engineering team — are the kinds of business outcomes that make executives sit up and pay attention.
Forcepoint VP of Engineering Platforms and Security Research Anthony Leung sat with host Thalia Elie in a recent episode of FinOps In Bloom where he talked about how he drove this transformation at his company:
Sometimes, uncovering unit economics leads to discoveries that drive huge, impactful business outcomes you might never have thought possible.
When CleverTap began working with CloudZero, engineers noticed that a particular feature they had been offering practically for free was capable of bringing in $50,000 per day. This discovery helped them radically restructure pricing and packaging tiers.
INRIX, another CloudZero customer, used its newfound data to increase cost visibility and share accountability throughout the company. INRIX found that it could now put its cloud spend into words that made sense across teams, which helped engineering and finance find common ground to work together.
Your approach will be as unique as your company, but it’s always a good idea to return to these principles when you need to communicate about cloud costs: Increase visibility, share accountability, dig down into unit economics, and translate your findings into impactful business outcomes.
Present data visually
Consider presenting your unit cost data to the executive team on a regular basis.
This approach worked for Wise; team members took turns speaking with the CEO and CTO and informing them, for example, when a particular unit cost grew by 15%. This brought the executives into the loop and ensured that everyone at Wise was on the same page about cloud costs.
If you do take this approach, go armed with data visualizations that paint a powerful picture of the situation.
It’s one thing to hear how a certain engineering change has affected the bottom line. It’s quite another to see in full-color detail the individual resource costs graphed out in comparison to the revenue generated by the change.
In fact, setting up your cost data dashboard to display visualizations for potential savings (in addition to your real-time numbers) is a great way to show executives how certain choices could result in a variety of business outcomes.
Emphasize the ROI value
When in doubt, bust out the big gun: ROI.
There’s nothing quite as effective as demonstrating how much money your company stands to make for getting executives to agree with your idea.
Our client Skyscanner, for example, found enough savings to pay for a year’s subscription to CloudZero within the first two weeks of using the platform. NinjaCat’s team had a similar experience and was able to pay for CloudZero outright with the savings they found — and they still had some savings left over.
These examples help in particular if you’re trying to justify to executives why your company needs to invest in a cost management platform. If you already have your cost strategy under control, you can use the data to pitch further great ideas and back up your claims with ROI data.
In either case, the bottom line is the same: show executives the return that will come from their investment, and they’ll be more likely to hear you out.
As a helpful note, if you are in the midst of pitching a cloud cost platform like CloudZero to your C-Suite, consider bringing up the fact that 89% of professionals feel poor cost visibility affects their ability to perform their jobs well. Improving cost visibility translates directly to higher productivity, which in turn leads to better business outcomes.
Read more: How To Present ROI On Cloud Computing To The C-Suite
Be ready for pushback
At some point, you’re bound to encounter a roadblock. “We don’t have time to discuss cloud costs!” is a common example.
This is yet another point where bringing in hard data will help your case. Break out the data visualizations showing a positive ROI and run through a few potential scenarios from realistic to optimistic and see if you can pique your executives’ interest by putting your idea into tangible outcomes. (Dollar signs are very persuasive.)
Remind your executives that running through the cost data now — during the brainstorming phase of a project — is actually the most time- and cost-efficient way to plan.
Cost constraints can actually increase innovation and the speed of development, since it helps engineers frame business decisions from the outset with efficiency in mind. This is a polite way to remind your executives that you do in fact have time for this — and that taking the time to do it now will save even more time on the other end of the project.
If the idea you’re presenting has to do with optimizing costs, you may also hear objections like, “This is just an operational issue, not a board-level issue.” In that case, point toward the fact that 73% of SaaS company leaders feel cost optimization is actually best handled by the entire organization as a whole — including the board. To keep up with the vast majority of competing companies, your board will need to sit up and take notice.
It’s Ultimately About Cost Control
Understanding (and talking openly about) cost control can give you a head start against your competition.
- Drives sustainable growth
- Encourages creative and efficient solutions
- Enables your team to price and package services strategically
- Ensures that your company’s margins stay healthy
Consider this, too: Fewer than 40% of companies know at any given point what they’re spending on business metrics like costs per feature or costs per individual customer. As a result, your company will have a huge competitive advantage over rivals in your field if you dive into your unit costs now.
Everyone else will still be developing products based on semi-educated guesses that may or may not pay off, while your team will be a streamlined development machine that builds efficiently from day one.
PicPay now has over 600 engineers logging into CloudZero to check on costs every day, and Duolingo has made cost efficiency a “non-functional requirement.” Your company could be next on the list of organizations that have mastered cost control and can now focus on exciting innovations instead.
to see the cloud cost management platform in action, and let us know if you need help discussing cloud costs with your executives. We’re always happy to spread the word about cost visibility and optimization!
The Cloud Cost Playbook
The step-by-step guide to cost maturity
