Predict Your Future (and Make Your CFO Happy)

Links:

• Unconventional Guide to AWS Cost Management:https://www.duckbillgroup.com/resources/unconventional-guide-to-aws-cost-management/

Transcript

Corey: This episode is sponsored in part by LaunchDarkly. Take a look at what it takes to get your code into production. I’m going to just guess that it’s awful because it’s always awful. No one loves their deployment process. What if launching new features didn’t require you to do a full-on code and possibly infrastructure deploy? What if you could test on a small subset of users and then roll it back immediately if results aren’t what you expect? LaunchDarkly does exactly this. To learn more, visit launchdarkly.com and tell them Corey sent you, and watch for the wince.

Pete: Hello, and welcome to the AWS Morning Brief: Fridays From the Field. I am Pete Cheslock.

Jesse: I’m Jesse DeRose.

Pete: We’re back again. And we’re here. We made it, Jesse.

Jesse: I was worried. This was a journey. Thank you, everybody, for coming on this journey with us.

Pete: It was quite an experience going through the Unconventional Guide to AWS Cost Savings. We’ve made it. I just can’t believe we’re here.

Jesse: Yeah.

Pete: So, what are we talking about today for the culmination of our magnum opus of cost savings optimizations?

Jesse: This is a fun one. And I know I keep saying that this is my favorite about everyone, but I have to admit that this one, this topic today probably is my absolute favorite. This one I get really nerdy over. Today, we’re talking about how to predict your future and make your CFO happy. No—spoiler alert—there are not any crystal balls involved in this one. There’s no stock market conversations.

This is talking about how you can use all of the different things that we’ve talked about throughout the course of this Unconventional Guide to really bring it all together into a couple ideas that will help you better understand your cloud costs, and really better understand your business, I think.

Pete: Yeah. All of the things we talked about really lead up to this one, which is the clients of ours that are the most mature, who are incredibly optimized in their Amazon usage, are the ones who have adopted a majority of these specific items. They all lead to this last one, that ability to predict your future usage based on something that’s happening internally, or if a salesperson comes to you and says, “Hey, we’re about to close this deal, but I need to discount our service.” People are going to start wanting to know well, what is the cheapest that you could sell your service for and still have a positive gross margin?

Jesse: Yeah. So, if you’ve done a lot of the things that we’ve talked about in the last couple episodes—I apologize, I know homework’s not the best for a podcast—but if you’ve had the opportunity to work on some of those things, you should have a ton of valuable insights into your spend. We’re talking about tagging, and showback models in particular, maybe even a chargeback model. But you can ultimately use all of this data to better understand what is your forecasted spend is going to look like with a new potential customer coming onto the platform? Or if you get into the topic that we’re going to talk about today, which is mostly unit economics, you can really understand how much can I discount my service and still make a profit, like Pete mentioned?

Pete: Yeah, I mean, imagine there’s a global pandemic that happens, and it causes your usage to spike by 500% within the course of a month. How did your spend change? Do you know where it changed? And did it change in ways that you were expecting it to? Like, my databases grew by a lot, and this other thing didn’t grow by very much.

Like, that would be expected. But also another thing that—a question that we actually like to ask a lot of our clients, if your sales just doubled overnight, okay would your spend change? Where are the places that are most expensive to operate your service? And again, this is kind of generic. I’ve worked in a lot of SaaS services, so I always think of sales, but just think of whether you’re using the cloud for a SaaS service that you provide and sell, like, B2C, things like that, or B2B, you still have users.

They might be internal users. Well, what if your users doubled overnight? What if half the company was using your internal service and now the whole company is? How does that change your usage?

Jesse: And it’s also important to think about not just your AWS usage, but all of the other services that you use that support your overall business model: things like monitoring and observability tools, logging vendors, maybe third-party sim tools. All of these are affecting your overall total infrastructure cost and are all part of this conversation. So, it’s really important to start thinking about those architecture diagrams. Remember, when we said, way, way back at the beginning of this conversation, to overlay costs on top of your architecture diagram, understanding that, understanding what parts of your product or what parts of your architecture are the most expensive will really help you understand what’s going to change?

Pete: Yeah, let’s say you’ve got a six-figure bill to Datadog or one of the big log management vendors out there, but inside of that bill, is that all just evenly spread across the whole business? What if your log vendor was—the entire spend was all by one service that some developer left the debug logging enabled for? You know, you’d want a way of understanding that maybe that spend was concentrated in maybe a non-production aspect of your account. Because then again, that wouldn’t grow, right? That wouldn’t affect your growth in your sales the same way as if maybe all of your services were equally sending logs of a certain volume over.

So, all of those extra services, they all add up, and we see it more and more, as more of our clients start adopting more than just Amazon services: they might be adopting a Snowflake, they might be adopting third-party services running databases running in other services, or EMR type workloads that are not on EMR, and they’re running on Qubole or things like that. There’s just a lot of these services that more and more people are consuming from that fall outside of just the AWS invoice.

Jesse: And this also gets back to not just architecture diagrams, but also tagging and showback models, cost visibility, really understanding where your spend is going. And this is fantastic to understand where your spend is going, but finance is probably going to want something a little bit more than this. It’s not just about how much are we spending, or where are we spending it, and maybe it’s not even a finance question. Maybe this is a sales conversation, assuming that you’re a SaaS company. Maybe this is, as Pete mentioned before, “Hey, we want to understand where...