1.6% gross margin improvement: How a SaaS provider increased its profitability through cloud cost optimization

The client-Efficio team ran full-speed to identify and execute on pragmatic cloud infrastructure cost optimization opportunities with minimal engineering lift:

These technical and commercial optimizations alone drove a 24% reduction in cloud costs.

 

Sustainable cloud cost governance

Cloud cost optimization is not a one-and-done deal. To ensure ongoing value delivery, the client-Efficio team built a process to track, maintain, and improve cloud cost performance on a continuous basis.

1. Equipping teams to tackle anomalies and wastage

The first step was to get rid of anomalies and wastage. The most effective way to drive this was to make sure teams and individuals could quickly identify these issues and access clear, actionable insights.

To enable this, the client-Efficio team implemented cost accountability and tracking mechanisms for engineering teams. This was made possible by introducing a new tagging convention across the business and developing a comprehensive, tag-based three-year forecast. Refined tagging allows the right people to be targeted at the right time with targeted KPIs, bespoke analytics (incorporating allocated containerized spend), anomaly alerting, and other cost governance mechanisms.

Reorganizing the budget and forecast from a lump-sum view to a team-level one pushed engineering teams to take ownership of their spend.  With visibility and ownership in place, high-growth teams like AI were empowered to manage their products, pricing, and costs more effectively. 

2. Outcome-focused cost analytics

To increase profitability, SaaS providers need to be able to understand cost as a function of client activity.  Efficio collaborated with product, account management, and financial teams to marry cost data with product-level consumption and revenue data.

As a result, the business gained a view of margin per customer, region, product, and feature, making it possible to identify areas of reduced margin. This improved visibility enabled targeted and fast-action remediation, including increased customer education efforts, targeted product and engineering initiatives, and focused packaging and sales responses. It also meant the business could catch low product utilization at an early stage, triggering the customer engagement team to prevent churn.  

3. Iterative improvement mantra

Optimizing cloud costs is an iterative process. Initial rounds of cloud cost optimization deliver up to 60% of potential value; businesses must establish targeted monitoring and performance indicators to capitalize on the remaining opportunities. By linking revenue growth, shared services cost allocation models, and product-level usage metrics, our client is driving targeted KPIs across all business levels: account-level and product-level margin improvement, shared service unit cost reduction, and resource consumption optimization.