Business leaders frequently need to make decisions that could impact the entire future of a company. Armed with pages of data and financial reports, many executives choose to slash costs, double efforts on certain products over others, or otherwise forge ahead with major decisions about cloud usage, spending, and overall business strategy.
Great choices could mean huge profits, but unwise choices could spell doom for the business as a whole.
Ultimately, it’s cost intelligence that forms the foundation on which business leaders should base major cloud decisions. And data is just one part of that overall intelligence.
Often, looking at data alone leaves important contextual information undiscovered. A situation may look a certain way in a report based solely on hard numbers, but adding in missing context could completely change the outcome.
Let’s say, for example, a particular product costs ten times as much as other products. It would be tempting to look at that data and conclude that the budget for that product needs to be severely restricted. However, if you’ve also been tracking the product’s cost per customer and the revenue it brings in, you could be surprised when you put the astronomical budget into context.
Perhaps that product has the lowest cost per customer of all your products, but the total cost is so high because it serves 90% of your customer base. If the product brings in fifteen times the revenue of every other product and supports the vast majority of your customers, slashing the budget could be a huge mistake.
Ultimately, it’s this bigger picture that makes it possible for business leaders to make informed decisions based on intelligence, not just data.
Let’s break down the difference between data, information, and intelligence to better understand what each contributes to the process of decision-making.
Using Data, Information, And Intelligence To Make Smarter Decisions In The Cloud
Data provides a foundation for future understanding
Data is crucial to a successful business.
Any SaaS company operating in the cloud must track items such as total development costs, costs per cloud service, revenue, total customers, and other metrics that allow executives to make sure the company is healthy and thriving.
However, raw data is only useful if a company has the ability to effectively analyze it. In the early days of a SaaS company’s cloud cost journey, for instance, it’s often hard to know whether spending aligns with product pricing.
This is because few companies track things like “cost per customer” and “revenue per customer segment” right out of the gate. Instead, they’re more likely to track total cost and total customers, and use rough division to find an estimate of costs per customer. This is better than nothing, but as we’ll see later, it isn’t ideal.
The finance department can provide a budget and engineers can provide a cost for each cloud service; total costs and revenue can be calculated based on that data. But if those things don’t line up as planned, it’s tough to see why or determine what could be done to fix the problem.
The company’s decision-makers might have a general feeling that something isn’t quite right, but without any context behind the raw spreadsheet data, that vague impression isn’t enough to guide major development and pricing decisions.
Information fills in some context
When a team goes over-budget or profit margin erodes, the finance department inevitably has some questions. Often, those questions pry at the edges of a deeper understanding than raw numbers could provide. In other words, the finance team wants information about why the company is spending a given amount, instead of just the data explaining how much is being spent and on what.
“Cost per customer,” “revenue per customer,” and other similar comparisons play a huge role in filling in critical information. If — instead of dividing total cost and total revenue by total customers — you can look at each individual customer and see how much each costs and earns on an individual basis, you can start to gain some visibility.
- Does one customer cost far more or less than the others?
- Is the revenue from that customer proportional, or has it scaled differently than expected?
- What might be causing that difference?
This information is valuable, but it can still only go so far. Knowing you’ve spent an extra $10,000 this month to support a large enterprise customer who only brings in an extra $5,000 in revenue per month tells you there’s a problem, but you won’t know how to fix it without breaking things down further.
Intelligence guides major business decisions
If data points are puzzle pieces, going through the information stage is like assembling all the edge pieces together to make a frame. Things are starting to make sense, and you often have a general understanding of what goes where, but the picture hasn’t been filled in enough yet to say anything for sure.
Information isn’t considered intelligence until it can be applied or acted upon.
By narrowing down and tracking more and more detailed metrics — for example, cost per customer per feature, or revenue per customer per country — you can begin to answer the truly tough questions:
- Which customer segments give us the best profit margin? And the worst?
- Are there any types of customers that cost more money than their revenue is worth?
- Could we optimize our system or business model to mitigate the impact of the high-cost customers?
- How do we attract more of the high-profit customers?
- Are we marketing our products correctly, or should we change tactics?
- Where should we put our dollars to ensure we get the best return on investment?
Once you can answer these questions with confidence, you can make educated decisions about your business model and strategies based on a firm foundation of cost intelligence.
Gather Data, Receive Valuable Information, And Build Real Cost Intelligence With CloudZero
Understanding why you should track the most granular metrics possible and actually doing it are two very different things.
Many companies lack the time and desire to tag every cloud transaction manually and produce complex reports from spreadsheets full of raw data.
That’s why CloudZero developed our cloud cost intelligence platform — to give companies an easy and convenient way to track customizable metrics and view detailed reports about how every business decision affects the bottom line.
CloudZero breaks down your costs per customer, per feature, per team, or anything else you’d like to measure, so you can have the strong foundation you need to make educated decisions in the cloud.
to see how it works!
The Cloud Cost Playbook
The step-by-step guide to cost maturity
