Last week I spoke at BenchmarkIt’s SaaS Metrics Palooza on why most companies don’t measure cloud profitability — but how, with the right partner, they can both measure it and maximize it.
Here are a few key takeaways from my session:
- Cloud costs continue to accelerate. After hitting half a trillion dollars for the first time in 2023, global cloud spending is poised to bypass $675B this year and $824B next year. For SaaS companies, cloud spend is in the top three areas of overall spend.
- AI is only making things worse. AI is driving up cloud costs faster than expected, and companies are pouring more and more resources into powering their AI initiatives.
- Excess cloud costs destroy profit. For 73% of companies, cloud costs consume at least 6% of revenue, with 31% saying it consumes 11% or more.
- Companies don’t proactively manage cloud costs. The problem isn’t the cloud itself; it’s how companies manage (or fail to manage) the cloud. 61% of companies lack a formalized cloud cost management program, which leads to budget overruns, poor valuations, and bad decision making.
- Cloud unit economics (CUE) is the answer. Unit economics helps companies quantify their cloud efficiency in broad views and with extreme granularity. All SaaS companies should be measuring unit cost metrics: an ongoing calculation of what it costs to service your customers.
- Unit cost metrics put cloud spend in the context of a demand driver (a quantification of customer demand). This lets you calculate unit cost metrics like cost per daily active user (Miro), cost per transaction (Nubank), and cost per AI lead (Clari). Unit cost metrics show you where to focus cloud efficiency initiatives, and give investors/boards/shareholders confidence that you have a reliable path forward. Learn more in CloudZero’s comprehensive guide to Cloud Unit Economics.
Cloud Unit Economics Is Your Secret Weapon For Profitability In 2025
Putting a focus on cloud unit economics is going to be every SaaS company’s potential secret weapon for profitability heading into 2025. And, if done correctly, cloud cost management will have a positive impact on both the top and bottom lines for your business. This is an underutilized lever that can really transform your business, particularly if you have or plan to adopt AI.
I’ve embedded the recording and slides below.
The Cloud Cost Playbook
The step-by-step guide to cost maturity
