How Drift Improved Their COGS by $2.4 Million

The Challenge

Since the company’s inception, Drift’s engineering team has been consistently bringing exciting new features to market. Often, building these features—especially the ones that use machine learning to respond to live website activity—results in surging and unpredictable AWS bills.

While the DevOps team had implemented some manual tagging processes in AWS to try to understand these costs in more detail, it was difficult to attribute costs to specific products or features. As a result, the Drift team built a cross-functional task force called “COGS Hunters” to tackle this challenge head-on.

Understanding COGS to put cost in context

For the Drift team, understanding Cost of Goods Sold (COGS) was more about supporting the customer than internal budgeting.

The highly differentiated product features and user experience that have propelled Drift to category leader hinge on the ability to ingest large amounts of data and provide tailored conversations to the end user—the type of functionality that can quickly run up a cloud bill.

However, encouraging users to frequently utilize these differentiated features, as well as making many of them available in their free tier, is a key part of Drift’s business strategy.

They knew that in order to continue delivering value to their customers, while maintaining healthy profit margins, they needed to better understand how exactly their cloud investment was contributing to different parts of their product.

Freedom Dumlao, Drift’s chief architect, spearheaded an initiative called COGS Hunters with four other team members. The group’s goal was to pursue projects that reduce AWS spending for the organization, starting with analyzing the cost of NAT Gateway and one of their top free products.

The team was spending roughly 80% of their time on cost reduction, without gaining deep enough insight into how costs were aligning with their business initiatives.

Often, their finance team would look into AWS bills retroactively, meaning that the engineering team spent even more time researching and justifying costs after they’d already occurred.

The Solution

The team adopted CloudZero to help them proactively attribute AWS costs to specific products, and improve communication with the finance team. Using CloudZero, the engineering team could more confidently deliver products, without having to worry about unpredictable AWS surges.

In order to understand their COGS, the Drift team needed to first organize their costs to align with their business—a process which had previously been challenging because of inconsistent AWS tagging.

Using machine learning, the CloudZero platform doubled the amount of tagged resources, then automatically grouped costs into products and features, without requiring any additional work from their engineering team.

Now, using CloudZero, the Drift engineering team has gained deep visibility into the cost of specific features and how those costs are changing over time.

“With CloudZero, we can see what we’re spending per individual feature and product easier than within the AWS billing console. We were trying to get this information with raw tags in AWS, but it was never accurate,” said Dumlao.

“It’s empowering to share that data with the individual product owners, so their teams can take ownership of their costs.”

One of their immediate discoveries was that their most-used and highly differentiated features was also their most costly—and they were including it in their free tier. Rather than changing that strategy and making customers pay for their usage, the team found specific areas where they could reduce AWS costs without impacting the functionality for the customer and have successfully reduced the cost by 80%.

The Drift engineering team has also significantly reduced the amount of manual effort required to surface cost insight, while giving their developers better visibility into the cost of the products they build.

“We used to have to set up a ton of alert thresholds in AWS. We’d have hundreds of alarms going off and only a portion were valuable. CloudZero’s alerts have been fantastic. They just show me when something important has changed and tell me where to look to understand what happened. We’re able to be much more responsive.”

CloudZero automatically sends weekly and monthly updates to slack channels for each feature team, which helps them stay on top of how their costs are trending.

In addition, CloudZero helped to transform how the Drift engineering team communicates with finance about AWS costs.

“With CloudZero, we’re getting a more frequent snapshot of how we’re doing in terms of costs, so we can forecast costs a lot quicker. Now instead of surprising our team, we can set expectations ahead of time and have conversations about the cost tradeoffs we’re making.”

Overall, this newfound level of cost awareness has helped Drift to deliver more value to their customers.

“Our job as an engineering team is to make our customers more successful. What CloudZero helps us to do is figure out how we can continue to encourage our customers to use more of our expensive features, while we make those features more affordable to operate.”

The Results

Mapping AWS costs to specific products has been a game-changer for Drift. From an engineering management perspective, the amortization features for real cost versus billed cost helped the team control spend.

With CloudZero, the Drift team expects that it can reduce its monthly AWS costs enough to continue to add engineering headcount to the team. In addition, they can work on improving their top features and driving their product roadmap decisions, without passing along unnecessary costs to the customer.

$200,000 monthly savings

The team at Drift was able to quickly identify expensive technical debt and prioritize areas for reduction. They are currently on track to save nearly $3 million in cloud costs.

Reduced the cost of top product feature by 80%

CloudZero helped Drift quickly discover the feature that provides custom messages to site visitors was hurting their margins the most, especially as customer utilization trended up. Plus, they were including it in their free tier.

Created trustworthy relationship with finance

Before CloudZero, Freedom said they had to sometimes have tough conversations about why the bill was higher than expected. Today, they can stay on top of their costs and set expectations early, so finance can prepare. They also are able to have more strategic conversations in terms of margins and COGS, rather than just whether the bill is up or down.

Gained the ability to make strategic product and packaging decisions

Understanding their COGS gave Drift the ability to make better product strategy decisions. Rather than choose between discouraging utilization or charging for it, they reduced the cost of that feature by 80% — so they can now keep this highly differentiated feature in their free tier.

Reallocated engineering time from cost management to building products

CloudZero significantly decreased the amount of manual effort required to manage and report on costs. Instead of pulling together inexact metrics in Excel or dashboards, CloudZero has a continuous view and deep understanding of their COGS.