Wednesday, March 13, 2024

The Secret Weapon for Cloud Cost Reduction? It's in Your Code

Let's start with a broken record I've been playing over the past decade or so, since "Cloud" became a thing;

Lifting and shifting a poorly designed codebase or system directly onto the cloud can significantly inflate cloud costs. Your "Platform Engineering" can't save you from that. Only "Software Engineering" can.

Here's why:

  • Inefficient resource allocation: Cloud resources are billed based on usage. Lifting an unoptimized codebase onto the cloud replicates its inefficiencies, leading to excessive resource consumption (CPU, memory, storage) and higher bills.

  • Lack of cloud-native features: Cloud platforms offer features like auto-scaling and serverless functions that optimize resource allocation based on demand. A poorly architected system might not leverage these features, resulting in unnecessary resource usage and ongoing costs.

  • Hidden costs: Cloud services often have additional charges for data transfer, egress fees, and API calls. Lifting an inefficient system amplifies these costs as it likely transfers and processes excessive data.

Overall, migrating a poorly designed system to the cloud without addressing its underlying issues replicates its inefficiencies in the cloud environment, leading to inflated cloud expenditures. Investing in platform engineering will never solve this problem. Because platform engineering and software engineering focus on different aspects. 

You can automate your deployments all you want. It just increases the speed you are deploying inefficient code to production. Your deployment speed will be 10x. So will be your cloud bill. And your cloud bill will not stop 10x-ing.

In today's cloud-driven world, understanding how your code impacts your bottom line is crucial. My blog post here was inspired by Erik Peterson's recent talk, Million Dollar Lines of Code: an Engineering Perspective on Cloud Cost Optimization. His talk dives into the importance of cloud cost optimization and explores a concept called the Cloud Efficiency Rate (CER) to help you make informed decisions.


The High Cost of Inefficiency

Erik Peterson, a cloud engineer with extensive experience, highlights several examples of seemingly small coding choices that resulted in significant financial repercussions. These situations emphasize that every line of code carries an associated cost, and neglecting optimization can lead to substantial financial burdens.


Thinking Beyond the Cloud

As it turns out, as compute costs became cheaper over the past few decades, cost-efficiency has ceased to be a primary concern for software engineers. However, the cloud introduces a pay-as-you-go model, for Compute and other resources supporting your application  such as Storage and Network Bandwidth making it essential to be mindful of resource utilization.


Introducing the Cloud Efficiency Rate (CER)

Peterson proposes the CER as a metric to gauge how effectively your cloud resources are being used. It's a simple formula:

    CER = (Revenue - Cloud Costs) / Revenue


Interpreting the CER:

  • 80%: Ideal target, indicating a healthy balance between revenue and cloud expenditure.
  • Negative (R&D phase): Acceptable during the initial development stage.
  • 0-25% (MVP): Focus on achieving product-market fit.
  • 25-50% (Growth): Optimize as your product gains traction.
  • 50-80% (Scaling): Demonstrate a path to healthy profit margins.


CER for Non-Profits and Government Agencies

For non-profit organizations, Peterson suggests using their budget or fundraising goals as a substitute for revenue in the CER calculation. Government entities, aiming to fully utilize their allocated budget, might need to reverse the equation to target their budget amount precisely.


Key Takeaways:

  • Every line of code you write represents a buying decision that impacts your organization's finances.
  • Cloud cost optimization is essential in today's pay-as-you-go cloud environment.
  • The CER provides a valuable metric for measuring cloud resource efficiency.
  • Continuously monitor and optimize your cloud usage to avoid hidden costs.


Call to Action:

  • Integrate cost awareness into your software development process.
  • Utilize the CER to set and track your cloud efficiency goals.
  • Be mindful of the long-term implications of your coding decisions.


By following these principles, you can make informed choices when working with cloud resources and ensure your organization gets the most value out of its investment.