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Prerequisites:

  1. You know how to split your bill to split Production from R&D costs.
  2. You choose a metric to follow your product usage: daily active users, total number of customers, total revenue.
  3. You choose a metric to follow your R&D costs: total number of engineers, time spend on the CI per repository.

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Output:

  • A clear report to share with your exec team.

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Steps:

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Step 1: Split your bill

Split your bill to split Production from R&D / marketplace purchases costs:a. If you have a correct cost labeling strategy, directly rely on your labelsb. Create a virtual dimension to correctly split the cost in two: Prod / Non Prod.
Ask yourself the question: If tomorrow I delete this cost line does the product still works ?: If the answer is yes, then it’s a Prod cost, else it’s a Non Prod cost.
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Step 2: Choose the metrics

Your businessPotential Metric to followWhat source to ingest it into Costory ?
B2C business varying on usageDaily active usersDatadog, Amplitude, BigQuery etc.
B2C business varying on usageNumber of email sentDatadog, BigQuery etc.
B2B / B2CTotal revenueGoogleSheet using Zapier for automation, BigQuery
B2B / B2CNumber of customersGoogleSheet using Zapier for automation / S3 export / BigQuery
R&D costsTotal number of engineersGoogleSheets / BigQuery
R&D costsTime spend on the CI per repositoryDataDog Ci visibility
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Step 3: Set targets !

Numbers alone are meaningless, is 0.1€ / active user per month a good level or can we do better ? You need to share with your exec team the targets you want to achieve and the reasons behind it. By how much can you reduce the marginal cost given N days of R&D work ?
  • Using advanced explorer, explore the variation of the marginal cost: does it make sense ? Is it aligned with the business objectives you want to follow ?
  • Set targets, min boundaries and max boundaries: At what marginal costs should we prioritize cost reduction work ? At what marginal costs should we prioritize cost growth work ?
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Step 3: Create a report

The report should absolutely contains:
  • The total cost of the production environment this month and for the past YTD.
  • The marginal cost of the production environment this month and for the past YTD based on the metric above.
The marginal cost value itself does not always mean much, what is important is the trend and the evolution of this marginal cost !
  • The total cost of the non production environment this month and for the past YTD.
  • The marginal cost of the non production environment this month and for the past YTD based on the metric above.
  • The total of credits received from the CSP for the current Year.
  • The savings achieved thanks to your work using reservations / savings plans.
  • If part of the cost is not attributed to a team / feature: show how much it is and its variation !
Never share a dashboard without context !
What additional information could you add to the report ?
  • The decomposition of the cost per team / feature if available.
  • If a cost reduction is achieved / a spike happened: the why behind it !
  • If you’re using Costory: you can choose a set of events to include in the report: this will help you to understand the why behind the cost changes.