CloudZero is the leader in proactive cloud cost efficiency. Pulse 2.0 interviewed CloudZero CEO Phil Pergola to learn more about the company.
Phil Pergola’s Background
What is Phil Pergola’s background? Pergola said:
“Before my role as CloudZero’s CEO, I was VP of Customer Success at VMware and CloudHealth Technologies, where I helped organizations optimize cloud computing and costs. Previously, I held leadership roles at EnerNOC, BMC Software, and BladeLogic, focusing across customer success, sales engineering and product management. My extensive B2B experience using technology to drive positive business outcomes for customers has been instrumental in shaping the leader I am today.”
Approach To Cloud Cost Management
Can you explain CloudZero’s unique approach to cloud cost management? Pergola shared:
“We give organizations complete and granular visibility into what drives their cloud spending – both at a business and technical level. Our platform ingests 100% of cloud, PaaS, and SaaS spend and normalizes it into a single, simplified view. Unlike other platforms that rely on manual tagging, CloudZero takes a code-driven approach to cost allocation, intelligently organizing customers’ cloud costs by whatever business dimensions are most important to them. That could include cost per customer, feature, product, team, microservice, or any business-relevant lens. Finally, CloudZero combines cost data and telemetry data to calculate unit cost metrics — metrics like cost per workout, cost per delivery, or cost per shipment — that quantify the overall business value driven by the company’s cloud spending. This level of explorable granular data assists organizations in optimizing their cloud investments.”
Key Findings
What are the key findings from CloudZero’s recent report on cloud efficiency? Pergola explained:
“We recently surveyed hundreds of cloud operations and finance professionals to define challenges, trends, and opportunities across the industry. This report, titled How Cloud Efficient Are Software Companies In 2024? revealed that many companies are leaving substantial cloud savings on the table. Some key findings of the survey are:
— 61% of companies don’t have a formal cloud cost management (CCM) program, and only 9% have complete or near-complete cost allocation
— Organizations with formal CCM programs can reduce cloud costs by 30% in the first year alone
— Around three-quarters of respondents said their cloud expenses account for at least 20% of their cost of goods sold (COGS), and more than a quarter (28%) said cloud costs account for more than half of their COGS”
Cloud Efficiency Rate
What is the Cloud Efficiency Rate? Pergola replied:
“Along with our recent survey, we introduced the first-ever industry-wide benchmark designed to measure and improve cloud cost efficiency, the Cloud Efficiency Rate (CER), calculated thus: (Revenue – Cloud Costs) / Revenue. This tool provides SaaS organizations with a concrete cloud spend target that enables leaders to analyze how their efficiency stacks up against industry peers. A high CER signifies efficient cloud spending, which is crucial in maintaining healthy profit margins. Our report shows that the top-quartile CER is 92%, meaning the most efficient companies send just $0.08 of every revenue dollar to cloud providers. Leaders can access the CER tool on CloudZero’s website to gain insights into how much of their revenue is allocated to cloud costs and benchmark their performance against others in the industry, driving more informed decisions for cost optimization and profitability.”
Biggest Challenges
What are the biggest challenges in cloud cost management today? Pergola pointed out:
“IaaS and PaaS spend is expected to reach more than $1.1 trillion dollars by 2030 amid the rollout of generative AI. With it estimated that about 32% of total cloud spend is considered waste ($352 billion), it is critical to get this problem under control.”
“The biggest challenges in cloud cost management are getting granular visibility into cloud spending and then connecting that visibility to important business metrics. Many companies struggle to understand what drives their costs and how to optimize them effectively. The dynamic nature of cloud environments adds another layer of difficulty. Costs can fluctuate rapidly, making it essential for businesses to have real-time visibility and control over their cloud expenses.”
Supporting Engineering Teams
How does CloudZero support engineering teams in managing cloud costs? Pergola noted:
“CloudZero takes an engineering-led approach to cloud cost optimization, providing real-time insights that enable engineers to build efficient applications from the start. Our platform’s AI-powered anomaly detection identifies inefficiencies, allowing the teams to take immediate corrective actions. Engineers can confidently make cost-efficient decisions, knowing they have the tools and data to manage fixed and variable costs proactively.”
“We also foster collaboration between engineering and finance teams for increased visibility. Our platform provides both teams with the essential data: Engineers receive real-time cost insights to optimize their usage, while finance teams receive automated cost analysis reports. This unified approach ensures that engineering teams can proactively manage cloud spend, while finance teams obtain a holistic view for a more effective optimization strategy.”
Managing Complexities Of AI-Driven Cloud Spending
How does CloudZero help companies manage the complexity of AI-driven cloud spending? Pergola concluded:
“AI-driven applications require substantial cloud resources, making effective cloud cost management even more critical. AI costs also tend to come in as a big block of shared spending, and CloudZero CostFormation® (our proprietary optimization engine) particularly excels in allocating shared costs. We help companies manage the complexity of AI-driven cloud spending by providing cost visibility into that cloud spend and allocating it to the right team, product, or feature. Our platform enables businesses to monitor the real-time cost impact of their AI initiatives, helping them optimize cloud usage and control spending.”
“Using AI, CloudZero provides predictive insights from historical data, enabling companies to forecast resource needs accurately and avoid overspending. Our anomaly detection tools quickly identify irregular spending patterns, allowing teams to act immediately. Additionally, our automated cost-saving recommendations offer tailored suggestions for cost optimization, such as pinpointing underutilized resources and recommending more cost-effective service options.”
