Basic FinOps within M&A-driven growth of a SaaS business

Introduction

Growth by merger & acquisition of a SaaS vendor comes with sufficient challenges as well as interesting opportunities. In this article we will look at the specifics of managing cloud costs in such an environment based on real-life experience.

Challenges

Decentralized cost management – blind spots. You cannot optimize what you don’t see.

Multiple billing entities – accounting overhead and invoice processing delays.

Manual reserved instances management – reduced coverage and utilization. 

Separate billing accounts – unnecessarily complex cost overview.

Separate pricing agreements – underutilized rate optimizations.

No established cloud cost hygiene – large amounts of money spent without ROI.

Short term actions

1. Tell Finance about your plans. Tell AWS users about your plans. Explain the goals.
2. Inform the AWS team to apply the highest available EDP discount from the group.
   1. If there is evident growth in the total AWS spend, consider renegotiation of the EDP.
   2. If there isn’t an EDP discount – start negotiating one.
3. Create an inventory of all AWS accounts, including ID, name, root e-mail, purpose and related business unit or cost center.
4. Export cost reports of the old organizations for archive purposes using the desired break downs
5. Merge accounts under the new main (billing) account:
   1. Move out each sub account from the old organization, invite into the new organization
   2. At last, invite former billing accounts into the new main (billing) account
6. Enable reservations sharing cross-accounts.
7. Amortized costs to be used everywhere for cost reporting to avoid incorrect allocation.
8. For international setups:
   1. Mind the VAT
   2. Mind which entity pays what amounts for tax purposes
   3. Avoid currency exchange
9. Provide the Finance team with access to the new billing account so they can download invoices. Explain billing entities.
10. Ensure the required Cost Allocation tags are active in the new billing account
11. Enable access to the billing data for the individual sub accounts
12. Update the contact information on each account to ensure valid e-mail addresses are used and the right legal addresses are used. Pay attention to the alternate contacts and update as needed.
13. Get the Technical Account Manager involved – they are responsible for your cost optimizations too. Look for credits, custom programmes.

Longer term actions

1. Consolidate tagging models. Keys should be company name agnostic.
2. Utilize Cost Categories for high-level cost classification. Retrofit the data.
3. Consolidate cost management tooling. Start simple, iterate.
4. Consolidate cost management rituals. Allocate cost center owners, inform, act.
   1. Anomaly detection and investigation
   2. Business unit profitability (cost vs revenue)
   3. Cloud cost hygiene and waste reduction
   4. Budgets and forecasts
5. Inventorize other COGS vendors’ costs. Look for consolidation opportunities.

Results

Effectively the above achieved:

• an increase of 2% of EDP discount across the accounts
• 5% total cost reduction after “waste disposal”
• 10x cost management tooling budget reduction
• 38% (and counting) effective savings rates (RIs) on compute across the board

Conclusion

Merging companies which have significant AWS usage can bring economies of scale by means of synergy of approach to cloud cost management. The majority of the ideas outlined above require smooth cross-functional collaboration rather than a complicated technical implementation.