> A billion dollar private software company told us that their public cloud spend amounted to 81% of COR, and that “cloud spend ranging from 75 to 80% of cost of revenue was common among software companies”
I find that quite hard to believe.
I mean, I can see that if you were selling cloud backup services and stored customer data on S3, I can understand S3 costs being a big part of your budget.
But for the vast majority of businesses - I'd expect a supermarket selling a $50 basket of groceries to spend maybe $0.01 on database storage and CPU and whatnot.
I don't see that a company like Slack, which has revenue of about $8.75/user/month would need to spend anything like that much on cloud costs.
I've worked at a few SaaS startups that did not price their service correctly and did not want to pay up front for reserved instances. The cloud costs were very high. 80% of revenue was about right.
A chart on the article said that Slack spends an estimated 41% of revenue on cloud costs, calculated using their financials by this author who claims they were being conservative but I don't know how to estimate such a thing myself.
This is high, unless you are a platform as a service, effectively selling the compute on to customers. Add on the free tiers subsidy (for growth!) and it make sense then.
If you are selling just software and 80% of that is on the cloud you are undercharging or wasting crazy resources.
I find that quite hard to believe.
I mean, I can see that if you were selling cloud backup services and stored customer data on S3, I can understand S3 costs being a big part of your budget.
But for the vast majority of businesses - I'd expect a supermarket selling a $50 basket of groceries to spend maybe $0.01 on database storage and CPU and whatnot.
I don't see that a company like Slack, which has revenue of about $8.75/user/month would need to spend anything like that much on cloud costs.