Cost Optimization for Cloud Hyperscalers with ProsperOps’ Chris Cochran

Scott Kinka:

Well, hi friends and welcome to another episode of The Bridgecast. I’m thrilled to have Chris Cochran, the CEO of ProsperOps, as my guest today. You may not know who they are, but it’s a super cool company, and you’ll hear more about that over the next 30 minutes or so. But before we do that, let’s discuss the demographics and some intros. Chris, first off, how are you? Welcome to the show.

Chris Cochran: 

Hey Scott, it’s good to be with you. I am calling in from Austin, Texas. It’s in the mid-80s right now, and it is quickly heading toward the low-100s. So, you know, stay calm. That’s the goal here in Texas, right?

Scott Kinka:

Yeah, I was going to ask you that I’ve got a little history myself in Austin. I was one of the co-founders in the CTO of a company called EvolveIP that purchased a small, I would say, integrator help desk company in downtown Austin. So we, I’ve made that trek from eighth and Brazos to fifth. It was like, you know, four seconds, four minutes to get from your desk to a Margarita. It’s dangerous in downtown Austin. Where are you in Austin?

Chris Cochran: 

Just west of the UT campus, just north of downtown.

Scott Kinka: 

Gotcha, gotcha. The Austinites, I don’t know if it’s an Austinite. Are you still calling yourself Silicon Hills there?

Chris Cochran:

You know, I don’t think anybody from here really uses that term. I mean, I think we have an aspirational tech scene here in Austin, which gets a lot of great press. I think, you know, I think everybody on the ground here would say there’s a lot more to do, a lot more to go. And, you know, I don’t think we’re at a status where we’re using monikers to designate the region. We’d love to get there, but not so much.

Scott Kinka:

Hey, you guys will help them get there. Who else? Just refresh me. Who else? know Dell’s there. I believe Electronic Arts is there. Any other notables?

Chris Cochran: 

Yeah, you know, it’s interesting. Austin sort of has this barbell effect with businesses. You’ve got a lot of sort of very small, almost think about it as pre-product market fit startups. And then you have a lot of outposts from the larger companies, you know, the Googles, Facebook’s, it’s EAs, et cetera. A few companies are sort of in the middle, and people like Q2 are sort of in a couple hundred million dollar ARR. But, you know, obviously, I think that’s where Austin is trying to move to. How do we build more of those high-growth companies that are growing fast, including a couple hundred millionaires who are on their way to the next chapter? And I think that’s what everybody’s trying to do here in the region.

Scott Kinka:

Well, we’ll explore maybe a little bit of that about being a tech entrepreneur as we get towards the end of the episode because you clearly did that. I mean, you guys were a free revenue startup 1.6 years ago, also. And here you are. Tell us a little bit about it before we get into ProsperOps directly. Is there anything else about you personally, such as your background or family? What else can we know about you personally?

Chris Cochran: 

Yeah, no, pretty boring. Native Texan who has two kids, a wife, and a Great Dane. That’s about it. Go to Colorado for the summer because it’s too darn hot in Texas. There’s me in five seconds.

Scott Kinka: 

You it. And you also have a history at Rackspace. We’ve had some other Rackspace folks on the show. They’re a partner as well of Bridgepoint. You were there for eight.

Chris Cochran: 

Yeah, you know, really formative experience. Rackspace, at that moment in time, was sort of a pre-cloud post and sort of DIY data center. Rackspace really had its moment in the sun. I was very fortunate to be part of that. We were a couple hundred million dollars at that time, going to a couple billion. And what an amazing learning experience and really a great culture, about as good as I’ve ever seen. And certainly, Aspects of it are what we’re trying to replicate at Prosperops. Fanatical support all the way, for sure.

Scott Kinka: 

Yeah, fanatical support, right? That was the big thing back then. I mean, I did find that story interesting, and I think it’s a great parlay of what you’re doing at Prosper Ops and why you founded it. You know, you know, not to wax a static about your history with them, but I mean, I did; I felt like they were the first, one of the first people to go like, maybe you shouldn’t just be doing stuff for the sake of doing stuff. It’s gotta be supportable. It’s gotta be something that’s. You know, you are comfortable and can help a business grow. And you’re coming out of that culture. And from there, you sort of founded ProsperOp. So tell me the story: What sort of led you to do it? What was the market need you were trying to fill? And then just sort of give us a little bit of information about where you guys are.

Chris Cochran:

Yeah, great. Yeah. So, just the back stories actually involve Rackspace. Rackspace as the world sort of transitioned to the cloud, Rackspace understood that, saw that, and had its own cloud. And for many years, you know, lions competed against AWS in the hyena style with varying degrees of success. And I had been running one of the enterprise units, and, you know, we ultimately saw at the time that the market was shifting. Customers really valued the cloud at the time. Largely, it was AWS, the cloud products from folks like AWS, but the services from Rackspace. So, my last assignment there as the SVP was to set up a cloud services business at Rackspace around AWS and, ultimately, Google and Microsoft. We did that, and it ended up being a great business for Rackspace and all the cloud providers. I think we saw something that was pretty important. Rackspace’s ethos was sort of to elevate humans and arm them with the best tools and technology available. We called them Rackers and turned those Rackers loose to help customers do more in the cloud. And that approach is really good. I think one of the things that occurred to us and ultimately was part of what helped us figure out ProsperOps. While humans are absolutely critical to a lot of the cloud optimization cloud migration questions, there are certain use cases where automation and algorithms can do things that a human can’t do. And it’s not just sort of like trading hands for ones and zeros, but sophisticated algorithms can see things and solve problems in ways humans can’t, and you can get really great outcomes and do it faster. The idea with ProsperOps was to say, how do you end up using technology to deliver and solve lots of these problems where technology can do things that humans aren’t yet able to do? And that was a little bit of inspiration for ProsperOps.

The Role of Automation in Cloud Optimization

Scott Kinka: 

Got it. And it doesn’t, I mean, from my understanding of the business, it doesn’t replace the hands. It’s really optimizing the, largely on the financial side. I’ve heard you referred, and maybe this will make you cringe, or maybe you’ll agree to a FinTech solution. What’s one, you know, maybe you could say that that’s not an appropriate moniker. That’s fine. But if you do, you know, how do you differentiate the sort of spin-up side of hyper-scale management versus real kind of more along the lines of workload optimizations or the hands work? Tell me a little bit about that difference.

Chris Cochran:

Yeah. Yeah, look, I think if you just pull back to the broadest level, there are sort of two types of zip codes when it comes to cloud optimization. There is the financial side, or if you follow, there’s a Phelps Foundation, which is awesome. They’re sort of the trade association for this emerging discipline. They’ll call it rate optimization. But largely, what it’s code for is how you pay less for what you use. There’s a second zip code, which is probably what most people sort of think of by default, called usage or workload optimization. And that’s more about using fewer things. That’s an engineering initiative. The companies that are crushing FinOps are doing both of those things concurrently, and they’re doing them well. We started off focused on that pricing problem, that rate optimization problem, because, you know, what we knew is algorithms are actually the right way to solve that problem. You’ve got dynamic usage patterns, and you’re trying to figure out, at a given moment in time, if there is some type of change that could be made to allow the customer to pay less. That was a problem that was very much given to an algorithmic solution, and it very much complements the workload or usage optimization work that engineers still find absolutely critical. Their knowledge of the app and their understanding of how changes to the architecture are going to ultimately change or impact performance and scalability are still critical. We think broadly about FinOps. How do you think about FinOps and break it up into those dimensions where automation can give you acceleration and lift versus places where human insight is still critical? How do you use those in a way that gives you an additive effect? And so that’s sort of how ProsperOps thinks about the world. But the net of it is that if you go back ten years and prompt an engineering team about how much waste they thought was potentially out there in their cloud spend, they would tell you it would be about 30 % plus or minus. And if you asked them five years ago, they’d say it’s about 30%. And if you asked them one week ago, they’d say it’s about 30%. So, you know, our provocation is when you apply automation liberally to the things where it can go and make a difference. That’s part of the equation to start chipping into that 30 % waste problem. And that’s ultimately the company we’re trying to be.

Scott Kinka: 

Got it. And I think it would. It’s interesting if you ask that question, not about it. If you ask that question in the way you posed the differences, I wonder if you would still get the 30 % answer or meaning. You know, you made a differential between what you pay and how much you use, right? And I think you’re totally right when you got a crackerjack, AWS engineers. My app is clean. It performs perfectly. They’re only really dealing with you, the latter, not the former, right? In that regard, are they answering that question when they say 30 % really just thinking about app performance and usage more so than what they’re paying from a rate perspective?

Chris Cochran: 

Yeah, it’s a great question. I don’t know the answer. My suspicion is that it’s the all-in estimate that includes lots of different optimization tactics. And I think, you know, generally lots of the engineers and, we end up, you know, our buyers tend to be VP engineering, CTOs, directors of DevOps, et cetera. And, generally, they will be thinking, you know, it’s their default condition to think about architecture and engineering, etc. What we found, in general, was that the pricing element might be secondary in the equation, but what’s interesting about fixing pricing is that you can do it in a way where it creates a very low dependency on your engineering work. And so, you know, if you, if you can basically go and address pricing it can really move the needle on your cost savings. And it doesn’t create dependencies in your engineering activities. You can really free up lots of dollars today while you’re continuing to sort of work through your engineering agenda. And, know, we’ve not met many engineering teams that are just nailing it shut in 40 hours a week. So there’s way more work to be done than there is time to do it. And, our argument to a lot of these teams is, you know, how do you make sure you divide and conquer? You use technology where it can give you lift. You put your cycles against the things where your knowledge, expertise, et cetera, is critical. And that’s sort of the magic combination.

The Value of Rate Optimization in Cloud Cost Reduction

Scott Kinka: 

I get it. You know, get in conversations all the time about this, you know, the automagically, right? Like, you know, a crappy application is going to be crappy on the cloud or on a server running in your data center. Conversely, if it performs well locally, it’s going to perform well in the cloud from a usage perspective. Let’s just take that off to the side for one moment. If you’re listening to this episode and you feel like you’ve got your workloads entirely engineered perfectly, they should still listen, Right? That’s the headline so far because we’re going to get into that next point. When I first met your team, I had a healthy bit of skepticism. Mean, I’ve been working in the cloud for a long time. You know, I was super impressed with just how easy it is to begin inspecting the way that the performing workload is consuming. Assets and pricing and how quickly you can get to a potential savings to understand if the service is going to work. In fact, you have pricing models that are largely just based on savings, right? Can you speak directly? I think this really will bring it home for folks who are in this space. Like, how do you turn your stuff on? How do you find the number, and how quickly can they get an idea of whether there’s a rate optimization opportunity?

Chris Cochran:

Yeah, it’s a great question. When we started the company, there was really no metric that allowed you to understand how you were doing on a relative basis. We created a metric called Effective Savings Rate at the time, and it’s now used widely across some of the different cloud management platforms, et cetera. But really, what the metric does is help you understand your return on whatever price optimization strategy you’re running. And we’ve now benchmarked this across thousands of different data points and users, et cetera. And rate optimization or price optimization is actually something that’s very much given to a benchmark metric, which I know leadership loves. When you look at the data, what you would see is that across all cloud optimization teams, the 75th is generally getting about a 25 % discount off of the on-demand price from a cloud provider before they apply whatever private pricing or enterprise discounts they get from the cloud provider. So, 25 % off of the list. And when you are running a rate optimization strategy that’s backed by automation, you can drive that effective savings rate up to 50 plus. And so a part of what we do when we go and talk to a prospect is immediately trying to just get to the numbers so that, you, we’re not having a qualitative conversation on whether you’re doing well or whether you’re not doing well. Let’s just look at the data from the previous 12 months and calculate your effective savings rate. And then, if we overlay algorithms against your own data and calculate your effective savings rate, you can then say that translates into X incremental dollars per month or Y incremental dollars per year. So, we try to take the whole rate optimization conversation out of the subjective into a quantitative objective dimension about value. And we’ll always show you the incremental value net of our charge. So it really is trying to get down to sort of a no BS. Total cost of ownership, what you’re doing today, the results you’re getting, what a provider like Prosper Ops could do for you, net of our charge. And if we can’t do better than you economically, you probably shouldn’t be a customer. However, the whole point is to try to dimensionalize it in economic terms and value terms and help people arm themselves with relative benchmarking and trend data to make an educated decision. So that’s a big part of our go-to-market process. We try to do that literally after the first introductory meeting. How do we get to the data so that you can see the numbers and then either fish or cut bait?

Scott Kinka: 

The customer does not. I mean, what’s their responsibility in helping you get there? Do they just need access to your admin or their admin? Give that to you, and you can pop in what you need. Like, what’s their part of that?

Chris Cochran: 

Yeah, we have very limited permission. Meanwhile, all of our team are sort of ex-enterprise software and rack space-type folks. So, you know, we’ve developed very narrow permissions that look very specifically at what your trailing cost and usage data says. That’s all we don’t access servers. We don’t look at things we don’t have to leave a very narrow set of permissions. And so literally, If a prospect were to add that permission to their cloud environment after having this, know, DevSecOps team review it, we could literally be on a call the next day, looking at your trailing 12-month history, understanding what your effective savings rate trend looks like, where you are benchmarked against peers, and then more importantly, what would automated rate optimization or discount management incrementally do to understand the economic value. So, you know, 24 hours is largely an hour of someone’s time over a 24-hour period. It’s a totally low lift. And candidly, it’s sort of a no-regrets proposition for an hour of investment just to gut-check your rate optimization strategy. Are you in the 90th percentile? Are you in the 50th percentile? And what’s the value of being better? So that really is how we try to structure that very fast analysis to put it in economic terms.

Scott Kinka: 

So I’m going put you on the spot, Chris. You’ve been doing this for six years now. You’ve grown from, you know, pre -revenue idea into an established business, now on the channel, partners with Bridgepoint, we work together. You know, what’s the number normally look like? Like if you, if you go in without real thinking around the rate optimization side, what are customers typically seeing?

Chris Cochran: 

Yeah, I mean, just think about this. Let’s just say you had a million dollars of monthly usage. I’m using usage. Just think about that as a million dollars of consumption at the on-demand rate. Your prior strategy was to get you that 25 % effective savings rate. That would be basically a $ 250,000 of savings. But if you could take that effective savings rate up to 50%, That’s $500,000. So you pick up an extra $250,000 of monthly savings for every million dollars of usage. So just to give you a ballpark of the magnitude, and that’s, you know, and it varies by company. Now, some companies have highly volatile workloads where dynamic patterns change at any given moment. Some have less volatility, but the order of magnitude of doing rate optimization well is probably one of the easiest bang for the bucks that you, as an IT leader, can make sure you’ve deployed in terms of low technology dependency or low engineering dependency and speed to

Scott Kinka:

Well, that’s amazing. And I just love the story. You know, you saw a need, you were working, you know, I believe there were some jobs in between, but you had a lot of history at one of the stalwarts in the industry. Saw a problem that could be solved algorithmically and started your company. Let’s just talk. I gotta ask you how; tell me about that day where you were like, Hey, Hey honey. You know, we’re gonna, we’re just gonna do this. I’m going to take a crack at, mean, you’re in a market where certainly some, you know, there’s a propensity towards investing in early-stage businesses, and there’s an environment around that. Like, tell me about starting a company, and you know, what’s, what’s kind of the lesson if there is one to be shared around, you know, grabbing that idea and getting.

Chris Cochran: 

Well, ReachPoint’s founder-led still isn’t, is that, so your firm probably understands this just as well as everybody. You were a founding partner of a firm as well. You know, I think, you know, for me in particular, my two partners, Eric and Chris, who I had a chance to work with, you know, basically the work we did at Rackspace around building a cloud services business. Chris, Eric, and I started that business at Rackspace. And so, you, I had a lot of time, a large part of that eight years I was at Rackspace had interacted. And, you know, when you think about going into business with folks, you know, understanding how people operate in good times and bad times and, you know, knowing like when things go sideways, are they going to freak out? Are they going to be a steady hand? You know, we had the benefit of having experienced that together In a prior life. When it came time to start ProsperOps, Eric and Chris, our chief product officer and chief technology officer, respectively, were brilliant. And with this optimization work that we do, I think they are literally at the top in the world. You know, they’re in the top five people in the world. They would be in that zone. You can start with folks that you have pattern recognition with, who are absolute perfectionists, and then really craftsmen about what they build and how they think about architecting solutions for customers. It was sort of risky, but it really wasn’t that risky. I just had all the confidence. So, all of that just goes back to who you decide to partner up with. And I feel like that’s really made all the difference. All credit to those two folks who are just absolutely top-notch.

Scott Kinka: 

Amazing. So, you know, go on the journey, but go on the journey with people who you’re accustomed to standing next to, right, which is interesting.

Chris Cochran: 

Yeah, and you know, we also started, you know, we started our company when I was in my mid-40s. So we had been in the space, you know, we had basically a couple of decades of experience in the space, which I feel like, you know, gave you some context that if, know, you are a true entrepreneur out of the gate in your 20s, you know, hacking it out in your garage and, you know, you know, the jungle, you know, you wouldn’t have had but you know, we ended up going into a space where we had a lot of pattern recognition. And then a lot of trust amongst us, and that was useful.

Scott Kinka: 

I love the context that you just gave. I sometimes ask fun questions that I think are a great parlay for this. So I’m gonna do it. Even going into that with some experience, you now have the Monday morning quarterback opportunity to look back at what you’ve done over this timeframe. You know, what’s something that you know now that maybe you didn’t know even in your forties when you started this thing that could be a helpful tidbit of advice for maybe that entrepreneur in their mid-twenties who’s trying to figure it out? They jump two generations, know, or two decades of knowledge and think about their company the right way as we’re starting.

Chris Cochran: 

Yeah. Well, you as you and I were as part of before we started, you know, we just talked about everybody, you know, there’s no playbook, right? Everybody’s experiences is so I certainly wouldn’t want to suggest that we figured anything out. But, you know, I think the one thing that I look at and one of the many mistakes that I made was that, you know, we sort of effectively bootstrapped our company from the beginning, and we were always very focused on trying to become profitable versus sort following the venture capital route. And by the way, there’s no right or wrong answer. It’s just what we had done. And so, with every dollar we invested back in the business, we were like, man, we got to make it work. And so we were probably, my fault, way too conservative early on going out there and, you know, trying to actively grow the business, actively market the business, hire salespeople, and all those types of things. I think we waited a couple of years to hire our first seller, who’s still with us because we just wanted the playbook to be right. We wanted to basically do it right for prospects and, ultimately, customers. We wanted to make sure we sort of figured it out before we tried scaling the business because we’d seen so many friends and colleagues try to start scaling the business before they had a playbook. And sometimes things go sideways. And we didn’t want to do that. So we went to the other side of the pendulum and probably were way too conservative when, earlier on, we should have seen that there’s lots of value you can provide here. Go ahead and start investing because there is a lot there for customers. I think we should have hit that decision point faster than we did.

The Potential of AI in Solving Specific Problems

Scott Kinka: 

Sure. Yeah, Chris, and I think that, look, it’s funny. I’ve got a similar history. I’m in a founder-led business now after a PE investment. I started a company before that. There’s always, like, this is the crux of the argument, really, right? At the end of the day. I mean, I think a lot of it is based on what you are. Are you building a company to operate? Are you building a company to sell IP? Like, you guys could have easily just been. Let’s get the algorithm right and see if it can get bought by any number of people who already have optimization software versus going. We’re going to build this as a service provider to operate. Here you are six years later, operating your business. You know, I think that clarity of vision really, in a lot of ways, helps to dictate that balance, too. Like, I hear you on the conservative nature, and I’ve been in multiple businesses, including frankly, my last one where, like, man, we could have gone faster if we didn’t care so much about being profitable upfront. But now you look at companies, stalwarts in the industry who are struggling with valuations because they’re public. It got a bunch of people rich early, but now you’re operating the business. Hey, is this a model that actually churns profit? I don’t know. You know what I mean? Or creates profit. That’s a super interesting story. Let me ask you two more fun questions while we have a couple of minutes. I just need a shameless prediction of some kind from you. Does it need to be about the business? It doesn’t even need to be about tech. I just wanna look back on this episode in 12 to 18 months, or maybe the next time we’re on the show together, and look back on that shameless prediction and say if you were right. So you throw it out. Is there anything going on in the world right now? Probably stay away from all that.

Scott Kinka:

Yeah, maybe geopolitical items notwithstanding.

Chris Cochran: 

Exactly. Yeah, you know, it’s the biggest thing. Think, maybe it’s a derivative of your question. I am still trying to figure out, you know, the AI cure looking for some disease. You know, I am bearish today, but I am bullish tomorrow. And, you know, obviously, that’s one I’m interested in just as someone who’s trying to operate a business. You know, how do I use those capabilities, you know, augment what my team can do to do things we’re not doing today? And, obviously, I’ve just sort of been watching all of the discussions about it, and the solution is AI. What’s the problem, you know? And so my suspicion is we’re going to get through the hype cycle. Maybe that’s what’s happening in the market as we speak today. Ultimately, we will find some of those use cases where the right solution for a particular disease is to be named. And I’m waiting for that day. But I’m waiting with bated breath for that day.

Scott Kinka: 

I get you. Yeah. I mean, we’ve, it’s come up a bunch, in episodes over the last six months, you know, like it feels. Here, you are in an automation business around the cloud, right? We spend a ton of time at Bridgepoint, know, in our data center and cloud business of what you guys are, you know, becoming a more important part of the portfolio every day, helping people unwind in a situation that is very much like the one we’re talking about now in which is just like, you know, board level edicts of go get some, because, you know, our investors want to know what our AI strategy is. Like, we get it, but you’re right. We definitely are, you know, those who don’t understand history are sometimes doomed to, you know, to live it again. We may be there with AI. We may be doing cloud, early cloud all over again, right? And it’s a warning I throw out there. So we will look back on this, but I’m with you. And I like the way you said it.

Chris Cochran: 

Yeah. Yes. They’re like most predictors.

Scott Kinka: 

We’re looking for the disease. have the cure. We’re just trying to find the disease right now on some of this.

Chris Cochran: 

Yeah, it looked like most predictors. I’m probably wrong. You know, we’ll come back, and we can put the finger on it.

Scott Kinka: 

Well, others have shared their opinion on this show. So, I think it’s probably not a stretch. One last fun one. You know, we had a pandemic, we’ve had all kinds of crazy things. We giggled a minute ago about geopolitical issues. Let’s just say that the next, you know, great world-ending thing happens. Let’s know that Skynet finally descends, and we all realize that the robots are running the world, whatever that is. And you have one app that’s still working on your phone, only one. What would it be? What’s your choice of survival?

Chris Cochran:

Well, it’s a guilty pleasure. I mean, it’s got to be Twitter. It’s got to be X, I guess. It is my guilt just watching the meltdown from whatever constituency is melting down over whatever topic. I’d probably be passively watching that till the bitter end.

Scott Kinka: 

So it’s entertainment value, and while it may all not be accurate, the timeliness of potential news coming at you, know, New York just fell. You’d be good to see that on Twitter, right? As the next to set, right? You would know what’s going on. You’re probably not getting it on the major news stations at that point, right? Yeah, we’ve had all kinds of answers to that question. One day, we will put together an episode.

Chris Cochran: 

Yes. Yeah, what’s the best answer, by the way? I feel like I played that one down the middle; it’s actually what I would probably be doing, and it’s a waste of time. But what is the best answer you’ve heard so far?

Scott Kinka: 

Flashlight. You’re like, if nothing else works at that point, I better be able to have light in the evening. You know what? Not a bad idea. There’s lots around GPS, right? People think about it in different ways. You know, we’ve had some people amend their answers, like, I need my ESPN app. Wait a minute. We’re not playing games anymore at that point. Like that kind of thing, right? It’s an interesting question to ask, but Chris, this has been an incredibly informative 32 minutes. You know, for those who may be interested, obviously.

Chris Cochran: 

Yeah, yeah, yeah, yeah. That’s not a bad idea.

Scott Kinka: 

Your friendly neighbourhood BridgePoint advisor is available to help, you know, not just on the optimization cost side, the FinTech side, and working with Prosper Ops, but also in optimization, repatriation, and wherever that is. Chris, you guys have become a big part of our story. We’re really enjoying working with your team, and I’m looking forward to having you potentially again on the bridge in the future.

Chris Cochran: 

Yeah, our feelings are mutual, Scott. It’s great being on here. Appreciate it.

Scott Kinka: 

Fantastic. Great. Great talking to you today. You got it.