The Costly IT Pitfalls of The Real-World Example: Insights from Reducing 60% IT Costs of Nas Company

Introduction

In my last article, I shared how we reduced the monthly AWS cost from $27.8k to $7.5k and achieved a final monthly bill of $181.44. However, as Artem mentioned in the comments, cost-saving measures don't walk alone. In this article, I will continue to share more pitfalls that can lead to money wastage in IT subscriptions based on my experience in reducing Nas Company's IT costs by 60%.

Situation

Nas Company was founded in 2020 with a mission to build community products that bring people together. Over the past few years, we have successfully built communities time and time again. In 2022, we launched our new product for community builders — Nas.io.

I joined the company in October 2022 as the Head of Engineering. During my onboarding, I was informed that we had been grappling with increasing IT costs for quite some time. As part of my efforts to ensure the healthy growth of the company, managing the IT budget became one of my top priorities.

Complication

Over 60 active subscriptions:?The company has a large number of active subscriptions, most of which are geared toward company operations rather than technical usage. Understanding the intricacies of these subscriptions and finding cost-saving opportunities without impacting company operations requires thorough research.

Technical debt in the system:?Some waste is due to performance issues within the system. However, finding a solution to address these issues may not be easy, as supporting business growth remains our top priority. We need to solve performance issues quickly without impeding product iteration.

Long-term contracts:?Several subscriptions are bound by yearly or even three-year contracts, leaving us with limited options for optimization.

Resolution

Several reasons can lead to money wastage:

1. Inefficient utilization of cloud resources:?Cloud service providers typically charge based on resource usage. Failure to effectively manage and optimize cloud resources can result in financial waste.
2. Additional features or services:?Startups sometimes purchase more features or services than they actually need. This may include advanced functionalities, value-added services, or custom development, all of which contribute to unnecessary expenses.
3. Improper solution or configuration:?Blindly purchasing IT equipment, software, or services without conducting thorough market research and comparisons can result in excessive spending. Lack of proper understanding and configuration may lead to overpaying.
4. Unnecessary licenses and subscriptions:?Purchasing excessive or unnecessary licenses and subscriptions can result in financial waste. Carefully assessing actual needs and adapting to changes can help avoid buying more licenses than required or opting for expensive subscription plans.
5. Ineffective contract management:?Failure to review and manage IT vendor contracts properly can result in financial waste. Optimizing costs and renewing contracts can help avoid unnecessary high fees.

The following are real-world issues we have encountered:

Inefficient utilization of cloud resources

AWS

This has been detailed in my previous article.

MongoDB

The database faces similar resource utilization issues as AWS. When the system experiences performance issues and the team lacks a proper optimization strategy, the default solution is to blindly scale up the system. This becomes even more serious if the system experiences varying traffic during peak hours or promotion campaigns.

Additional features or services

MongoDB

We utilize MongoDB cloud service to save operating efforts, but it can introduce additional services that increase costs. Careful evaluation is required for backup strategies, analytics nodes, BI connectors, operation auditing, data transfer across regions, etc.

Postman

Postman offers powerful features in the paid version. However, we use the paid license solely to support collaboration among more than three users.

Our final solution is to migrate to ApiFox. It is even more powerful than Postman, and the cloud version is free to use!

Check it out: https://apifox.com/

Intercom Plugin

To connect Intercom with Jira, two solutions are available:

1. Free: Jira for tickets plugin by Intercom
2. Paid: Jira Cloud and Intercom for Jira by ToolsPlus

The free option already meets our requirements, but we mistakenly chose the paid one.

LastPass

LastPass offers free, premium, families, teams, and business plans. We use it simply to manage shared passwords. Currently, we use the business plan because we need to support more than 50 users. However, not all employees actively use it.

I'm still exploring a better alternative solution for this. Let me know if you have good practices.

Google Workspace

We unintentionally signed up for the Enterprise Plus tier, which much exceeds our needs. The reason behind this is one account requires a significant amount of Google Drive storage.

Improper solution or configuration

Redis

Redis cloud pricing is quite unreasonable. We paid $217 per month for 2.5 GB memory with some HA failover. However, we were told by the Redis support team that it was not production-ready and didn't support VPC peering. The production-ready solution costs a minimum of $600+ per month. I think Redis Cloud is not suitable for startup companies. We downgraded to the cheapest plan and will migrate to the built-in AWS solution.

Datadog

Setting up Datadog is simple. You only need to connect your AWS/MongoDB account, and it takes care of the rest. However, it automatically collects numerous metrics, which can result in shocking bills. Additionally, it offers functions such as API sanity checks, which may burn money if there is no clear reason to use them.

Now we have set up out own Prometheus and Grafana, which only cost $10 per month.

Zapier

We abused Zapier as our notification service. For example, whenever a new community is created on our platform, we would use Zapier to send a notification to Lark. As the platform grew in popularity, costs also increased. In fact, the same can be achieved by using Lark webhooks directly.

Klaviyo

Klaviyo is a powerful tool for reaching customers. However, it charges based on the number of profiles. If you have many profiles without regularly suppressing them, you will spend a lot of money regardless of whether you send emails to them or not.

Unnecessary licenses and subscriptions

These platforms charge based on the number of seats. If you don't manage your onboarding/offboarding process closely, you may end up paying for inactive users.

1. Notion
2. Figma
3. Calendly
4. GitHub
5. Tableau
6. Jira & Confluence
7. Postman
8. Contentful
9. Vercel
10. Zoom
11. LastPass

Ineffective contract management

Google Workspace

To secure a discount, we mistakenly signed a 3-year contract with an excessive number of licenses and an improper plan. Although we recognize the need to reduce seats and downgrade the plan, we are currently unable to make any changes. We are still actively seeking support from the Google team to resolve this issue.

Algolia

We used Algolia as a discovery service provider for a certain period before abandoning it. The contract is yearly, and we missed the requirement for a 60-day notice to cancel the auto-renewal. Consequently, we have to pay for another year. It's unfair, but it's part of their business model, and we have to comply.

BrowserStack

The team explored automation testing with TestProject, which required integration with BrowserStack. We signed up for a 1-year plan. However, TestProject terminated its service, which makes our BrowserStack usage inactive.

Currently, we have set up Cypress automation and Sorry-Cypress dashboard, which is a free open-source solution.

HackerRank

We were on the premium plan, which charges based on the number of admin users, screen users, interview users, and test attempts. The price could easily reach thousands per month, and it required a yearly contract. But how often does a startup hire engineers?

We have now transitioned to CoderPad without any contract. Interestingly, we managed to hire a front-end engineer during the 14-day free trial.

Conclusion

Cost-saving is an ongoing process. It's not simply about reducing usage but rather about working efficiently and smartly toward success. Fortunately, we are on the right track now. Exploring and resolving these issues has been interesting and fulfilling, but I am even more excited about the ongoing journey to solve more real-world problems in this position.

In the next article, I will share how I tackled one of the most critical issues — HIRING. See you in the next edition!

#tech #leadership #engineeringmanager #ITCostOptimization #StartupGrowth #CostSavingStrategies