 Hey, everyone. Welcome to the Cube's presentation of the AWS Startup Showcase, Analytics and Cost Optimization. This is season three, episode two of the ongoing series that covers exciting startups from the AWS ecosystem. I'm your host, Lisa Martin. Today excited to be joined by Eric Carlin, the co-founder and chief product officer at ProsperOps. Eric and I are going to be talking about how generative AI is being applied to the FinOps space and why with the current macroeconomic environment we're all living in, cost optimization is as important as it's ever been. Eric, thanks so much for joining us. Great to have you. Hi, Lisa. I've watched the Cube anytime, so it's a pleasure to be on. All right. Yeah, after this, you're going to be a Cube alumni. Tell the audience a little bit about ProsperOps, your vision, your mission. What was the catalyst to co-found the company? Yeah, so the three co-founders of ProsperOps all used to work at Rackspace, which is a very large pre-cloud managed hosting company. In our journey there, we ended up partnering with AWS and the three co-founders started that business at AWS that is now one of the largest MSP resellers in the world, but we helped customers manage a number of things on AWS, cost being one of them. We were combining current tooling, which was kind of recommendation and visibility based with human experts. We were seeing that the cloud was just so complex, so dynamic, that the outcomes that were being received in terms of cost optimization were very suboptimal. We took a step back and said there has to be a better way. It was sort of the dawn of AI. This was circa 2018. How do you take and make this a 100% computer science problem? How do you watch environments in real time? How do you basically optimize them to where you can remove the waste from the environment and then reduce customer's bills so they're just paying for exactly what they need? Some of the catalyst cloud complexity, the solutions out there were just suboptimal. The three of you from Rackspace saw this opportunity. Talk to us about the ProsperOps platform that you've built and what you're enabling customers and AWS environments to be able to achieve. So unlike the V1 products, the cloud management platform products that launched, they were primarily about visibility. You could see what you're spending on, but the activity to actually optimize is still work that is placed on the human. And so what's different about ProsperOps is that we are not a visibility and recommendation tool. We are an AI-enabled automation platform that delivers outcomes for customers. So you configure some settings in our platform. We point it at your environment and that's it. The human is out of the process. Our platform is watching and doing all of the work to effectively optimize your environment. And at the end of the day, we effectively write our customers a check every month. Oh, I like that. Sign me up. You said basically an AI-enabled automation platform that delivers outcomes. We're going to be talking about some of those outcomes of customers. But one of the things I had the chance to do about I think two weeks ago is I sat down with your CEO, Chris Cochran. One of the things he said is, in customer conversations, if you think rate optimization is a page two issue, you might want to think again. So talk to us about who you're talking to within customer organizations. I think CFO, C-suite. Has this cost optimization risen up that stack? Yeah. So if you think about an average company's cost, you generally have people and their cloud bill are generally number one and number two. And you can see from all of the recent layoffs, like how companies are basically trying to reduce cost in the people area, the exact same thing is absolutely happening in cloud as well. There's no question about it. And so generally we're interfacing with an engineering leader of some sort. Could be a VP of engineering, director of engineering. More and more we're having conversations with CTOs. And so you can see this issue just becoming more and more relevant given the current macro economic environment. So when you're having chats with the leaders of engineering, the VP folks, the CTOs, what are some of the challenges that they're coming to you specifically to address? I mean we talked about complexity, but there's got to be a number of challenges that they're saying. Prosperous. Help us knock these off the table. Yeah. So the way I like to think about it is that our mission and the fundamental problem is waste. And the cloud is very powerful, right? You have programmatic access to all of these resources, but that gives you a lot of agility and a lot of power. But it also means that you can create things that you don't necessarily need or want. And it makes it, the dynamism makes it very difficult to optimize. And so our mission of ProsperOps is really to attack waste in the public cloud. And it's not that what you want to do in the cloud may actually be expensive. And so it's not about reducing cost at all costs. It's about really removing waste so that exactly what you need, you pay an optimal price for it, kind of no more, no less. Attacking waste, very interesting, but also very needed. One of the things that Chris and I talked about, and I want to talk to you about this, is that ProsperOps uses a Phenops metric called Effective Savings Rate, or ESR. What is that? Why is it so important for organizations, those CTOs, those leaders of engineering, to get their heads around it? Yeah. So one more comment on waste, and then I'll answer that question. Just to quantify that, if you think about AWS, the run rate of AWS and Andy Jazz, his last shareholder letter, he said it was about $80 billion. And it's been estimated that about 30% of all cloud spend is waste. And so if you think about that, that's like a $24 billion problem where this is a huge opportunity for customers to go and optimize in a way that they can sort of reclaim that spend. So that just kind of gives you an order of magnitude when we talk about attacking waste, what we're talking about. That's just AWS that doesn't include the other clouds. So speaking of sort of quantifying things, that's really what Effective Savings Rate is about. So what's interesting is if you think about this space and the magnitude of what we've been talking about, about the number one or number two spend, the scale of waste that we're talking about, when we started ProsperOps, we realized if you look at other industries, like investing as an example, if you take action, you invest money, you have a way to quantifiably measure the outcome or the effectiveness of that investment. Generally, that's like an ROI type metric, like I put in this much money, I made this much money back. It's interesting that in the world of cloud, there actually isn't any metric that helps you understand what you're effectively saving. There are other sorts of metrics that we refer to as input metrics, things like utilization and coverage on these rate optimization commit discount instruments. But there's nothing that says at the end of the day, I saved 50% off of what I would have otherwise spent. And so we realized if we're going to build an automated solution, you don't want an automated solution that's inferior, right? Just because you'd rather have a human involved, you can get a better outcome, you need a way to actually quantify and measure what you're effectively saving so that you know whether the optimization that you're employing is better or worse. And so nothing existed. And so we created this metric, which we call the effective savings rate. And we're actually actively working with the FinOps Foundation, which is a Linux foundation, sort of sub body, very focused on FinOps best practices and standards. And we're working with them to help make this a standard KPI that everybody measures in cloud. Nice. That would be nice to have that as a standard KPI. I do want to get your description, effective savings or ESR. You did a great job of explaining, hey, there was no metric out there. You're obviously working to standardize that. How does it relate to ROI? Because we talk about ROI so often. How are those two? I imagine there's a relation. It is the ROI of cloud savings. You can think about it that way. So it's very simple in concept. It's basically how much did you save over what you would have otherwise spent? And that is your savings rate. If you want to target and you would have spent a dollar and you only spent 80 cents, then you saved 20%. And so it's very complex in terms of how you actually implement that and sort of calculate it. But the concept is very, very simple. And it basically helps you understand, at the end of the day, how am I doing in my optimization efforts? And the cool thing about ESR too is that it's benchmarkable. Right? There was no metric that allowed companies to say, well, I'm saving this much. Is that good or is that bad? We've benchmarked thousands of data points now. And so when we go and work with customers, we can understand where they sit, relatively speaking, to the industry. And then our platform takes them to the 98th percentile of outcomes based on the data. So they get that benchmark to see where they are in relation and what they can do to turn the dials to really improve. So one of the things that Chris and I talked about is, you know, prosperous at the end of the day, we want customers to be able to use the cloud the way that it was meant to be used. So with that said, some of the key benefits, obviously we talked about effective savings, right? But talk to me about some of the key benefits when you're in prospective customer conversations that you say, this is what we're getting outcomes wise delivered to you. Yeah. Well, obviously the first benefit is more money back in your budget, right? So I said that we effectively, we charge a percent of the savings that we generate. And so the overall savings that we create more than pays for our fee, and the rest flows back to your budget. And so at the end of the day, the first benefit is we write you a check. So if your budget is constrained, you're looking for more, you know, more money in your budget. We're not a vendor that consumes budget. We're actually a vendor that puts money back in your budget. So in that sense, we're a very atypical, you know, vendor. The second benefit that we create for customers is what Chris is talking about, this ability to use the cloud as it was intended. And so the cloud in many ways is very elastic, right? You can spin stuff up and spin stuff down. But in the world of rate optimization, you're making commitments to these cloud providers in exchange for a discount. And those commitments are very inelastic. And so you have this trade that typically is made where you say, well, I want to use the cloud elastically, but it's too much. So I've got to make these commitments, which now put me back in a very inelastic proposition. What our platform can do is actually make the rate optimization universe very elastic again, because we're constantly watching and we're mirroring your environment in real time and generating discounts on your behalf. And so we take what is normally an inelastic overlay in order to get savings and we make it elastic again, which just means you're back to using the cloud however you want. If you want to spin stuff up, spin stuff down, however you want to use the cloud, go for it. Our platform is watching always in real time and making the necessary adjustments, which is not sort of the native experience that you get, you know, out of the box. So I'm hearing differentiation there. And I want to kind of unpack that a bit. We know when we think of this space, cost optimization and cloud automation, AI, those are terms that are used heavily in this space. How would you differentiate the Prosperops automation and AI compared to other solutions that are aimed at trying to help folks optimize costs? Yeah, well, that's a great question. The first thing I'll talk about is the fact that sadly, it's been our experience that a lot of vendors in the space actually aren't using AI and automation. It's sort of like in the early days of cloud, there was a lot of cloud washing where people were sort of using a term cloud but weren't really cloud. I sort of see that happening in this space now. I call it AI washing, right? Where there's a lot of talk about AI and automation, but in reality behind the scenes, that's not actually the case. There's a lot of, you know, we've seen instances even of like engine rooms of people in the background that are sort of doing work. So I think the first thing is for anybody, you know, considering Prosperops or one of our competitors, really make sure that who you're looking at, they're automated, they're using AI, you know, we can look at environments and we can see signs of humans, right? Computers automate things in perfectly consistent ways. And you can tell, you know, when it's actually not being AI-enabled and automated. And so that's the first thing I would talk about is like make sure that your vendors actually using AI and automation. I think the other interesting thing to talk about maybe for their viewers is like the types of AI that are being used in this space right now. You mentioned in your intro about generative AI, you know, there's really two categories of AI. There is generative AI is kind of the new hotness, you know, chat, GBT, all these things. And the purpose of this AI is actually to create new content, right? So you can ask chat, GBT, write me a poem for my wife or, you know, create an itinerary because I want to explore Austin and I want to experience the best barbecue that there is. And generative AI can create content. There's a second form of AI called predictive AI. And this AI is really about taking large data sets and making predictions on it. Think about I'm feeding you lots of radiology images and I want to be able to detect cancer or here's a huge amount of data, you know, forecast what's going to happen or optimize this problem. And so right now we're using a lot of predictive AI at ProsperOps because really this is a financial space. Predictive is think about like weather, healthcare, financial, etc. Generative is really around our content creation, etc. So we're looking at generative but right now we're using a lot of predictive AI at ProsperOps. It's so exciting that the potential there that predictive AI can deliver. I do want to, you did a great job of explaining effective savings rate, the value in it for customers, the outcomes they're going to be able to achieve and we'll talk about some customer examples next. But I got to ask, what's in it for me if I'm AWS, what's in this for me for customers to really heavily pursue cost optimization on my platform? Yeah. Well, first of all, AWS is credit, they're very customer obsessed and so they don't want customers to waste money as like a general principle and we've seen that which is to their credit. Practically speaking, you know, they make a lot of instruments available and a lot of tooling, a lot of data so that customers can cost optimize and that's, you know, they're kind of putting the data, they're making it available so that customers can actually go and do this. So Amazon wants customers to use the cloud efficiently and if they do that, they're going to be long-term customers, they're going to be happy customers. And the other thing we've seen time and time again and AWS has confirmed this, we've seen it ourselves is that when customers save money, generally on maybe more commodity parts of the portfolio, the list of things they want to do is, you know, very, very long and that money generally that gets freed up generally enables other projects that aren't able to be funded today. So maybe there's some AI project, they want to go experiment with AI and AWS, but today there's no budget to do that. Well, if we can free up money by removing waste in other areas that money then gets flows back into AWS in terms of other areas and so we've seen that time and time again and that's really what AWS is after is efficient use of their cloud and, you know, people being able to take advantage of these, a lot of these sort of higher leveled advanced capabilities that just unlock, you know, more things customers can do with cloud. Right, way more things they can do with cloud. The stat that you mentioned that Andy Jassy shared about 30% is waste is huge. There's a tremendous upswing hockey stick curve for customers to be able to achieve. You mentioned AWS being customer obsessed. We know that well. I think that you guys are too. Share with me, Eric, a customer example that you think really shows the value, the ESR that customers are achieving, the value in it for them to be able to do more with less. What customer example comes to mind that you think this nails it? Yeah, that's a great question. I actually just pull it up here on the side so I can make sure I get the data right. So I'm thinking one of our customers, they're actually, they're a global media company on computer loan. They spend about $20 million a month. So let's call it a quarter of a billion dollars a year on AWS. And they have a very sophisticated team and, you know, they were saving a year on a quarter of a million dollars, about $80 million a year. So their effective savings rate before they came to us was around 32%. Right? So based on what they would have spent 240, 32%, I'm rounding here, about $80 million. And we got introduced to them and they were very sophisticated. They have an internal team that had sort of built a lot of their own tooling to try to sort of automate and optimize. They were skeptical, but interested in sort of seeing what our platform could do. And, you know, over the past year, we've taken their savings, their effective savings rate from 32 up to, I'm looking here in April, it was 43.7%. So that's about an incremental $21 million a year that's flowing back into their budget. So not quite $2 million a month, but this is incremental money that they now have that would have, again, been spent on this sort of commodity part of the portfolio, that they're now free to spend on other things or use in other ways to kind of unlock more power, more agility, more things they can do with AWS. That's a mic drop moment. That must be so exciting for you as the Chief Product Officer to be able to show customers tangibly metric-based benchmarks about the significant savings that you can deliver to them. So I got to ask you as the Chief Product Officer, what's next? Could we get a sneak peek at the roadmap, some of the exciting things that you guys got going on? Well, what I'll say is we've attacked a specific space in AWS that's sort of like, in our view, the biggest lever of removing waste. There's lots of other areas. You know, that 30% figure, by the way, was not from Jassy. The $80 billion was from Jassy. 30% is generally kind of a recognized number. But nonetheless, it's a huge number. There's lots of opportunities. So you can expect us to basically expand laterally within AWS in terms of optimizing costs and then also across clouds in terms of being able to also provide this benefit to Google and Azure customers eventually as well. Exciting stuff. Eric, it's been such a pleasure having you on the program as part of the AWS Startup Showcase about analytics and cost optimization. Big impact the ProsperOps is making. We'll definitely keep our eyes on this space. Thanks so much for your time. Yeah, it's been great. Thanks. My pleasure. We want to thank you for watching and tell you to keep it right here for more action on the Cube, the leader and live tech coverage.