2015 Velocity SC: Convince your CFO that #perfmatters

1. Convince Your CFO that #PerfMatters @ColinBendell

10. ©2015 AKAMAI | FASTER FORWARDTM • Use existing business metrics: • Revenue • Conversion Rate • Don't forget in-direct metrics: • Engagement • Successful Logins Lara Hogan http://larahogan.me Run A/B Tests; Compare results

17. ©2015 AKAMAI | FASTER FORWARDTM Speed Matters: Conversion Rate vs. Load Time Conversion Rate (%) 0-1 1-2 2-3 3-4 4-5 5-6 6-7 7-8 8-9 9-10 10-11 11+ Population Conversion Rate (%) Page Load Time (Sec)

19. ©2015 AKAMAI | FASTER FORWARDTM 2 Seconds Faster Boosted Conversions By 66% http://www.conversionconference.com/blog/case-study-how-making-pages-2-seconds-faster-boosted-conversions-by-66/ Tammy Everts @tameverts

30. ©2015 AKAMAI | FASTER FORWARDTM Discount Cash Flow // Common Valuation Technique1 𝐶𝑜𝑚𝑝𝑎𝑛𝑦_𝑉𝑎𝑙𝑢𝑒 = 𝐶𝑎𝑠ℎ_𝐹𝑙𝑜𝑤2 1 + 𝑊𝑒𝑖𝑔ℎ𝑡𝑒𝑑_𝐴𝑣𝑒𝑟𝑎𝑔𝑒_𝐶𝑜𝑠𝑡_𝐶𝑎𝑝𝑖𝑡𝑎𝑙 2 + 𝐶𝐹= 1 + 𝑊𝐴𝐶𝐶 = + ⋯ + 𝐶𝐹? 1 + 𝑊𝐴𝐶𝐶 ? + 1This is one of many techniques. It is has *many* flaws.

36. ©2015 AKAMAI | FASTER FORWARDTM Velocity SC 2015: Financial Impact How LinkedIn used RUM to drive optimizations and make the site faster Thursday @ 13:45pm - Ritesh Maheshwari (LinkedIn) What are third-party components doing to your site? Thursday 14:40 - Andy Davies & Simon Hearne (NCC Group) Reaching everyone Friday 11:50 - Tim Kadlec (Akamai) How Go is making us faster Friday @14:40 - Wilfried Schobeiri (MediaMath PHP 7 Friday @16:10 - Rasmus Lerdorf (Etsy) Speeding up the PlayStation 4 user interface - web performance optimization outside the browser Friday 17:05 - JP CASTRO (Sony) Yesterday's perf best-practices are today's HTTP/2 anti-patterns Friday 17:05 - Ilya Grigorik (Google) Revenue COGS CapEx ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔ ✔

39. ©2015 AKAMAI | FASTER FORWARDTM What is Financial Modeling? • Excel! Yay! • Technique to build confidence in decision making • Consistent comparison for project planning outcomes • Good: consistent IRR comparison • Bad: ignores Goodwill (Brand) and Job satisfaction (Culture) • Two schools of thought: • Precision: Consider every detail • Directionality: Consider the big inputs

45. ©2015 AKAMAI | FASTER FORWARDTM Pros & Cons of CashFlow Modeling Use this model: • When you are optimizing backend processes • Adding caching layers (back-end, cdn, client) • Optimizing user workflows • Optimizing page layout Don't use this model: • Optimizing client compute (eg: javascript) • Optimizing client rendering (eg: adding webp)

48. ©2015 AKAMAI | FASTER FORWARDTM Questions • Will your improvements slow the rate of new hardware purchased? • Will it reduce the operating costs? • Will you be able to turn down servers? • What are the projected costs with and without improved performance?

49. ©2015 AKAMAI | FASTER FORWARDTM Avoid including "Funny Numbers" Don't include: • Productivity gains • Revenue from selling old hardware • Contract [re]negotiation time • Software Licensing savings This will allow you to bypass a 7 week discussion with your procurement about the true cost of your enterprise agreement.

51. ©2015 AKAMAI | FASTER FORWARDTM Two Models • CoLo / OnPrem • This years Capital Expense contributes to next years' Operating Expense • You can theoretically extend the life of purchased capital • IaaS / PaaS • Everything is Operational Expenses

52. ©2015 AKAMAI | FASTER FORWARDTM Operating_Exepnse = Number of Servers * Usage OR Capital_Expense = Number_of_New_Servers * Average_Server_Cost Operating_Exepnse = Number_of_Servers * Average_Server_KVA * CoLo_Cost_per_KVA

53. ©2015 AKAMAI | FASTER FORWARDTM Calculating Capital Expenses (CapEx) CapEx = Number_of_Servers * Average_Cost • Use "Fully Loaded" cost (incl: cost to procure, security audits, colo service tickets, rack & stack fees, etc) • Use lowest-common-denominator to save inventorying your infrastructure • If in doubt: $5,000 $100,000

56. ©2015 AKAMAI | FASTER FORWARDTM Calculating Operating Expenses (OpEx) Best Practice: • Include all servers, regardless of role • Assume that increase in user demand = increase in infrastructure use Data-Center OpEx • Most Co-Lo providers bill based on power usage • Assume Co-Lo pricing includes cooling, floor space, and internet • Each datacenter is a special snowflake: be conservative in your calculations

57. ©2015 AKAMAI | FASTER FORWARDTM OpEx OpEx = Number_of_Servers * KVA_per_Server * KVA_Price • Pick one hardware profile that is representative • If in doubt, use the newest hardware’s power consumption • Use 80% of the manufacturers reported fully loaded power draw • Most hardware reports power as Watts and BTU. Assume a power- factor of 0.9 and use: • KVA = Watts / 900 • When in doubt I use these approximation numbers: • 0.5KVA for an average pizza box server • 3.5KVA for a 6U high density compute chassis

58. ©2015 AKAMAI | FASTER FORWARDTM Colo's charge by electricity OpEx = Number_of_Servers * KVA_per_Server * KVA_Price • Most CoLos bundle amenities and charge by electricity • Ranges from $0.70/KVA/mo to $0.20/KVA/mo • Running your own datacenter =~ colo space • If in doubt, a conservative, after tax value: $0.50/KVA/mo

65. ©2015 AKAMAI | FASTER FORWARDTM PageView and Interaction Cost • A Page View requests that return Content-‐Type: text/html. • Page View is not perfect: use a metric that represents user activity • Conversions • Checkout-Rate • Logins

67. ©2015 AKAMAI | FASTER FORWARDTM Interaction Cost Interaction_Cost = (OpEx + CapEx) / Page_View_per_Second • Max page view per second tells us how much money is spent to maintain this peak traffic • You have built implicitly to meet peak traffic • As user demand grows, you will build more hardware in lock step • Interaction Cost to remain constant year over year

70. ©2015 AKAMAI | FASTER FORWARDTM What about IaaS / PaaS? • Model still applies with a few tweaks; ignore Capital costs • Each IaaS / PaaS provider has different pricing levers • Focus on cost-per-interaction model

74. ©2015 AKAMAI | FASTER FORWARDTM Reduce Server Utilization $- $10,000 $20,000 $30,000 $40,000 $50,000 $60,000 $70,000 $80,000 $90,000 CapEx… OpEx Assumptions: 5yr Amortization;; 0.5KVA/server;; $0.50/VA/mo $200,000 savings over 5yrs

75. ©2015 AKAMAI | FASTER FORWARDTM Cashflow Summary • Backend performance can impact end-user performance • Performance can have financial impact • Use CapEx and OpEx modeling to show directionality of impact • Avoid the detailed nuances – use conservative generalizations • You can use the same model to project negative financial impact (eg: image responsive images)

77. ©2015 AKAMAI | FASTER FORWARDTM Revenue Modeling • Your Operations teams can control CapEx and OpEx spending What about Revenue? • How can performance improve total sales? • How performance increases user growth (CAGR) • How performance increases sales per user (ARPU)

81. ©2015 AKAMAI | FASTER FORWARDTM Notes about Revenue Modeling • Use Revenue Modeling to show directionality • Avoid absolute claims about performance • Consider regression analysis to understand what probability inputs • Know your user performance distribution first. (You are using Real-User-Monitoring, right?)

83. ©2015 AKAMAI | FASTER FORWARDTM Summary • Performance correlates to engagement • Make performance part of your culture • Understand the user experience and leverage empathy • Project cash flow savings from performance • Applies to OnPrem and IaaS/PaaS • Project revenue impact from performance

85. Thank-You! @ColinBendell

2015 Velocity SC: Convince your CFO that #perfmatters

Colin Bendell

2015 Velocity SC: Convince your CFO that #perfmatters