Austin—[Updated 1:28 p.m. See below.] Cloud computing is big business, and Amazon Web Services is the biggest. A new Texas startup is carving its own space in this growing sector, but it’s not doing it by competing with Amazon’s AWS head on. The founders of ProsperOps have tied their firm’s growth, at least initially, to AWS.
Seattle-based Amazon (NASDAQ: [[ticker:AMZN]]) reported $25.65 billion in sales for its AWS unit last year, and owned about 32.3 percent of the market in the fourth quarter of 2018, according to one estimate. That’s more than eight times the $3.1 billion in sales the company reported in 2013.
Tech research and consulting firm Gartner (NYSE: [[ticker:IT]]) expects the global market for public cloud computing services to grow to $214.3 billion in 2019, up 17.5 percent from last year. Demand for cloud services, from enterprises and consumers alike, has risen so dramatically during the last decade that ancillary businesses have shifted their models, or opened shop, to follow suit.
Companies like Rackspace, a San Antonio, TX-based cloud computing support business, had to be creative in order to survive in the market. As Amazon’s dominance grew, Rackspace developed a strategy to offer support for customers of AWS instead of merely trying to compete against Amazon.
Likewise, ProsperOps, which was co-founded by three former Rackspace employees that helped develop the company’s Amazon customer support strategy, aims to take a slice of the billions that AWS brings in each year by saving money for companies that use AWS. Austin-based ProsperOps has developed software that optimizes how and when engineering and software development teams pay for computing resources on AWS—specifically its elastic cloud compute, or EC2, service. [Updated to clarify that all three co-founders worked at Rackspace.]
It may seem like a simple problem to tackle, but tracking how much engineering teams use (and pay) for computing resources is time consuming and difficult, says Chris Cochran, a co-founder and CEO of ProsperOps. Amazon offers discounts to companies that commit to using certain types of cloud computing resources for a specific time period, either one or three years. But knowing exactly how much to pay for up front is tough to gauge, Cochran says, especially with software development, where the type of computing resources a developer might need can change quickly. [Updated to clarify the time commitment to receive a discount.]
“It’s hard for a human, even a really smart engineer with a spreadsheet, to stay on top of that,” Cochran says. “We built this in a way where all our algorithms sort of work behind the scenes.”
To optimize how much to spend with AWS, ProsperOps’s machine learning and artificial intelligence algorithms analyze a company’s previous use of computing resources, and have managers answer how much money the company is willing to spend and how long it will commit to using resources.
ProsperOps charges customers based on how much it saves them—18 cents for every dollar the user saves. The startup is quite young: It launched an early access version to a select group of customers in March. The company is planning a full launch in the third quarter of this year, Cochran says. In the future, the company may also add services for resolving other cloud computing problems its customers have experienced, Cochran says, though he didn’t provide more detail.
ProsperOps has already raised some financing, though Cochran declined to provide further detail on how much or from whom. San Antonio venture firm Active Capital is involved with the company, though, Cochran says.
Before founding ProsperOps last September, Cochran was CEO of San Antonio-based Chargify, a portfolio company of investment firm Scaleworks. Chargify handles recurring billing for businesses that charge customers a monthly fee—a prime example would be AWS, which has dozens of pricing options for the EC2 segment of its cloud computing service, as well as a massive billing system to track it, Cochran told Xconomy in 2018.
Cochran joined Chargify in 2016, but before that worked at Rackspace, where he strategized on how to create a business unit that would work with the growing behemoth that was Amazon, rather than try to compete against it. Cochran led Rackspace’s “Fanatical Support for AWS” as general manager from April 2015 to August 2016, a business that is now listed as one of Amazon’s 41 “premiere” North American partners.
“Cost optimization tends to be one of the top items that people have problems on, whether they’re large or small or immature or advanced, in the cloud,” Cochran says.
