Inside Exiger’s Cost Structure Redesign: How They Turned Vendor Relationships into Strategic Advantages
When the 2022 tech downturn hit, most companies defaulted to standard cost-cutting playbooks. But in a recent episode of Category Visionaries, Exiger CEO Brandon Daniels shared how his team took a different approach: transforming cost centers into strategic advantages that would fuel future growth.
The Downturn Decision
As Brandon explains, they faced a critical choice: “You’re sitting there and you’re thinking to yourself, well, I’ve got two options. I can either continue to invest in the scale and burn, or I can basically take a little bit of the foot off the gas off of growth and I can get to EBITDA positive on a sustainable basis so that I can just weather the storm.”
Instead of choosing between these options, they found a third way.
The Deep Dive
The team started with a comprehensive review. Brandon explains: “We did a much finer review of our sort of core SaaS metrics to actually dictate what we should do. And what we did was we identified that one our data hosting, or actually our overall hosting costs, our data costs and our essentially services costs, like the open source services that were using that we had grown them on a consumption basis and hadn’t reset them now that we had gotten to an economy of scale.”
Strategic Vendor Consolidation
Rather than just cutting costs, they restructured vendor relationships: “We shrunk our pool of hosting companies, shrunk our pool of data providers, and actually spent more with each of them…We took our data vendors from 83 to 20, but bought more from the 20.”
This consolidation created leverage: “Basically what it allowed us to do is to cap those costs so that as we scaled up in terms of revenue, we would get the delta between what had become cap costs that might have been at higher rates than previously feasible.”
Service Optimization
They applied similar thinking to services. Brandon shares a telling example: “We had just sort of taken this blunt instrument approach to translation as an example and it was costing us a few million bucks a year.”
The solution was smarter, not cheaper: “The URLs that we’re bringing in, the open source data that we’re bringing in, we’re going to build a cache of that. And all we’re going to do is if that URL already exists in the cache and has already been translated, we’re going to use that translation.”
This single optimization reduced translation costs from $3 million to $150,000 annually.
The Results
The impact on unit economics was dramatic. Brandon notes: “Every net new dollar that Exiger adds in terms of software revenue equals 90 plus percent gross margin. That falls to gross profit.”
More importantly, they reinvested these savings into growth: “We tried to self fund, essentially the doubling of our sales and marketing team from ten to 20 million. We tried to self fund it with Efficiencies and waste removal, which were able to do.”
The Payoff
The strategy is working. Brandon shares: “We’re 2 million ahead of our bookings targets for April, $2 million in bookings in excess of what our bookings target was.” The excess is “now flowing through into the PNL and it’s creating net new cash that, again, we can reinvest in the business.”
Key Lessons for Founders
- Don’t just cut costs – transform your cost structure
- Use scale to renegotiate vendor relationships
- Look for hidden inefficiencies in services
- Reinvest efficiency gains into growth
- Think long-term about unit economics
The key insight? Sometimes the best response to a downturn isn’t cutting costs or maintaining burn – it’s fundamentally reimagining your cost structure to create sustainable advantages.