Business spending on cloud computing, widely viewed as immune to economic turmoil, continues to grow but at a slower pace as technology leaders face pressure to control costs.
Some chief information officers have turned to cloud management tools and set up internal teams to oversee their cloud spend.
Zach Nimboorkar, Senior Vice President of Global Technology Services at Schneider Electric SE,
said the French energy and automation company began moving to the cloud a few years ago and soon realized it needed to rein in its cloud spending through its hundreds of accounts on Amazon.com inc
Mr Nimboorkar said the company has since built a dedicated team to manage its spend on Amazon Web Services and has invested in a third-party cloud spend management tool. It plans to “continue to take a pragmatic approach to cloud investments” as spending comes under closer scrutiny.
According to market research and advisory firm Gartner, global cloud spending is expected to grow 18.5% this year to $576.5 billion, slightly below the 18.8% growth forecast for 2022 inc
latest projections. In the U.S. alone, cloud spending grew 27% in the fourth quarter of 2022, less than the 31% average growth rate of the previous four quarters, according to Synergy Research Group, a market analysis firm.
This recent drop in cloud spending follows what some CIOs have described as a poor return on their cloud investments, with unrealistic expectations of the technology’s cost versus data center operations forcing them to reassess their cloud plans evaluate.
After a rapid move to the cloud to support remote work during the Covid-19 pandemic, many companies “haven’t necessarily thought about things like cost management, security, resiliency and operational efficiency,” said Tracy Woo, an analyst at market research firm Forrester Research inc
With inflationary fears lingering, some CIOs say controlling their cloud spending is non-negotiable.
Eighty-two percent of companies surveyed by Flexera Software LLC in late 2022 cited managing cloud spend as their top cloud challenge, the first time cloud spend ranked ahead of cybersecurity in over a decade of conducting the survey, the software company said . According to International Data Corp., budget pressures for information technology and the complexity of digital business are increasing. will result in 70% of organizations better managing their cloud spend by 2024.
Rob Zelinka, CIO of Jack Henry & Associates inc,
said the ability to predict cloud usage is critical for the financial technology company, which has made a certain amount of spend with multiple cloud providers in exchange for a discounted rate. Mr Zelinka said accurate forecasting keeps the company from overspending on cloud services it doesn’t end up using and paying a premium for usage in excess of the contracted amount.
“The last thing we want to do is leave money on the table,” he said.
However, industry analysts and CIOs emphasized that while enterprise investment in the cloud is increasing — particularly as updating aging enterprise technologies remains a priority — growth is “moderating” amid ongoing economic turmoil, said Forrester analyst Lee Sustar.
The leading cloud providers Amazon, Microsoft corp
and alphabet inc,
all have recently reported a slowdown in their cloud computing business. Amazon Web Services last month reported revenue growth of 20% in the most recent quarter, up from 27% in the previous quarter. Microsoft’s Azure cloud unit reported a decline in revenue growth from 35% to 31%, and Google Cloud’s revenue growth slowed to 32% from 38%. Executives from all three cloud giants have said customers are optimizing or curbing their cloud spend, citing economic factors.
But getting a handle on cloud bills isn’t as easy as cutting IT spending in areas like hardware or software, where downsizing means cutting back on devices or licenses, analysts and CIOs say. Managing cloud costs requires close attention given how quickly cloud computing performance – and costs – can go up or down as you use it.
As a result, some CIOs prefer to outsource management to a third-party tool or consulting firm, or if they have the resources, invest in building a team to oversee costs full-time, said Forrester’s Ms. Woo. Many of the best practices in cloud spend management have been codified by the nonprofit FinOps Foundation, which promotes financial literacy and accountability in the cloud, she said.
Prakash Kota, CIO of Autodesk inc,
said the software and services design company has evolved from using a “static” financial reporting system to building its own dashboards and using third-party optimization tools to recommend cost-saving opportunities to its engineers. It also has a dedicated cloud spending management team and encourages its finance and engineering teams to work together to keep costs under control, Mr Kota said.
Sonal Gupta, cloud infrastructure manager at Carlsberg AS
said the Copenhagen-based brewery, which began moving to Microsoft’s Azure platform and AWS in 2017. After noticing overruns on its estimated cloud budget, the company built a small team to manage cloud costs and train other departments on how to take cost-saving measures. Ms Gupta’s team also uses third-party tools like Flexera’s software to create customized spend dashboards, she said.
UST, a private company in Aliso Viejo, California that helps clients with digital transformation, manages cloud costs under the responsibility of CIO and Chief Investment Officer Sunil Kanchi. This model allows Mr. Kanchi to fully manage cloud spending, he said, but will only be able to do so after UST figures out how to label cloud usage across its various lines of business.
“By keeping it within the CIO organization, we can provide both the balance between the technology and the financial cost aspects of doing it,” he said.
Write to Belle Lin at [email protected]
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