Why 35 percent of cloud spending is wasted

While cloud spending soars, companies fail to take advantage of cost controls, automation, and provider discounts

Why 35 percent of cloud spending is wasted
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The fast revenue growth of AWS, Azure, and other cloud providers makes it clear that companies are embracing public cloud. However, the story behind the numbers can be a bit murky. In its annual survey of cloud users, the RightScale 2019 State of the Cloud Report from Flexera gives us a clearer picture of how companies are adopting cloud, what the challenges are, and which cloud initiatives they are investing in.

One of the key findings revealed in the report is the challenge that many organizations are facing with growing cloud spend. Larger enterprises are running 33 percent of workloads in the public cloud. That is driving large public cloud bills, with 13 percent of enterprises already spending more than a million dollars per month ($12M per year). Additionally, organizations of all sizes are expecting to grow public cloud spending by 24 percent in 2019.

cloud spend Flexera

Managing cloud spending is a major challenge

Unfortunately, most enterprises don’t yet have strong governance around this large and growing area of spending even though 66 percent have a central cloud team that could establish and enforce polices for cloud expenditures. And while 68 percent of enterprises see managing cloud spending as the responsibility of central IT teams, doing so is a top challenge for these teams, followed closely by governance.

cloud challenges Flexera

Much of cloud spending is wasted

Organizations may not even understand the full extent of their overspending in cloud. While wasted cloud spend has been measured at 35 percent by Flexera (and even higher by some analysts), respondents tended to underestimate the level of wasted spending at 27 percent.

cloud waste Flexera

Cloud cost controls are lacking

Organizations are also not doing all that they could to optimize their cloud investments. Cloud spend can be highly dynamic as new cloud resources are continually added and removed. To optimize these fast-changing environments, automation is critical. Like the kids’ toys that seem to reappear in the family room almost as soon as you pick them up, manual approaches to reducing wasted spending can begin to feel futile. Companies need to leverage automated policies to continually optimize spending, yet only a minority of companies have begun this process.

cloud policies Flexera

Cloud discounts go unused

In addition, many companies are not taking full advantage of the discounts offered by cloud providers. Fewer than half of AWS users and fewer than a quarter of Azure users take advantage of Reserved Instances. The complexity in purchasing and managing these discount options requires cloud cost management tools to avoid miscalculations that can cost users money.

cloud discounts Flexera

Top cloud initiatives in 2019

The combination of rapidly growing public cloud spending, the accompanying waste, and the challenges of managing cloud costs has spurred organizations to focus on optimizing their existing use of cloud in order to save money. For the third year in a row, cloud cost optimization has remained the top challenge, ahead of even cloud migration efforts.

cloud initiatives Flexera

The cloud cost management imperative

As cloud becomes the dominant approach to delivering IT services, organizations will need to develop new capabilities to optimize the use and cost of these dynamic environments. They will need to go beyond basic cloud cost reporting and embrace the use of automated policies to reduce waste and provide the guardrails needed for appropriate cloud governance.

For more information, please download the RightScale 2019 State of the Cloud from Flexera.

Kim Weins is vice president of cloud strategy at Flexera. She has held executive marketing positions at a variety of enterprise software startups and public software companies. She received a B.S. in engineering from Duke University.

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