Dive Brief:
- Rising cloud bills haven’t soured customers on the technology, according to researdh from Java platform company Azul. Censuswide surveyed 300 enterprise CIOs for Azul’s cloud trends report, published last week.
- More than 4 in 5 respondents said cloud infrastructure and application spending was an average of 30% higher than anticipated. Only 2% said their organization came in under budget.
- Despite elevated cloud spend levels, tech leaders are still seeing value in the technology. Four in 5 respondents reported cost savings in cloud and more than half said their CEO supports current spending levels and would greenlight further increases.
Dive Insight:
While enterprises are keen to eliminate wasted cloud spend, most have made peace with growing their overall investments in hyperscaler infrastructure, platform and software services. Efficiency gains and potential cost savings justify the budgetary hit.
Cost management surpassed security as the leading enterprise cloud concern in 2023 and remained the top priority this year. Larger cloud budgets went hand-in-hand with sharper spend scrutiny and even a move to repatriate some workloads, according to Flexera research.
Companies are doing more in the cloud than they initially planned because of the agility, flexibility and top-line benefits, Azul CEO Scott Sellers said. Nearly all respondents in the Azul survey — 98% — expressed confidence in correlating cloud spend with revenue gains, although only 71% said they had the data to prove it.
As organizations leverage FinOps and other cost tracking practices to get a better handle on existing deployments and connect spend to value, they’re simultaneously spinning up new workloads, migrating additional applications and increasing cloud consumption.
Many see FinOps as a lever to ease and even accelerate adoption.
“FinOps’s job isn’t purely to cut costs,” said Jay Litkey, SVP of cloud and FinOps at Flexera and a governing board member of the FinOps Foundation. “If you’re doing it right, you might well be increasing your cloud spend because you’re able to prove that it’s productive.”
That consumption curve aligns with Jevons paradox, an economic concept referenced earlier this year in the context of generative AI by Microsoft CEO Satya Nadella, Sellers said.
“As AI gets more efficient and accessible, we will see its use skyrocket, turning it into a commodity we just can’t get enough of,” Nadella said in a January post on X.
Cloud is subject to the same principle, Sellers said.
“The fact that cloud is inherently more cost effective encourages consumption, which ultimately creates even more consumption and leads to the budget overruns that we’re seeing,” he said.
There are limits to the amount of additional spend companies can absorb. Over 2 in 5 respondents acknowledged their CEOs have expressed concerns about growing cloud budgets and 27% said board approval for cloud footprint expansions is contingent on favorable market conditions.
Sellers is familiar with the cost-value balancing act.
“Just like CIOs, we play whack-a-mole at Azul,” he said. “Sometimes we see cloud spend rising and our engineering and operations leader will have to go in and whack it back down and try to understand what the heck happened.”
