Reducing Cloud Spend During Economic Uncertainty

Cloud optimization could offer the best method for reducing costs according to a new report.

As businesses continue to navigate economic uncertainty, IT leaders are pursuing ways to optimize their budgets and reduce spending on cloud infrastructure, applications, and tools. According to a recent report by Vega Cloud, 65% of IT executives plan to reduce their cloud spend this year. In this article, we’ll explore the importance of reducing cloud spend, the top five IT and cloud optimization trends identified by Vega Cloud, and strategies for reducing cloud spend.

See also: Collaboration is the Key to Cloud Optimization

The Importance of Reducing Cloud Spend

Cloud computing has revolutionized how businesses operate, offering scalability, flexibility, and cost savings. However, in times of economic uncertainty, cost optimization is critical. Overspending on cloud services can quickly eat into IT budgets, leaving businesses vulnerable to financial instability. Reducing cloud spend can help companies weather economic uncertainty but they must also balance cloud growth to keep up with competition. Let’s explore what companies are doing to maintain this balance.

Top 5 IT and Cloud Optimization Trends Identified by Vega Cloud

The Vega Cloud study identified the following five IT and cloud optimization trends. These will have an impact as the economy continues to fluctuate.

Trend 1: Concerns about the effect of the economy on IT budgets. 

Vega Cloud found that 56% of IT executives are worried about the economy, and 95% said those concerns have impacted their IT strategy. In times of economic uncertainty, businesses are likely to face budget constraints and cost-cutting measures, and IT budgets are often one of the first areas to be scrutinized. 

As cloud infrastructure, applications, and tools are often a significant portion of IT budgets, IT leaders may need to shift their focus to reducing cloud spend to stay within budget constraints. Additionally, IT leaders may need to justify their cloud spending to stakeholders who are more cautious about investing in new technologies during economic uncertainty.

Trend 2: Surprises in cloud bills. 

Forty-five percent of IT leaders said they received a surprise in their cloud bills “a number of times” over the past 12 months, with overspending on database costs being the most common surprise. Cloud service providers often charge for cloud services based on usage, and unexpected increases in usage can lead to surprises in cloud bills. These surprises can occur due to a variety of reasons, including unplanned usage spikes, incorrect resource allocation, and changes in pricing models.

To mitigate the risk of surprises in cloud expenses, IT leaders need to closely monitor cloud usage and costs, conduct regular cloud cost assessments, and implement cost optimization best practices. By actively managing cloud expenses, IT leaders can reduce the likelihood of surprises and avoid overspending on cloud services. Additionally, by identifying areas of potential cost savings and implementing cost optimization best practices, IT leaders can reduce the impact of surprises and better manage their cloud budgets.

Trend 3: Investment in cloud cost optimization tools. 

Sixty-two percent of executives surveyed by Vega Cloud said they monitor cloud costs very often, and 93% said they have invested at least a fair amount of money on tools to optimize cloud costs. These tools provide IT leaders with visibility into cloud usage and costs, allowing them to identify areas of overspending and potential cost savings. By analyzing cloud usage data, these tools can help IT leaders to optimize their cloud resources and identify areas suitable for cost reduction.

IT leaders can shift their focus from simply reducing cloud costs to optimizing cloud usage. Rather than just cutting costs, IT leaders can use these tools to identify ways to optimize cloud resources and improve performance helping balance cloud spending with maintaining performance. Cloud cost optimization tools can also influence the overall cloud strategy by enabling IT leaders to make data-driven decisions about cloud spending and strategic cloud investments.

Trend 4: A focus on optimizing cloud use. 

Vega Cloud found that 33% of IT executives believe the best approach to reducing cloud costs is to consistently optimize the use of cloud resources. Going beyond cost-cutting for its own sake allows decision-makers to leverage cloud resources for the fullest potential of business value and brings numerous benefits to businesses—think enhanced agility, improved user experience, scalability, and competitive advantage. 

By maximizing the value derived from cloud investments, organizations can align cloud spending with business priorities, deliver superior services, drive innovation, and respond quickly to changing market conditions. While cost reduction is important, optimizing cloud performance ensures a balanced approach that leverages the full potential of cloud technologies, resulting in better business outcomes and positioning companies as leaders in their industries.

Trend 5: The potential of the Big 3 cloud providers and AI to reduce cloud spend. 

Among the Big 3 cloud providers, Google is doing the most to help customers manage and reduce cloud costs, according to 38% of surveyed executives. However, all three cloud providers (add AWS and Azure to the mix) offer tools for businesses to reduce costs. They provide flexible pricing models, such as pay-as-you-go and reserved instances, and cost management tools and dashboards allow monitoring and analysis of cloud spending, identifying areas of overspending and optimizing resource allocation. 

Resource optimization services like autoscaling and load balancing automatically adjust resources based on demand, ensuring efficient usage. Additionally, cost optimization programs and reserved instances/savings plans offer personalized recommendations and discounts for long-term cost savings. Leveraging these offerings empowers businesses to optimize cloud costs while ensuring technical requirements are met.

Strategies for Reducing Cloud Spend

To reduce cloud spend, IT leaders can implement the following strategies:

  • Conduct a cloud cost assessment: This involves analyzing cloud bills to identify areas of overspending and potential cost savings.
  • Implement cost optimization best practices: This includes using Reserved Instances/Savings Plans, eliminating waste, and right-sizing cloud resources.
  • Leverage the Big 3 cloud providers and AI: By working with cloud providers and AI tools, IT leaders can optimize their cloud usage and reduce costs.
  • Negotiate with cloud service providers: IT leaders can work with their cloud service providers to negotiate better pricing and terms.
  • Right-size cloud resources: By matching cloud resources to actual usage, IT leaders can optimize their cloud spend and align cloud strategies to business goals.
  • Monitor cloud usage and costs: Regularly monitoring cloud usage and costs can help identify areas of overspending.

Best Practices for Effective Cloud Budget Management

Reducing cloud spend is critical in times of economic uncertainty, and IT leaders must take steps to optimize their cloud budgets while still maintaining the benefits of cloud computing. Vega’s cloud optimization survey offers insight into how companies are approaching the practicalities of doing more with less in an economic downturn while continuing to pursue everything the cloud offers. The balancing act will be something to watch over the next few years.

See the full report from Vega Cloud here: 2023 IT and Cloud Optimization Report

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