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March 11, 2022updated 26 Mar 2022 11:38am

A third of cloud computing spend goes to waste

Cloud spending is growing, according to Flexera's latest State of the Cloud survey, but so too is the proportion of that spend that goes to waste.

By Matthew Gooding

A third of cloud computing investments are being wasted, according to new survey of over 750 businesses. The survey, conducted by software vendor Flexera, shows that companies using cloud are struggling to make deployments work efficiently. Better management of resources could hinge on establishing multi-disciplinary teams to make decisions around cloud workloads.

Oracle is among the companies investing in data centres to cater for anticipated growth in demand for cloud services. (Photo by Akos Stiller/Bloomberg via Getty Images)

How much do businesses spend on cloud computing?

The Flexera report polled 753 business and tech leaders from around the world about their organisation’s cloud usage. Cloud adoption is still growing, the survey shows, with the proportion of respondents describing their organisation’s cloud use as “heavy” at 63% in 2022, up from 59% the year before.

The vast majority of enterprise organisations spend more than a million dollars a year on cloud computing, the survey shows. The most common level of annual cloud expenditure among companies with more than 1,000 employees is between $2.4 – $6m (19%). Among SMEs, the most common spend bracket is $600k – $1.2m.

But a significant proportion of this investment goes to waste. When asked how much of their cloud expenditure is being used efficiently, the average estimate was 68%. This leaves 32% of cloud spending that is wasted, up from 30% last year. What’s more, cloud projects come in at an average of 13% over budget.

The way in which cloud services are provisioned could explain this overspend and waste, says Frank Contrepois, head of FinOps consulting at Strategic Blue, a consultancy that helps businesses manage cloud deployments.

“Traditionally technical teams would lay out their requirements, finance departments would set the budget and procurement would handle purchasing,” he says. “Cloud changes that approach completely, and everything is being handled by the IT team.

“Engineers typically focus on doing the job to the highest standard, and might not know, for example, that you can do deals and get discounts with the cloud providers,” he adds.

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The Flexera report says FinOps, in which a multi-disciplinary technical and business team is brought together to make data-driven spending decisions around cloud deployments, is one way to combat these problems. "Numerous roles, including IT/Ops, cloud centres of excellence and FinOps teams, are seeking to keep costs down," the report says.

Azure strikes back against AWS in the cloud wars

Elsewhere the report shows Microsoft's Azure platform is now more popular than public cloud market leader AWS among enterprises, with 80% of large companies polled using Azure compared to 77% deploying on AWS. It also surpassed AWS in the number of virtual machines (VMs) enterprises are running: 71% of enterprises are running more than 51 VMs on Azure, compared to 69% for AWS.

This reflects the impact Azure is having among enterprises, argues Dan Kirsch, managing director of Techstrong Research. "AWS is not getting the level of engagement with enterprise that Azure is," he told Tech Monitor earlier this week. "You wouldn't say they're struggling, but it's not getting the level of engagement in the enterprise that Microsoft gets in highly regulated banks, the huge airlines, the huge insurance companies, and with its governmental cloud offering."

He adds: "AWS is the defacto standard if you're a small or medium-sized business looking to get into cloud, but if you're a mature company, which already has Microsoft products in-house, there's a good chance you'll go Azure."

Oracle Cloud Infrastructure came in fourth place behind Google Cloud platform. Yesterday, the company told investors it expects its cloud division to drive higher than expected profits in the next quarter.

As it announced its third-quarter results, Oracle said it is on course to spend $4bn on cloud infrastructure this year, building out data centres and adding services to its offering as it looks to compete for business in the public cloud.

This investment should start to pay off in Q4, said CEO Safra Catz. “Our overall revenue growth is being driven by both our rapidly growing cloud infrastructure and cloud applications businesses,” Catz said, revealing that Oracle’s cloud revenue for the year is likely to top $11bn.

Read more: A CFO's guide to cloud cost optimisation

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