Cloud Computing Lack of Cost Optimization Loses $ 24 Billion Per Year

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Organizations around the world are not properly optimizing cloud spend to the tune of $ 24 billion in missed savings, according to a new study from 451 Research of S&P Global Market Intelligence.

There are a myriad of options for organizations in terms of different options for cloud resources, with some more expensive than others. It should be noted that the report found that 36% of organizations pay for cloud resources at on-demand rates, as opposed to other cost-effective options that are cheaper, such as Reserved Instance pricing.

“The fact that more than one in three companies we surveyed only use on-demand resources is incredible,” said Owen Rogers, research director, 451 Research at S&P Global Market Intelligence. ITProToday. “Even though these companies only use relatively small amounts of cloud, huge savings can be made by taking even a small level of engagement. “

Rogers noted that paying for on-demand cloud resources isn’t always a bad option. He explained that the benefit of the cloud is that organizations still have the freedom to use on-demand consumption when they need it, but they can commit for the capacity they know they are going to use.

Taking a multi-cloud approach can improve cloud cost optimization

Another key finding from the report is that organizations can save money by taking a multi-cloud approach.

According to the report, only 17% of organizations are currently using hybrid or multi-cloud approaches to mix vendors to deliver the same application. According to Rogers, by using a multi-cloud approach to an application, it is possible for an organization to optimize costs.

Rogers explained that the Cloud Price Index is a benchmark price of the average cost of an application specification based on cloud vendor prices and market share. He noted that it is possible to determine the minimum cost, i.e. how much the application would cost if the user chose the cheapest supplier for each component of the application. By mixing and matching application components and resources in a multi-cloud deployment, you can achieve significant savings. Overall $ 24 billion could be saved if the multi-cloud approach is fully adopted, according to the report.

“The $ 24 billion comes from what buyers could save if they went from the average cost of a single supplier to the lowest cost by mixing suppliers,” Rogers said.

Myths and Misconceptions About Optimizing Cloud Costs

Improving cloud cost optimization isn’t just about reducing costs.

Rogers noted that cloud costs are rising for two reasons: either organizations are consuming more resources to deliver business value, or they are accidentally consuming more due to poor governance. He pointed out that if cloud costs go up to improve business value, that’s not necessarily a problem, because if the organization gets more revenue as a result, the added cost of cloud doesn’t really matter. .

“A lot of the companies I speak with still haven’t understood that increasing cloud spending isn’t necessarily a bad thing, in fact it could be positive because of its enabling business value – but governance is needed. to make sure that the money is not thrown away, “he said


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