The evolution of cloud computing and its cost
Over the past decade, the cloud has evolved from a competitive advantage to a necessity. Its agility, flexibility and scalability are essential to meet today’s dynamic markets and increasingly remote and hybrid workforce.
However, as the number of cloud users increases, so does the complexity of managing it. Today, there are public cloud and SaaS applications to meet every need and, according to Oracle, 98% of organisations today use or plan to use multiple public clouds (i.e. a multi-cloud hybrid system architecture). But this complexity comes at a price. A recent study found that 82% of organisations rank cloud optimisation management as their top business challenge.
Anticipated cloud usage and costs
What is cloud optimisation?
Cloud cost optimisation means actively monitoring, managing and controlling costs to improve efficiency and reduce waste. It involves analysing usage and costs, setting budgets, monitoring costs and changing configurations and resource allocation accordingly.
Cloud resource optimisation is critical for modern organisations because of the pay-as-you-use approach to pricing and resource allocation. As enterprises adopt multi-cloud environments in public, private and hybrid models, complexity increases exponentially. Without optimisation, costs can quickly spiral out of control.
Current Statistics 2023–2024
According to the Flexera 2024 report, organisations are wasting around 32% of their public cloud spend due to inefficiencies and redundancies. Proper optimisation can eliminate this waste and ensure budgets are used more efficiently.
Key benefits of optimising cloud spend include:
- Maximising performance and capacity while minimising costs
- Avoiding over-allocation of resources that go unused
- Optimising cloud workloads based on usage metrics
- Utilise discounts for reserved instances and spot prices
- Execute budgets, track costs and allocate expenses
Understanding cloud costs
Understanding what contributes to costs in this area provides the basis for our discussion. Most service provider rates fall into three main categories:
Compute costs — based on the computing power consumed by your instances, virtual machines, and other components. These costs depend on the RAM, storage capacity, and processor cores consumed by your cloud applications. For example, machine learning tasks use more processing power, so they cost more.
Network costs — depend on the bandwidth usage and data transfer in your cloud application environment. Most vendors offer tiered pricing structures to serve businesses with higher utilisation.
Storage cost — based on the type and amount of storage used over a period of time. Storage types include block, file and object storage, which have different ease of access, performance and levels of redundancy. Other costs include system maintenance and upgrades, patches and support.
Modern expense management in the cloud
Today, cost challenges remain, but new methods have emerged to better optimise and control costs. Auto-scaling automatically adjusts resource capacity based on demand. Reserved instances allow upfront commitments to secure lower rates. Spot instances allow you to purchase unused capacity at deep discounts. Workload optimisation and size optimisation analyse usage and requirements to eliminate waste.
However, managing costs across multiple vendors and services remains challenging. As cloud services expand with AI, containers, edge computing and more, enterprises need to continuously improve cloud cost efficiency and reduce waste. Managing costs requires a combination of strategy, tools and organisational culture.
The Importance of a Cloud Optimization Strategy
Effective strategic planning is essential to align business spending with its goals and ensure value for money. It facilitates cross-functional collaboration to drive technology best practices across the organization. Planning also helps identify skill gaps, training needs, and structural changes needed to make optimal use of cloud resources.
Strategic planning for cloud optimisation is important for several reasons:
Resource Efficiency
Cloud cost optimization identifies underutilized or inactive resources that can be reduced or eliminated to save money. According to a 2024 Gartner report, companies that actively optimize their cloud resources can reduce their costs by 20–25%.
Budget Forecasting
With optimized costs, businesses can gain a clearer picture of their spending, which is critical for accurate forecasting and budget allocation. This is especially important in times of economic uncertainty, when every dollar counts.
Competitive Advantage
Cost savings from cloud optimization can be reinvested in other areas, providing a competitive advantage. Lower operating costs can lead to lower prices for customers or more funds available for innovation. According to a McKinsey study, companies that implemented cloud optimizations were able to increase their investment in innovation by 15%.
Improved Customer Experience
Efficient resource allocation can lead to increased productivity, a better user experience, and potentially increased profits. For example, companies that improved their cloud strategies reported a 30% improvement in application response times, which directly impacts customer satisfaction.
Environmental Impact
Implementing cloud infrastructure optimization can also reduce a company’s carbon footprint by requiring less energy for cooling and operation. According to a 2023 Greenpeace report, companies that actively optimize their cloud resources were able to reduce their CO2 emissions by 20%.
Improved decision making
With accurate cost and usage data, companies can make more informed decisions about their strategy. This includes selecting the most appropriate cloud service providers, optimising workloads, and forecasting future resource needs.
Economic Impact
The economic impact of cloud computing goes beyond direct cost savings. By reducing the need for significant capital expenditure on IT infrastructure, companies can allocate resources more strategically, fostering innovation and growth. Cloud computing also enables small and medium-sized enterprises (SMEs) to compete with large corporations by providing access to advanced technology without the associated costs.
In addition, the flexibility and scalability of cloud services facilitate business continuity and disaster recovery. With cloud solutions, companies can quickly adapt to changing market conditions, scale operations during peak periods, and ensure data security and compliance.
Conclusion
Overall, thoughtful strategic planning and cost alignment ensure that cloud computing delivers maximum value and business impact at minimum cost. This not only contributes to a company’s financial sustainability, but also improves its competitiveness and environmental responsibility.
