Published on November 2, 2023, 6:45 am

TLDR: Cloud costs remain a top concern for CIOs, with expenses cited as the main barrier to advancing in the cloud. Despite this, enterprise cloud budgets continue to increase and IT decision-makers expect their cloud budget to grow in the next year. To address these challenges, CIOs are using tools and platforms that offer greater visibility into cloud costs and negotiating with cloud providers to lower expenses. Some CIOs opt for a hybrid approach, running certain workloads on public clouds and heavier workloads on private clouds. It's recommended for less experienced CIOs to seek assistance from managed service providers or cloud experts during the initial stages of cloud deployment. Managing IT talent costs is also a budget concern, leading more enterprises to turn to FinOps specialists who help manage these costs effectively. In conclusion, while experience and better tools have helped IT leaders navigate cloud economics more effectively, emerging technologies like generative AI continue to complicate cost management. CIOs must remain vigilant in optimizing cloud spend and anticipate future challenges associated with new technologies.

Experience, best practices, and better tools are helping CIOs become more knowledgeable about cloud economics. However, emerging technologies like generative AI and the drive to innovate are continuously complicating the equation. Cloud costs remain a major concern for IT leaders who need to contain expenditures on core workloads in order to free up funds for innovation.

According to the Foundry Cloud Computing Study 2023, enterprise cloud budgets continue to increase, with 31% of overall technology budgets allocated towards cloud computing. Additionally, two-thirds of IT decision-makers expect their cloud budget to increase in the next 12 months. Despite this growth, controlling cloud costs remains the top challenge for CIOs. Approximately 35% of respondents cited expenses as the number one barrier to advancing in the cloud.

Other concerns include data privacy and security challenges (31%) and a lack of cloud security and expertise (24%). To address these challenges, CIOs are leveraging a multitude of tools, managed services, and platforms that offer greater visibility into cloud costs. This increased visibility is crucial for lowering expenses.

“Cloud costs continue to be a top concern for CIOs,” says Dave McCarthy, an analyst at IDC. He emphasizes that awareness of financial operations practices (FinOps) and advancements in software automation have enabled enterprises to better understand key cost drivers. However, as environments become more complex with disruptive forces like generative AI, challenges persist.

One approach CIOs are taking is negotiating with cloud providers to lower costs. By better understanding charges and negotiating fees, organizations can effectively manage compute and storage resources themselves. While vendors may not necessarily cut costs on licenses or capacity, they often offer guidance and tools that aid in cost optimization.

It’s important for IT leaders and procurement chiefs to carefully study terms of use before signing contracts with cloud providers. Contracts typically include “gotchas” such as discounts not being applied to renewals or situations where downgrading service levels could nullify negotiated discounts. Security costs may also be separate and require upgrading to an enterprise-level plan, resulting in additional expenses.

Some CIOs opt for a hybrid approach, running certain workloads on the public cloud and heavier workloads on private clouds. The decision depends on the organization’s business model and specific needs. However, it’s crucial to constantly evaluate the economics of both options.

For less experienced CIOs, seeking assistance from managed service providers or cloud experts during the initial stages of cloud deployment is recommended. Organizations that attempt to migrate to the cloud independently often face cost and time overruns due to inexperience. A managed cloud offering allows organizations to focus on delivering business value while outsourcing specialized expertise.

Hiring IT talent is another budget concern faced by many CIOs. People costs, particularly paying high salaries for engineers, can significantly impact overall cloud expenses. Consequently, enterprises are increasingly turning to FinOps specialists who help manage these costs effectively.

As CIOs gain more experience with the cloud, they become more adept at implementing strategies that reduce operating expenses. This includes being diligent about shutting off CPU usage when not in use and negotiating contracts with built-in flexibility to control costs.

Despite these efforts, emerging technologies like generative AI present new challenges for managing cloud costs. The substantial power and storage requirements of gen AI workloads are expected to escalate expenses significantly. However, it remains uncertain how high these costs will ultimately be.

In conclusion, while experience, best practices, and better tools have helped IT leaders navigate cloud economics more effectively, emerging technologies like generative AI continue to complicate cost management. CIOs must remain vigilant in their efforts to optimize cloud spend while anticipating future challenges associated with new technologies.

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