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Not Optimizing Cloud Computing Spend Costs Enterprises $24B

New research reveals that organizations are not choosing the best options for cloud cost optimization and not making use of multi-cloud deployment capabilities.

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

There are myriad options for organizations in terms of different options for cloud resources, with some being more expensive than others. Of note, the report found that 36% of organizations are paying for cloud resources at on-demand rates, as opposed to other cost effective options that are less expensive, such as reserved instance pricing.

"The fact that over 1 in 3 enterprises we surveyed are only using on-demand resources is amazing," Owen Rogers, Research Director, S&P Global Market Intelligence’s 451 Research, told ITProToday. "Even if these companies are only using relatively small amounts of cloud, huge savings can be made by making even a small level of commitment."

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

Taking a Multi-Cloud Approach Can Improve Cloud Cost Optimization

Another key finding from the report is the fact that organizations can achieve savings by embracing a multi-cloud approach.

According to the report, only 17% of organizations are currently using hybrid or multi-cloud approaches to mix providers to deliver the same application. According to Rogers, by using a multi-cloud approach for 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 provider prices and market share. He noted that it is possible to determine the minimum cost, that is how much would the application cost if the user chose the cheapest provider for each component of the application. By mixing and matching application components and resources across a multi-cloud deployment, there can be significant savings. According to the report, globally $24B could be saved if the multi-cloud approach was fully embraced.

"The $24B comes from how much could buyers save if they moved from the average cost of a single provider to the lowest cost by mixing providers," Rogers said.

Myths and Misconceptions about Cloud Cost Optimization

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

Rogers noted that cloud costs go up for two reasons – either organizations are consuming more resources to deliver business value, or they are accidentally consuming more because of poor governance. He emphasized that if cloud costs are growing to improve business value , that isn’t necessarily a problem, because if the organization is getting more revenue as a result then the additional cost of cloud doesn’t really matter.

"Lots of companies I talk to still haven’t got their head around the fact that increasing cloud spend isn’t necessarily a bad thing, in fact it might be a positive because its enabling business value – but governance is needed to make sure money isn’t being thrown away," he said

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