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Public Cloud Spend Levels Stay Steady, Despite Economic Worries

Enterprises will increase their public cloud spend in 2023 even as they struggle to manage cloud storage costs, a Wasabi study finds.

Growing data storage needs are keeping business investments in public clouds at high levels, with the vast majority (84%) of organizations increasing their budgets to accrue greater amounts of cloud-based storage, according to Wasabi Technologies' 2023 Global Cloud Storage Index, a survey of 1,000 IT decision-makers.

The study found that nearly nine in 10 (89%) organizations migrated data from on-premises storage to public cloud in the last year, with more than half (51%) of respondents citing use of public clouds to support enterprise resource planning (ERP) and customer relationship management (CRM) business applications.

The findings indicate that the value of cloud infrastructure services remains high, especially as it relates to the ability of these services to fuel digital transformation and modernization initiatives, primarily because of reasons like instant scale, access to new geographic regions, and quicker time to market.

"From an economic standpoint, we were pleasantly surprised to see how positive the outlook is for 2023," said Andrew Smith, senior manager of strategy and market intelligence at Wasabi. "Our data shows that despite economic uncertainty, enterprises are still allocating budget and capacity to cloud storage — growing their footprint of stored data in the public cloud."

The survey data found central IT has the highest level of influence over an organization's public cloud storage spending, which Smith said is likely a good indicator of who also has a high level of influence over the decision to shift/migrate to public cloud.

Organizations Struggle to Manage Cloud Storage Spending

Smith said he is surprised at how big of a challenge many organizations have managing their cloud storage budgets and spending: More than half said they exceeded their budgeted spend on cloud storage for 2022.

"When we asked why, many of the top reasons were fee-related," he said. "This highlights the need for ongoing simplicity of billing, as well as the need for better accuracy when it comes to current and forecast usage of cloud resources."

The survey also asked organizations to estimate the proportions of their storage install base across three categories: public cloud, dedicated cloud, and traditional IT (i.e., on-premises systems and appliances).

The results revealed that for 39% of respondents, their storage install base is in the public cloud, which is expected to increase to 43% over the next 12 months.

Smith called this a "significant movement" of share proportion in just one year and said some of this share growth in public cloud will come at the expense of "traditional IT," which is the only segment that was forecast to decline, according to the respondents. 

Smith predicted that one of the timeless values of cloud infrastructure and storage — cost-effectiveness — will continue to resonate in 2023, as enterprises face renewed scrutiny when it comes to infrastructure spending, as well as some additional budgetary risk aversion due to economic uncertainty.

Cloud Migration: Top Challenges

The survey found that the top three challenges associated with organizations' migration to public cloud are:

  • understanding cloud usage and cost/fees
  • planned/unplanned downtime associated with the migration process
  • meeting compliance and regulatory requirements

"While public cloud spend will not decline in 2023, despite economic uncertainty, we do expect there to be added scrutiny and risk aversion when it comes to cloud storage purchases or migrations, which can result in slower growth and extended buying cycles," Smith said.

In addition to economic uncertainty, businesses are also facing record increases in gas and electricity prices that directly impact their finances.

Smith said CIOs will need to analyze the actual usage and costs associated with their storage strategy, whether it is public, private, or hybrid cloud.

"In addition to technical aspects such as data availability, the choice of a cloud provider must take into account the simplicity and predictability of the services' billing," he said. "That way buyers can accurately forecast predicted use and make sure they don't end up with a runaway cloud bill that knocks their entire IT budget out of sync."

About the author

Nathan Eddy headshotNathan Eddy is a freelance writer for ITPro Today. He has written for Popular Mechanics, Sales & Marketing Management Magazine, FierceMarkets, and CRN, among others. In 2012 he made his first documentary film, The Absent Column. He currently lives in Berlin.
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