There is a push-pull effect currently happening with cloud. Its popularity continues to burgeon, with worldwide end-user spending on public cloud services forecast by Gartner to grow 20.7% in 2023 to total $591.8 billion. Yet, many organizations are spending less given the current inflationary pressures and macroeconomic conditions, with recent earnings reports from Amazon, Google, and Microsoft showing cloud users are looking for ways to cut costs.
Cloud spend has become decentralized and distributed — a trend that's a direct result from the increased usage of cloud. This means greater visibility and management of cloud spend must be attained, shifting the focus to cost optimization. To remain competitive, businesses need to go beyond just slashing budgets and dialing down cloud spending. Instead, they should look for ways to maximize cloud spend more efficiently and effectively by ensuring they are spending on the right things to drive the business forward.
Here, we'll lay out the ways in which businesses are using the cloud to achieve competitive advantage amid uncertainty, specifically looking at it through prioritization, optimization, and innovation.
Identify the Current MVP (Most Valuable Priority)
Today's cloud technology can cut down on the time needed to spend on managing infrastructure, freeing businesses up to focus more on improving products and relations with customers.
Early cloud repositories like Dropbox gave end users and businesses alike the ability to declutter documents and offload storage that was taking up space on local drives and servers. This first step of decentralization opened pathways for more innovative, cloud-backed software-as-a-service (SaaS) offerings to infiltrate the market and help businesses run more affordably and productively.
Today's cloud can provide businesses with invaluable, actionable insights based on real-time data — allowing the ability to zero in on only the key revenue-generating activities. The data that's being processed through the cloud is synchronized and easier to access than on local servers, meaning that valuable business information can be gleaned from anywhere across an entire network and fed through other SaaS services for instant analysis. This enables businesses to identify pain points in their bottom line in real time to be able to react quickly and move the financial needle forward.
This includes activities like leveraging the cloud's dynamic resource allocation, yielding the ability to quickly adapt to scale up or down to meet current demand based on ever-changing conditions — without worrying about spending too much money or time. Or identifying where to offload or reduce attention to unnecessary activities that aren't keeping in line with business goals or what's most valuable to being successful in the market right now.
Optimize for Price and Performance
With the distributed and decentralized environment of cloud, it's a great way to eliminate the expense of maintaining and supporting equipment. And by reducing hardware costs, businesses can also reduce labor costs or power consumption associated with running physical servers.
But beyond that, leveraging cloud financial management (FinOps) tools makes it possible to maximize cloud value even further — reducing waste and spend and maintaining agility in operations, squeezing out even more savings.
The latest report on gross domestic product (GDP) uncovered a sluggish first quarter of 2023. To combat this, businesses are forced to monitor their spend through a mix of controlling cloud costs, offloading redundant apps, and reducing vendor spend. This is an extensive project that also requires the rapid replanning and forecasting of budgets to remain aligned.
This is why forecasting is happening more frequently. According to the FinOps Foundation, they saw a 52% decrease in respondents doing annual forecasting in 2023 from 2022, with a 22% jump in those forecasting monthly. Here, the role of artificial intelligence (AI) within FinOps becomes even more important. Predictive analytics and automation capabilities offered through the cloud will help drive faster, smarter decisions and cost efficiencies. Those who are equipped with FinOps tools will be able to use data to find the right places to cut or redirect spend in real time to remain viable, as opposed to just slashing budgets generally.
Don't Lessen but Increase Innovation
The cloud has changed competition between businesses due to its innovation opportunities. Even when navigating an economic downturn, businesses should be redirecting spend to this area, because not taking full advantage of cloud's innovation capabilities means missed growth opportunities. And in turn, losing out on the chance to leapfrog (or even completely overtake) competitors.
Perhaps no greater example of this is the case of Blockbuster, the leader in video rentals in the 1990s and early 2000s. A competitor in the DVD rental space, Netflix, opted to stay away from brick-and-mortar retail, instead focusing on growing their space online, especially as high-speed internet was being developed.
With the innovation of cloud computing, Netflix created a vast digital library leveraging cloud streaming technology to revolutionize the way entertainment is distributed and ultimately consumed. While Blockbuster has shuttered, Netflix has become a top streaming giant, with their own original shows and movies — all thanks to finding opportunities to innovate (and disrupt competition) with the cloud.
Moves like these are exactly why the profile of not only the development process, but the developers themselves, has been elevated in enterprise C-suite discussions. Simply put, the cloud democratizes the ability to test great ideas and bring them to life. While it can take days, weeks, or even months to provision a new physical server in an on-premises data center, it can take only minutes to provision a new infrastructure in the cloud. This opens the door of possibilities for innovation, acting as a sandbox for the best developer talent to want to play and revolutionize in.
Faster development processes, plus empowered, incentivized developers, equates to quicker time to market and the ability to respond more quickly to changing market conditions and customer preferences.
Lock In Cloud as a Secret Weapon
Cloud goes beyond helping businesses thrive during the good times. It can act as a powerful tool to support safety, security, and growth during times of economic instability. As cloud spend continues, every business should have a rock-solid plan for maximizing the value of cloud through prioritizing what's most valuable, optimizing costs and performance, and continuing to identify innovation opportunities. Those who do will stay ahead of the competition and remain aggressive in an ever-evolving landscape.
About the author:
Eugene Khvostov is Apptio's Chief Product Officer, with global responsibility for the full suite of Apptio's products including Product Management, User Experience/Design, Pricing and Strategy, and Product Marketing teams. With more than a decade of experience leading end-to-end technical product development in a variety of different industries, Eugene takes a strategic, customer-first view on product vision, roadmap decisions, and new product investment areas. He is also a Board Member for the FinOps Foundation, a community-based industry group focused on the evolving cloud financial management discipline and best practices. Prior to joining Apptio, Eugene held positions of increasing responsibility at Mastercard and Amazon Web Services.