Manage Your Growing Cloud Costs


As IT spending grows, it’s increasingly cloud-focused. Rising IaaS, PaaS, and SaaS use impact on-premises investments and require new processes for cost management that consider the continuous purchases of cloud resources.

IT spending is rapidly shifting to cloud investments, which is also changing the mix of vendors used by IT. At the same time, organizations continue to struggle to manage both their overall IT spending and their cloud costs, in particular.

Spend optimization for growing cloud costs needs a fresh approach – one that considers the fact that cloud resources are being purchased every time a developer deploys an application, or a DevOps engineer scales up a cloud virtual machine or an IT employee scans a credit card for a SaaS application. Cloud services are being purchased continuously by business units, departments, and individuals to move faster.

What do organizations need to do to optimize their shifting IT portfolios? In the new Flexera 2020 State of Tech Spend SurveyOpens a new window , more than 300 enterprise IT executives addressed the implications of the shift toward the cloud. Answers provided by respondents, who represent companies with more than 2,000 employees, shed light on the specific nature of cloud spend trends. The result: the valuable insight that can inform your overall IT spend optimization plans.

Track and Manage Your IT – and Cloud – Spend

Today, the percentage of IT spending that’s dedicated to cloud solutions is higher than what’s invested in traditional on-premises software. Overall, cloud spend is on the rise. With 18 percent spent on IaaS/PaaS solutions and 7 percent spent on SaaS, the 25 percent total spent on cloud bypasses the 22 percent going to on-prem software offerings. This trend promises to continue. More than four out of five respondents anticipate that their spend on IaaS/PaaS and SaaS will grow; within IaaS/PaaS spending, 41 percent say that they will see a “significant increase” in spending. Concurrently, spending on on-premises software is trending down, with 55 percent reporting that they anticipate a slight or significant decrease in 2020.

Recognize What’s Driving These Trends

Simply Put: more workloads are migrating to the cloud, which is a primary driver of these tech investment trends. Currently, 32 percent of workloads are running in the cloud (SaaS, IaaS, and PaaS); next year, that number is expected to go up to 43 percent.

To fund the growing use of cloud, investments in on-premises software and data centers are being reduced. Only 7 percent of respondents plan to increase the number of data centers their companies use, while 65 percent plan to reduce the number of data centers in 2020. More broadly, more than half of the respondents are likely to reduce traditional software investments next year.

Understand and Mitigate Spend Optimization Challenges

Struggling with IT spend isn’t new. Getting visibility and control of this area has long been difficult. These challenges grow as workloads shift to the cloud. Few organizations (23 percent) feel that they’re mature at optimizing traditional software license spend. Fewer companies consider themselves mature at managing public cloud (14 percent), and SaaS (15 percent) spend, and optimizing costs to reduce waste proves to be even more challenging.

Today’s top challenge in IT spend visibility: reporting on spending by delivered IT business services, which 61 percent of respondents identified as the main hurdle. Collecting IT spend data (43 percent) and reporting on IT spend by application (38 percent) round out the top three challenges. Each of these is a critical impediment, particularly as businesses attempt to accurately track the costs of migrating their IT delivered services to the cloud and to measure the ROI for digital transformation initiatives.

Beyond issues of visibility are issues of management. Avoiding waste and having too many manual processes are the top challenges in spend management (as cited, respectively, by 89 percent and 86 percent of respondents). Other significant issues to clear spend visibility include challenges in understanding the cost of delivered, difficulty in getting data to optimize spend, and increased prices from vendors.

Evaluate the Shifting Landscape of Vendors

As IT investments shift, so does the use of vendors. The vendors who are the most heavily used include traditional vendors (Microsoft, VMware, SAP, and Oracle top the list), but SaaS and cloud vendors are moving up the list.

The future promises a shift, however. AWS and Microsoft will be winners, with the majority of respondents planning to increase the use of these vendors. Traditional software vendors (Oracle and IBM) may see more customers decreasing in use than increasing, putting pressure on them to grow customer use of their own SaaS or cloud solutions.