Is cloud cost management key to surviving an economic downturn?
Aimee Manning | OCT 09, 2023
7 min read
Finance leaders across the globe may be starting to feel somewhat optimistic about their growth prospects – at least more so now than earlier in the year – but with the pressure still mounting to reduce outgoings, many are continuing to look for new ways to reign in organizational spending and identify unnecessary costs.
For an increasing number of companies, the focus has subsequently turned to the amount being spent on cloud computing.
But just how much is being spent? And realistically, how much could you be saving by optimizing your cloud costs?
Here’s everything you need to know.
How much you could be saving on your cloud spend
With cloud spend now running into the millions, it’s a cost that’s difficult to ignore. Even for SMBs, the average annual spend is around $1.2m. While generally speaking, the larger the company, the higher the cloud bill, Vertice’s data indicates that the average company spends $3.8 million a year, although for some enterprises, it is typically far more.
And the costs are likely to increase further. By 2025, it is estimated that these cloud costs will account for as much as 51% of total IT spending.
But while there’s no denying that cloud is a worthwhile investment, and one that’s going to become all the more important as organizations continue to adopt digital transformation models and invest heavily in emerging technologies such as generative-AI, the sheer amount of spend that’s going to waste simply cannot be ignored.
To put it into perspective, our own data indicates that organizations are wasting close to a third of their cloud spend (32%), which in many cases equates to over $1 million being spent unnecessarily each year by the average organization.
But, where there’s waste, there’s opportunity. Which means that with a solid understanding of how your budget is being spent – and more specifically wasted – you really do stand to alleviate the financial pressure on your organization and in turn mitigate the impact of inflation.
The question is, how?
In short, by optimizing your cloud costs.
Why cloud cost management could be the key to alleviating financial pressure
Not only is a sizable amount of budget going to waste within the average organization, but cloud costs are generally increasing year-on-year too – AWS, for example, increased its average prices in 2020, 2021 and 2022, the latter of which was a hefty 23%.
The problem is, despite soaring cloud costs and escalating usage, finance leaders have very little visibility into how exactly their budget is being spent and more importantly, how these costs can be minimized. In fact, this lack of insight leaves many needing to find workarounds for predicting cloud spend.
And it’s not much better for those in companies where there’s some degree of FinOps practice in place. This is because there’s often a high tendency to optimize usage with zero insight into the impact it will have on the cost.
As a result:
- 66% of companies report higher usage than planned
- 70% don’t know the exact drivers of their cloud costs
- 48% of CFOs aren’t able to measure cloud ROI
- The actual amount being spent on cloud computing exceeds budgets by 20%+
So, just how much difference could cloud cost optimization make?
Well, with the right approach, a substantial difference, and not just in terms of saving money.
One of the biggest advantages to optimizing your cloud infrastructure by far is the amount of money you stand to save – up to 25% on average.
The question is, how does it work?
Vertice’s Cloud Cost Optimization platform specifically leverages more than 75 sophisticated optimization tests, with coverage across 40+ AWS products, in order to provide detailed recommendations with quantifiable savings estimates.
As a finance leader, however, this isn’t the only advantage.
Vertice can also provide historical context on your usage, giving you invaluable forecasting insights, as well as year-on-year growth projections that enable you to prepare budgets and cash flow models with greater predictability.
The problem, however, is that finance teams often have to take IT’s word that the cloud environment has been optimized, even though, in many cases, costs continue to rise.
So, what’s the solution?
While it’s certainly worth knowing which questions to ask your IT colleagues, the best course of action is to gain first-hand visibility into your cloud spend and usage. This is where Vertice comes in.
Vertice’s Cloud Cost Optimization platform specifically provides simplified reporting on your total spend, enabling you to not only see how exactly your spend adds up, but more importantly where the potential savings exist.
Behind the scenes, our recommendation engine also continuously works to identify further savings opportunities, enabling you to see just how optimized your cloud environment is at any given time, all the while receiving real-time alerts when ther
Time back in your day
Not only can it be time-consuming for finance leaders to try to predict cloud spend, but the process of uncovering savings and implementing optimizations requires valuable engineering resources. Even then, the full potential of savings are rarely identified.
With the right platform, this no longer has to be an issue.
After all, our savings recommendations require minimal engineering effort, meaning your organization not only benefits from maximum cost-savings, but also significant time-savings.
And it’s not the only way we can save you time.
In addition to providing savings recommendations, our platform also uses advanced algorithms to trade your AWS reserved instances and maximize your discount commitments on your behalf – a process that is usually manual and cumbersome.
Future proof your business and drive down spend with Vertice
With organizations under increasing financial pressure, it comes as no surprise that so many are now turning to cloud cost optimization solutions in a bid to minimize company spending.
After all, with the ability to reduce cloud expenditure by up to 25%, many companies are looking at monetary savings of more than $1 million each year. For some, significantly more.
These savings are, however, largely dependent on having a platform such as Vertice in place, that not only provides both finance and technology teams with granular visibility of hidden costs, but that also provides actionable recommendations on how to eliminate wastage and maximize cloud efficiency.
This isn’t the only advantage of partnering with Vertice though.
With cloud cost optimization seamlessly integrated with your organization’s SaaS spend, Vertice is well positioned to optimize both, driving maximum time and cost savings across your entire tech portfolio.
See for yourself how Vertice discovered $1.1 million in cloud savings potential for one company, or alternatively learn more about the benefits of partnering with a Cloud Cost Optimization provider.