Enterprise cloud strategy matured last year as organizations scrutinized IT spending and invested in technologies to support generative AI adoption.
Despite the shift, mixed signals abounded, according to Flexera’s 14th annual State of the Cloud report, which drew on a survey published Wednesday of more than 750 IT professionals and executive leaders conducted by the software company late last year.
A move to repatriate select workloads gained momentum alongside growing enterprise appetite for hyperscaler services. Cloud budgets swelled, while the spread of FinOps cloud costs management practices helped organizations trim away wasted spend and identify applications ripe for repatriation, Flexera found.
One-third of participating organizations budgeted $12 million or more a year for public cloud, up 4 percentage points year over year. Optimization levels rose, too. Respondents estimate that 27% of their cloud spend in infrastructure and platform services is wasted, compared to 32% four years ago.
Optimization went hand-in-hand with repatriation, as respondents reported moving more than one-fifth of cloud workloads back on-prem. This year marked the first time in the survey's history respondents were asked about repatriation.
“Going back five or six years, folks were talking about repatriation, but no one was doing it — it just wasn't a thing,” Brian Adler, senior director of cloud market strategy at Flexera, told CIO Dive. “As folks get more experience, they start to realize what is and is not appropriate for cloud.”
FinOps expands
FinOps is one of the drivers behind the trend. IT leaders are simply getting smarter about how they leverage cloud, according to Jay Litkey, SVP of cloud and FinOps at Flexera and FinOps Foundation governing board member.
“They're getting very good at allocating costs and understanding the cost of workloads,” Litkey said. “FinOps is providing the data to make repatriation decisions.”
The cost optimization framework is gaining ground. The proportion of respondents from organizations with an active FinOps practice grew 8 percentage points year over year to 59%. Managing cloud spend was the top priority for 84% of respondents, surpassing cloud security by 7 percentage points.
FinOps principles are also spreading beyond cloud to attack software, data center and AI spending.
The FinOps Foundation found that nearly two-thirds of organizations are targeting SaaS spend, and roughly the same number have AI costs across cloud and on-prem ecosystems on their FinOps radar. The industry group surveyed more than 800 companies for its 5th annual report published in February.
AI adoption is driving broad changes across enterprise technologies. Flexera tracked a surge in data warehouse services, which topped the list of public cloud services leveraged by enterprises. More than three-quarters of respondents reported leveraging cloud for data warehousing, up from 67% last year.
An Apptio report from earlier this year found that many organizations plan to divert budget to AI initiatives from other IT spending buckets.
Flexera identified a spike in cloud-based AI usage, too.
Nearly three-quarters of respondents this year said their organization uses public cloud generative AI services, up from fewer than half in 2024. Most will be looking to manage that spend in the coming year.
“Some of the AI is in the cloud, some of it is through SaaS browsers, and some of it is in the data center,” Litkey said. “As execs get wind of the spend and the distraction level, they’re going to ask more questions about the business value of what feels like an endless supply of science projects.”
