Unused discounts, lack of contract fuel cloud overspend

Dive Brief:

The majority (61%) of cloud decision makers and users plan to optimize cloud costs in 2021, making it the top initiative this year, according to Flexera's 2021 State of the Cloud. Cloud decision-makers estimate 30% of their organization's cloud spend is wasted, according to the survey of 750 global respondents released Tuesday.
In the next 12 months, companies expect 54% of enterprise workloads to be in the public cloud. While 31% of enterprises spend more than $1 million monthly on public cloud in the latest report, only about 20% said they were spending that much in 2020.
COVID-19 accelerated cloud adoption and cloud spend for organizations. Of respondents that answered a question about the pandemic, 90% expect cloud use to exceed plans because of it.

Dive Insight:

IT departments are feeling the pressure of their quick wins from early on in the pandemic. After preparing the office for remote work in about two weeks time, business units now expect the IT department to take on other major projects just as quickly, according to Cyndi Tackett, VP of product marketing at Flexera.

Quick transformations aren't feasible for IT because they can leave loose ends and cost overruns. "It was a necessary, chaotic move," said Tackett. "But [they] might not have done it in the most cost-efficient manner."

So, 2021 IT budgets will go toward the clean up. "Now's the time that they need to be going back and looking at everything that they have, getting all of their cloud bills together and understanding where they can save costs," Tackett said.

The top challenges for operating in the cloud remain the same; 81% named cloud security as a challenge, 79% cited cloud spend and 75% named governance.

A multicloud strategy, taking advantage of cloud discounts, and securing contracts with vendors can all help businesses rein in cloud costs, according to Tackett.

Multicloud provides insights into the costs of different vendors to negotiate pricing. Ninety-two percent of cloud decision-makers say they have a multicloud strategy and 80% have hybrid cloud, according to the report.

A contract, rather than paying on-demand or signing a click-through agreement, tailors cloud costs to the business, according to Tackett. "We still don't see most enterprises really taking advantage of the discounts provided like reserved instances and that's really shocking," Tackett said.

The discounts are a no-brainer for business, but require a good analysis of cloud costs to understand where they may apply. Cloud-decision makers are starting to leverage the discounts with 49% of respondents implementing automated policies to shut down workloads during off hours and 48% rightsizing instances, according to the report.