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Home Technology Cloud gets better, but not cheaper

Cloud gets better, but not cheaper

by Jessica Weisman-Pitts
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iStock 1467790942

Cloud gets better, but not cheaper

By Umashankar Lakshmipathy, Executive Vice President and Head for Cloud, Infrastructure, and Security, EMEA, Infosys

Early cloud was a neat, tidy solution.

The corporate world began to vigorously embrace cloud about 10 years ago to solve a timely problem. Companies with aging data centers and growing digital systems faced a choice: spend heavily to modernize server racks and proprietary networks or move to cloud. Early corporate cloud effortlessly linked the IT departments desire for modern systems with the business desire for lower costs.

A decade on, cloud entered a new era. Companies today can’t turn to cloud for enhanced capabilities and diminished tech costs. The two are now decoupled.

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Using cloud to replace or update systems remains popular, but now pairs with growth-focused motives such as enabling new revenue streams, acquisitions integration, and access to new technologies.

The good news is that cloud delivers on the capability front. Infosys’ Cloud Radar 2023 research report found that businesses increasingly rely on cloud for sophisticated solutions, growth, and transformation. It delivers, executives tell us. Some 73% called their cloud systems very effective or extremely effective.

But the cost-saving front is a different story. Today, few companies turn to cloud to cut costs. Only 15% consider cloud for cost-cutting to be a major motivation. British companies fell in in line with the overall survey, with 13% of UK-based enterprises identifying cost-cutting as a major motivator for cloud migration. Rather than focus on cost, British companies are most likely to move to cloud to replace or update systems and enable new revenue streams. Overall, only 2% ranked cloud to cut costs their top motivation for cloud migration.

What’s more, those who apply cloud to save money, are relatively dissatisfied with the results. Cloud migration is less effective for cost cutting than it is for more nuanced objectives such as adding new capabilities or enhancing collaboration across systems. Further, those who said using cloud to cut costs was a top priority were no more effective at delivering with it than those who valued cost cutting as a secondary priority.

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Cost an emerging area of concern

While their ability to contain costs appears unproven, companies that focus on cloud costs have tapped into an emerging area of concern. Companies have low confidence in their ability to predict, monitor and optimize spending on cloud.

UK companies showed even lower relative confidence in their ability to monitor, predict and optimize costs. In fact, British and German companies recorded lower relative confidence in their abilities to monitor costs than any other regions. However British companies were more confident in their use of cloud to achieve operational resilience.

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Cloud management and governance startups raised about US $1.3 billion in venture capital funding in 2022, according to an analysis by Greylock Partners of Pitchbook data. That came in No. 5 in cloud-related startup funding, behind only artificial intelligence/machine learning startups, Cloud security, analytics, and developer tools.

The underlying reason is clear. Cloud started out as a tool to save money and boost efficiency, but now this technology supports growth and transformation initiatives. Still, many companies have not changed their cloud governance to thrive in this new cloud era.

 

A change in approach for growth

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First, a same-as-it’s-been approach will result in companies losing visibility into their cloud technology environments. Without visibility, it grows difficult to clearly articulate what a particular cloud service is for. Visibility into your cloud environment is essential, but falls flat without a change in approach.

FinOps, or financial operations, aims to unite tech, business, and finance teams around a common goal to balance the need for top-flight cloud capabilities with financial disciple and efficient cloud usage.

In addition to maintaining visibility into what cloud companies are using, it is now more critical than ever to have a clear statement on why companies are using cloud. This can simply be achieved by attaching a business case to each cloud deployment and system.

Currently, too few enterprises link cloud deployments to a business case. Only 21% of  companies report they always have an approved business case for adding cloud.  Without a business case or business owner, tracking and attributing the return on investment of a cloud initiative is challenging, if not impossible. And in a growth mode, the stakes are higher, because growth investments carry more risk than those predicated on cost savings.

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Cloud works well, and companies want more. With 80% of companies planning to increase cloud spending in the next year, cloud environments will become larger and a more complex to manage. Only with a new approach, centered on visibility and establishing a business case, will companies achieve growth and transformation in the new era of cloud.

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