Double or bust? Cost management versus cloud innovation

Posted on December 2, 2021 by Design in Design Innovation | 0 Comments

Holiday season is upon us, and predictions are that online sales will hit an all-time high of $206.88 billion in the run up to Christmas

The growth in online demand has meant e-commerce operators, banks and logistics companies are increasingly reliant on cloud strategies and investments to rapidly scale, and remain resilient and secure. In retail, the cloud market is predicted to expand over 18% CAGR by 2025 driven by omnichannel experiences while the cloud supply chain management market is set to grow at a CAGR of 13.81%.

While retail is a cloud leader, other industries are following suit, and as such, we’re starting to see the trends influencing adoption. The recent 2021 Cloud Adoption Survey, explores the state of the cloud, microservices, distributed application development, and other critical infrastructure and operations technologies. Similar to last year’s results, and echoing market analysis, cloud adoption has continued to grow, with 90% of respondents indicating that their organisations use cloud computing; retail, media and entertainment, finance and banking among the industry sectors with the highest cloud use. In fact, almost half of respondents said they planned to migrate 50% or more of their applications to the cloud in the coming year. A fifth planned to migrate all their applications, signifying continual cloud progress.

But what about those still resolutely refusing to join the cloud revolution? Among those who are not currently using cloud computing, cost was a top concern. And they are not alone. While the proliferation of cloud adoption is almost universal, the complexity of cost models is a major challenge for all organisations, regardless of where they are in their journey. Even among respondents who were using the cloud, the biggest concern cited was managing cost.

Cost is especially pertinent when considering the adoption of public cloud services such as AWS, Azure and Google, which over two thirds of respondents have invested in. While many see moving to such public clouds as a cost-saving measure, (removing the need to maintain on-premises infrastructure), this is an assumption that often comes back to bite them. It’s a common misconception that cloud computing is inexpensive, which is simply not a reality at corporate scale.

Unlocking the benefits of cloud adoption

The issue of costs is complex. As Gartner research suggests, 95% of business and IT leaders find cloud billing the most confusing element of using public cloud services. With scaled costs depending on usage over time, forecasting cloud costs is a challenge in itself. The pandemic provides a perfect example of how costs can spiral. According to Accenture, ‘as multiple enterprises shifted rapidly to cloud during the pandemic, some saw costs balloon… by 20% to 50% just from the increase in usage’. Gartner predicts that through 2024, 60% of infrastructure and operations leaders will encounter public cloud cost overruns.

Now, consider the cost of festive data spikes in a year that will surpass previous consumer purchase records. This may prove a rather nasty surprise for those who have failed to understand the cost implications or failed to adopt cloud optimisation tools. This issue is further complicated when an organisation invests in multiple cloud providers or adopts a hybrid cloud model.

The advantages of the cloud, its flexibility and scalability, can also make monitoring and controlling costs a fine art. This doesn’t mean it is one that doesn’t pay to master. Cost planning and cost governance can help to control expenses while maximising investments.

Good cost management needs to account for the true benefits of moving to the cloud. The ability to scale quickly to handle sudden changes in workload is worth a lot, as is improved uptime; cloud providers have multiple data centers and backup power that most businesses can’t afford.

However, as those who are using cloud services to maximum effect know, the cloud is about much more than data storage and processing. It provides the ideal platform to build innovative solutions that harness that data to drive superior insights and services. Simply put, cost concerns should not be a barrier to cloud adoption, which is really focused on enabling innovation, in turn delivering greater opportunities for optimisation and growth.

As Tracy Woo, a senior analyst at Forrester Research warns, “focus on managing costs isn’t there. We tell clients that shifting workloads from the data center to the cloud doesn’t mean cost savings, but rather should be seen as a tool for innovation.”

Despite concerns around cost, given the already high usage rates and ambitious plans for migration shown by the respondents to our survey, it’s clear that technologists understand the value of the cloud. Flexibility, reliability, and scalability are the real advantages. Cost shouldn’t be a hindrance to innovation. With that in mind, we expect to see cloud strategy rise to the top of all organisation’s wish-lists this year.

About the Author

Mike Loukides is Vice President of Emerging Tech at O’Reilly. Inspiring the future for more than 40 years We share the knowledge and teach the skills people need to change their world. For more than 40 years, O’Reilly has imparted the world-shaping ideas of innovators through books, articles, conferences, and our online learning platform. When individuals, teams, and entire enterprises connect with the world’s leading experts and content providers, anything is possible. Whether you’re working to advance your career, be a better manager, or achieve the next breakthrough in technology or business, learning new skills is at the heart of it all.

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