Stretching Cloud Investments for Optimal Results
February 13, 2024

Grant Duxbury
Aptum

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Cloud computing continues to soar, with little signs of slowing down. Gartner predicts a 5.5% global increase in digital technology spending in 2023, with a significant percentage of it going to cloud initiatives. But, as with any new program, companies are seeing substantial benefits in the cloud but are also navigating budgetary challenges.

With an estimated 94% of companies using cloud services today, priorities for IT teams have shifted from purely adoption-based to deploying new strategies. As they explore new territories, it can be a struggle to exploit the full value of their spend and the cloud's transformative capabilities.

Realizing the Benefits of the Cloud

The significant benefits experienced by cloud adoption make the costly investment worthwhile over time. Some of the most notable advantages include increased efficiencies, reliability and scalability. Part two of Aptum's Cloud Impact Study, titled Maximizing Value: Controlling Costs and Optimizing Cloud Spend surveyed 400 senior IT professionals in the US, UK and Canada. The study revealed that 95% of respondents stated the cloud is an important way to deliver better business continuity, 93% said it helps their organization improve security and better manage data, and 94% agreed that cloud has delivered expected efficiency gains in 2023.

For many organizations, the return on their cloud transformation results from the flexibility it offers compared to costly legacy systems. Companies can scale up or down based on their unique needs at any time, eliminating unnecessary spending on excess capacity.

Controlling Costs

Cloud investments are a substantial part of a company's budget, with 71% of IT professionals reporting that cloud-related costs account for 30% or more of their total IT spend, and 34% said it accounts for the majority of their tech budgets.

While the cloud provides many operational benefits to organizations, there is still work to be done economically — 73% of survey respondents said their cloud investments have led to higher-than-expected IT costs in the past 12 months, a 28% increase from 2021. Additionally, 52% of IT professionals stated their organizations have wasted significantly on inefficiencies with their cloud platforms and services.

Understandably, many organizations jumped head-first into the cloud during the pandemic and are now realizing the implications of the lack of a Cloud Adoption Framework. While many factors can play into increased costs, the most common are the lack of strategic plan and skills readiness to manage cloud usage effectively and efficiently. These shortcomings are exacerbated for organizations using a hybrid or multi-cloud approach with a mix of on-prem and public cloud services for different data needs and workloads.

Today, most IT professionals believe their organization lacks the right skills and expertise to plan complex and multi-cloud implementations, with 62% agreeing that a lack of internal expertise has prevented them from accelerating cloud implementations. This is imperative for controlling runaway costs and inefficiencies. Companies must have resources with the necessary skills and knowledge to make more informed decisions.

The Power of FinOps

In addition to investing in the right talent and more informed strategies, companies can address cloud costs by adopting FinOps. A collaborative culture approach between diverse teams, FinOps helps organizations gain real visibility into their cloud costs to make more informed decisions. FinOps brings together teams such as engineers, finance and product to create a central, cross-functioning "Center of Excellence" that is dedicated to offering best practices to stakeholders by aiding them in optimizing the company's cloud expenditures.

According to McKinsey, adopting FinOps in a complex cloud environment can reduce costs by as much as 30%. Controlling costs was the top challenge reported in the study, with 37% of IT professionals stating that a key driver of their cloud strategy and investment is gaining more flexibility and scalability in the amount of capacity available.

FinOps is a viable way to address IT professionals' challenges by bringing control and flexibility to achieve more cost-effective cloud consumption.

As the study found, the benefits of cloud computing are irrefutable given its potential for scalability, agility and cost savings. However, in order to reap its true benefits, companies must have a clear strategy in place, including the use of FinOps to ensure it is operating efficiently. Without this level of structure and planning, businesses will continue to experience unexpected costs, security breaches and operational inefficiencies.

Grant Duxbury is Global Director, Advisory & Consulting Services, at Aptum
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