Advanced Computing in the Age of AI | Wednesday, May 18, 2022

The Hidden Costs of Cloud Adoption 

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Cloud adoption brings with it a paradox, a market analyst finds: Enterprises primarily embrace the cloud to reduce operating costs but end up spending more on inexpensive access to cloud computing and storage due to increased consumption and inevitable waste.

“Reality doesn’t match expectations,” concludes a cloud adoption study released this week by 451 Research. It turns out that cost, the top driver of enterprise cloud adoption, is also the “number one pain point post-migration,” the market watcher asserts.

While enterprises reap immediate cost savings after shifting to the cloud, the required migration of current and new applications—what the study calls “switching cost—tends to erode those upfront savings. Those costs are partially offset by reducing dependence on dedicated application kits, but “infrastructure costs slowly and surely ramp up,” the researcher notes.

“Cloud is an inexpensive and easily accessible technology,” the infrastructure survey concludes. “People consume more, thereby spending more, and forget to control or limit their consumption.”

In response, larger enterprises often bring their workloads back to their own datacenters as a way of controlling costs. Others attempt to rein in cloud usage through resource governance guidelines or prioritizing consumption by department of project. Another tactic is making individual departments responsible for cloud consumption, providing a budgetary incentive to control consumption and costs.

As the realities of cloud adoption are reflecting on the corporate bottom line—a reality that has fueled hybrid and multi-cloud approaches—the survey authors argue that enterprises are entering a new phase in which “the key objective now is to squeeze costs while enabling flexible IT consumption.”

They add: “We are entering the brave new world of utility computing.”

Implementing the emerging “utility” cloud will require enterprises to be more selective in how they use cloud resources, 451 Research said. In response, the market analyst found that 34 percent of enterprises polled said they have over the last year moved applications and data from a public cloud to either hosted private or on-premises private cloud.

That imperative also has given rise to a new category of vendors offering governance tools and cloud price models as a way of reducing spiraling costs. With governance tools in place, cloud spending “slows, but inevitably there is waste,” the survey found. “Waste management technologies right-size instances, terminate unused resources and seek to ensure all resources are being consumed by real projects.”

With more governance tools being used to control public cloud consumption, 451 Research predicts the market for “cost optimization” tools will be “ripe for acquisition” over the next 12 to 18 months.


About the author: George Leopold

George Leopold has written about science and technology for more than 30 years, focusing on electronics and aerospace technology. He previously served as executive editor of Electronic Engineering Times. Leopold is the author of "Calculated Risk: The Supersonic Life and Times of Gus Grissom" (Purdue University Press, 2016).

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