Cloud costs are skyrocketing, and the trend shows no signs of slowing down. With generative artificial intelligence (GenAI) projects becoming more widespread, organisations are experiencing a surge in cloud expenses. Such costs have risen by 30% over the past year alone, according to a recent Vanson Bourne survey of 250 IT and 250 financial decision-makers in the USA.
Three-quarters of IT and finance leaders report that managing these growing expenses has become increasingly difficult. A (quite literally) million dollar question emerges: How exactly can leaders navigate—and alleviate—this growing financial pressure?
But first, why is this happening in the first place?
Why is AI leading to unmanageable cloud costs?
AI applications, particularly those involving GenAI, are fuelled by vast amounts of computational power and storage. This increased demand is pushing organisations to their limits when it comes to managing cloud costs.
The figures speak for themselves: 50% of organisations cite AI as the primary driver of rising cloud costs, while 49% point to generative AI solutions. Additionally, 36% of companies are focused on automation, contributing to these rising expenses.
Beware the hidden ‘double drain’ on cloud budgets
While AI grabs the headlines, software as a service (SaaS) accounts for 28% of an organisation's cloud budget, with an average spend of around $2,500 per employee annually. However, nearly half (47%) of companies reporting difficulties in managing licences and subscriptions effectively.
Another major issue is unauthorised purchases through Shadow IT. This accounts for 38% of SaaS spending, with 46% of companies struggling to control these hidden expenses. Another major issue is unauthorised purchases through Shadow IT, which accounts for 38% of SaaS spending.
In both cases, the result is substantial, uncontrolled costs that can quickly spiral out of control.
Solving the FinOps cloud infrastructure spending puzzle
As IT teams continue to build and deploy applications in the cloud, tracking those costs becomes ever trickier. The lack of transparency around cloud infrastructure purchases is a growing concern, with 43% of organisations reporting challenges in allocating expenses to the appropriate departments.
Then there’s the 53% of businesses who report struggling with recharging cloud costs internally, leading to inefficiencies and time-consuming manual processes for FinOps teams. This growing complexity is making it harder for organisations to maintain financial control over their cloud environments.
Could on-premise be the answer?
The rising costs of cloud infrastructure are leading many organisations to reconsider where workloads should be hosted. A staggering 95% of companies are now planning to repatriate a portion of their public cloud resources back to private clouds or on-premise data centres in an effort to cut costs.
However, managing on-premise costs brings its own set of challenges, and many organisations are—rightly—wary of the potential complexities involved in balancing the financial and operational aspects of a hybrid approach.
Taking control of your cloud costs in 5 steps
Managing cloud costs in the age of AI and SaaS requires proactive strategies. Let’s recap on some ways to make a difference and regain control:
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Audit your SaaS licences regularly to cut costs by avoiding payments for unused subscriptions.
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Set up stricter controls to reduce shadow IT and prevent unauthorised software purchases.
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Make cloud spending transparent, and use clear cost allocation to track and control spending.
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Automate recharging processes to reduce manual work and let FinOps teams focus on more important tasks.
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Partner with a specialist for tailored cloud cost management solutions. For instance, Penta provides businesses with comprehensive cloud control, offering the security and reliability of a dedicated server room without the in-house hassle.
With 24/7 monitoring, built-in regulatory compliance and bank-level security, we ensure cloud costs stay predictable while safeguarding data. Our customised solutions cut down on complexity and provide ample computing power, and it’s all backed by a dedicated team of experts available around the clock.
Want to know more about how Penta can bring predictability to your cloud costs? Contact us and one of our friendly specialists can explain how it works, and what sets us apart.