Cloud spending has risen by an average of 30%, primarily due to the influence of Generative AI and AI technologies, with 72% of IT and financial leaders agreeing that GenAI-driven cloud costs are becoming unsustainable. These insights come from a recent Vanson Bourne study, commissioned by Tangoe, a leader in expense and asset management solutions for over two decades.
“GenAI is creating a cloud boom that will take IT expenditures to new heights,” said Chris Ortbals, chief product officer at Tangoe. “With year-over-year cloud spending up 30%, we’re seeing the financial fallout of AI demands. Left unmanaged, GenAI has the potential to make innovation financially unsustainable.”
The study surveyed 500 IT and finance professionals across a wide range of business sizes and industries with the overwhelming majority (92%) reporting their cloud spending was on the rise. The top three reasons were listed as AI (50%), GenAI (49%) and automation (36%). On average, companies spend $40M on cloud services with a surprisingly even split among categories: SaaS (28%), private cloud (28%), IaaS (25%), and UCaaS (19%).
Key Challenges in Private Clouds, Software, Cost Allocations
The findings also spotlight the complexity of cloud financial management, highlighting specific challenge areas.
• Hybrid Cloud Cost Management is Rising in Criticality: 80% say private cloud cost management is tricky compared to public, yet 95% plan to repatriate their resources from public to private clouds with 47% of resources slated for repatriation.
• Software is a Key Contributor to Overspending: 38% of SaaS spending comes from Shadow IT, and 67% admit their productivity software licenses (like Microsoft 365® and Google® Workspace) go to waste.
• Sharing Cloud Expenses is Important but Difficult: 93% agree shared cloud expenses should be allocated across the organization, and yet, 53% find chargebacks challenging and time consuming.
Preparing Companies to Handle Rising Cloud Expenditures
In addition to putting context around the challenges associated with cloud financial management, the study also reveals the best practices helping accelerate results.
• FinOps Coverage Has to Expand: A decisive 94% of cloud cost practitioners assert that FinOps must evolve to incorporate SaaS, and not just focus on Infrastructure as a Service (IaaS). Learn how Tangoe’s FinOps solution helped a manufacturer reduce Microsoft 365 spending.
• More than Cost Cutting – It’s about Productivity and Security: 94% of respondents consider increased productivity a derived value of cloud cost management. Enhancing productivity and security have emerged among the top three benefits of effective cost management, highlighting the need for FinOps solutions that do more than just pinpoint ways to save but also advance financial operations and risk management practices.
• Popular Approaches Leave Leaders Worried: In controlling spending, a collective 62% of respondents use either manual processes (21%) or native tools from cloud service providers (42%), rather than adopting specialized FinOps software. These approaches correspond with a lack of confidence and higher concerns that costs will spiral out of control.
“The cloud’s hidden costs and unpredictable invoices can become the silent killer of GenAI,” added Ortbals. “The more urgently companies adopt comprehensive cost management FinOps strategies, the easier it is for them to turn GenAI’s promise into lasting innovation instead of runaway expenses and technical debt.”
To review the Tangoe report: “State of Cloud: The Critical Role of Third-Party FinOps in Cloud Spending Control”, visit the website here.
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