Organizations Pulling Back on Unfettered AWS, Azure, Google Cloud Spending
… $800 million more than it had planned. It’s clear that the other macroeconomic pressures impacting nearly every organization – from supply chain shortages and foreign currency fluctuations to availability of skilled staff and geopolitical problems – are also bruising the cloud computing providers.
How this will all play out against the backdrop of a global recession remains unknown. We predict that end-user organizations will continue to apply more mindfulness to their cloud spending — an overdue necessity. For years, people bought the assertion that cloud computing, and the associated shift from the capex budget to opex would result in less spending compared to running on-premises infrastructure. That’s not the case. Cloud computing is expensive. Subscriptions do not come cheap and they have created mounting – often surprising – bills for organizations. Of course, so did pandemic-led cloud deployments. Between 2020 and late 2021, in efforts to support remote workers amid COVID-19, organizations consumed cloud services and infrastructure at unprecedented rates.
Now, as end users clean up the excess and rein in spending, the Big 3 are reeling a bit from the pullback. The earnings disappointing investors this past week represent a natural result of years of overspending. Moreover, they serve as a response to macroeconomic pressures.
Cloud Computing Growth Will Continue — Just Not at Recent Rates
Yet underneath the hype and hysteria lies the reality: Cloud computing adoption will only continue. It may not do so at the rates the greedy beast that is Wall Street requires, but growth itself remains in little question. Synergy Research Group, for one, predicts “strong growth over the next five years.”
“U.S. spending on cloud services is now approaching a $100 billion annual run rate and continues to grow by 30% per year, which is pretty unusual for such a large IT market,” said John Dinsdale, a chief analyst at Synergy. “The growth rates for regional cloud markets beyond the U.S. will bounce back as some of the current exceptional circumstances work their way through the system. This helps to underpin Synergy’s cloud forecasts.”
In the more near-term, Gartner is forecasting almost 20% higher spending on cloud computing in 2023 than in 2022. New numbers from the research firm indicate outlay on public cloud will hit $592 billion in 2023, up from $490 billion this year. That’s an increase of nearly 19%.
“Current inflationary pressures and macroeconomic conditions are having a push-and-pull effect on cloud spending,” said Sid Nag, vice president analyst at Gartner. “Cloud computing will continue to be a bastion of safety and innovation, supporting growth during uncertain times due to its agile, elastic and scalable nature.”
However, Nag cautioned (and reflecting our point), organizations “can only spend what they have. Cloud spending could decrease if overall IT budgets shrink, given that cloud continues to be the largest chunk of IT spend and proportionate budget growth.”
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