Cloud spend insights for Q4, 2023

As cloud spend escalates, it comes as little surprise that finance leaders cite it as their number one cost-cutting priority for 2024.

The problem, however, is that despite this increased focus, cloud computing remains one of the most difficult areas of business spending to get under control. If not, the most difficult – not only because of the extremely complex pricing models and volatile nature of cloud usage, but ultimately because you can’t control what you don’t know.

With cloud visibility posing a major issue for CFOs across the globe, we’re on a mission to bridge this gap by shedding light on the spending patterns we’re seeing across our user base, along with practical guidance on how you can start getting your own spend under control.

With this in mind, here are our Cloud Spend Insights for Q4.

Insights of the month

Cloud spend increased 4.2% in the last month. Back in September, we reported that cloud spend had increased by a substantial 35% year-over-year. But if this month’s data is anything to go by, these soaring costs are showing no signs of slowing down.

With spending having risen by 4.2% in the last month alone, it’s clear that organizations worldwide are faced with a major challenge – one that becomes all the more alarming when you consider how the average company is already spending in excess of $3.8 million on cloud computing each year.

But what’s perhaps more concerning is that if these costs were to continue to increase at this same rate over the next 12 months, the equivalent annual growth figure would be around 64% – almost double that of the previous year.

The bottom line is, cloud costs are becoming increasingly unmanageable. Not to mention unsustainable.

Having a plan in place to optimize these costs is therefore crucial for eliminating wastage and future-proofing your business.

Cloud compute fees account for the greatest share of cloud spend

With lack of cloud visibility comes a lack of understanding of how exactly an organization’s cloud budget is being spent – a challenge that 44% of finance leaders cite as their biggest cloud-related concern.

Although the exact breakdown of a company’s cloud spend will differ depending on a host of factors – from data volume and storage requirements, right through to industry and scale of operations – our own data indicates that within the average organization, compute remains the highest cloud spending category, accounting for 34.31% of total cloud costs – up marginally from 33.99% last year.

This is followed by databases (16%), cloud financial management (savings plans) (12%), networking & content delivery (10%) and storage (9%).

While the key to controlling spend is ultimately understanding how your own organization is utilizing the cloud, the fact that compute costs represent the greatest share of cloud spend means that, for many, it also represents the biggest opportunity to optimize on cost.

Which helps, given it’s one of the easiest cloud services to optimize.

But why is this?

According to Philip Knapp, Vertice’s Senior Solutions Engineer, many companies are wasting a substantial amount of budget in this area. “Companies tend to be overprovisioned on their instance sizes. They’re often using old instance types, as well as higher cost processors, when many times they don’t need to be”.

Having an understanding of where the cost-saving opportunities exist within your cloud infrastructure is key to eliminating wasted spend.

The question is, how do you go about identifying these opportunities?

Start by asking your tech colleagues the right questions – as an example, inquire whether there are any idle or underutilized resources that could be incurring costs or if there are any savings plans in place.

Alternatively, find out how a cloud cost optimization solution can help you obtain much-needed visibility into your organization’s usage and spend.

AWS cost leaderboard

Below, we’ve provided a breakdown of the top ten AWS services by share of spend, along with a look at how it compares from last year.

With compute costs accounting for the largest share of spend within the average organization, it comes as little surprise that Amazon Elastic Compute Cloud, more commonly referred to as EC2, tops our AWS cost leaderboard.

Over the past year we’ve seen the share of spend for this service increase, albeit only marginally – a possible result of enhanced cloud usage, larger instance sizes, greater investments in AI and machine learning, or simply a lack of cloud optimization.

Another AWS service that is now accounting for a greater share of cloud spend is Amazon Virtual Cloud.

While the actual percentile amount is still minimal at just 1.75%, it can’t be ignored that this is a 200% increase on the previous year and therefore indicates that more companies are starting to favor the security, control, scalability and cost benefits that an isolated cloud environment provides.

In contrast, we’ve seen Amazon CloudFront’s share of spend decline. While this hasn’t changed its overall position on the leaderboard, it does indicate that companies are now allocating a slightly smaller amount of their budget to the content delivery network (CDN) service – possibly due to them optimizing their CloudFront usage, for example by using a cheaper price class or by caching content more efficiently.

Gain control of your cloud spending

The rate at which cloud costs are rising is not only unsustainable for many organizations, but with limited visibility into cloud usage and spend, finance leaders often have no effective way to get these costs under control.

With Vertice, this no longer has to be an issue.

As a Cloud Cost Optimization platform, we will continuously monitor and analyze your cloud infrastructure, using more than 75 optimization tests to generate cost-saving recommendations – all of which either require minimal engineering effort or can be implemented on your behalf.

What’s more, we’ll alert you to anomalous increases in spending, manage your discount commitments and provide you with much-needed visibility and insights to accurately forecast spend.

See for yourself how Vertice discovered $1.1 million in AWS savings potential for one company, or alternatively learn more about the benefits of partnering with a Cloud Cost Optimization provider.

Find more info on Cloud spending insights here