A recent study by Vanson Bourne, commissioned by Tangoe, reveals significant concerns around the financial impact of Generative AI (GenAI) on cloud spending. With a 30% rise in cloud expenditure driven by AI and GenAI technologies, 72% of IT and financial leaders find GenAI-driven costs unmanageable. The study surveyed 500 IT and finance professionals, uncovering the growing challenges in managing cloud expenses, particularly around AI and automation.
- Cloud Spending on the Rise:
- Cloud spending has increased by 30% year-over-year, primarily due to the rising demands of AI (50%), GenAI (49%), and automation (36%).
- On average, companies spend $40 million on cloud services, with a near-equal distribution across SaaS (28%), Private Cloud (28%), IaaS (25%), and UCaaS (19%).
- Key Challenges in Cloud Financial Management:
- Hybrid Cloud Cost Management: 80% of respondents find managing private cloud costs challenging, and 95% plan to repatriate some resources from public to private clouds.
- Software Overspending: 38% of SaaS spending stems from Shadow IT, and 67% of companies admit their productivity software licenses (e.g., Microsoft 365, Google Workspace) are underutilized.
- Cloud Expense Allocation: 93% agree that cloud expenses should be allocated across departments, but 53% find chargebacks time-consuming and difficult to manage.
- Best Practices to Manage Rising Cloud Costs:
- Expanding FinOps Coverage: 94% of practitioners assert that FinOps strategies must extend beyond IaaS to include SaaS, improving financial operations and risk management.
- Beyond Cost Cutting – Focusing on Productivity and Security: Effective cloud cost management enhances productivity and security, with 94% of respondents citing these as key benefits.
- Challenges with Current Approaches: 63% of companies rely on manual processes or native tools from cloud providers to manage costs, resulting in concerns about uncontrolled spending.
- The Impact of Unchecked Cloud Spending:
- Chris Ortbals, Chief Product Officer at Tangoe, warns that GenAI could lead to unsustainable cloud spending if not managed properly. He stresses the importance of adopting comprehensive FinOps strategies to ensure GenAI remains a driver of innovation rather than a financial burden.
The rapid adoption of AI and GenAI is pushing cloud spending to new heights, and companies must navigate the complexities of cloud financial management to prevent escalating costs. By expanding FinOps practices and focusing on productivity and security, businesses can manage cloud expenses effectively while harnessing the full potential of AI-driven innovation.
