Maximizing Cost Efficiency with Cloud Services

July 17, 2023

According to Gartner, global end-user spending on public cloud services is forecast to grow 21.7% to total $597.3 billion in 2023, up from $491 billion in 2022.

Here is a breakdown of the spending by segment:

  • Infrastructure-as-a-service (IaaS) is forecast to experience the highest rise, increasing by 30.9%, followed by platform-as-a-service (PaaS) at 24.1%.
  • Software-as-a-service (SaaS) spending is projected to grow at a slower rate, 17.9%, but it will total $197 billion in 2023 and remains the largest segment of the cloud market by total end-user spending.

The growth of cloud infrastructure spending is being driven by a number of factors, including:

  • The increasing adoption of cloud-based applications and services by businesses of all sizes.
  • The growing demand for scalable and elastic cloud infrastructure to support the increasing volume and variety of data.
  • The rising importance of security and compliance in the cloud.

As cloud infrastructure spending continues to grow, it is likely to have a significant impact on the global IT industry. Cloud providers will need to invest heavily in their infrastructure to meet the growing demand, and businesses will need to develop strategies for managing their cloud costs.

Cloud Providers Bear the Brunt of Expenses, Which is Great for Enterprises

It might seem obvious. An enterprise that maintains its own hardware and software at a physical location is paying lots of overhead: for staffing resources to maintain the facility, including IT professionals keeping the software running smoothly and maintenance staff keeping the hardware, electrical, plumbing and all other physical infrastructure in good working order.

One easily overlooked cost is energy. It takes electricity or natural gas to keep facilities operating. Facilities, especially those packed with lots of hardware running millions of calculations an hour, must be kept cool. Keeping data servers cool requires overhead fans, which in turn use energy. Depending on the size of the data center, they can use as much as 50% or more energy than a typical commercial office building.

There are many reasons why cloud computing is cost-effective:

  • Pay-as-you-go pricing: Cloud services allow organizations to pay for the exact amount of cloud storage they need  for their data. A pay-as-you-go, or PAYG, pricing model provides greater financial flexibility and provides additional storage as a business scales.

A company could make its fixed payments on a monthly, yearly, or as-needed basis, depending on the vendor’s storage and payment options. Planning a cloud services budget is more cost effective than estimating what a company might have to spend on its own data server every month.

  • Reduced capital expenses: The initial investment in on-premises data storage typically runs high. Enterprises must first purchase data servers; and these large machines are a considerable upfront investment, and so is their installation.

It’s particularly challenging for smaller or growing organizations to get started as initial costs can run relatively high for legacy content management systems. Cloud platforms don’t require hardware. There’s no initial investment, reducing the upfront cloud server cost.

Cloud storage is significantly more cost effective because cloud providers manage storage infrastructure for their users. Rather than paying for hardware purchase, installation, and associated costs, cloud storage users usually pay a fixed price for their storage. This approach to data storage removes the need for an extensive upfront investment.

A company can spend less on its data storage solution when it doesn’t have to purchase data servers worth thousands of dollars. And if a company is not hosting physical hardware, there is no need to build or rent  space for data centers, nor pay for additional equipment like those fans needed to cool facilities and processors used to manage all that data.

Lower initial investment price of cloud computing reduces the cost barrier to entry. Cloud services enable more companies to transition their data away from on-premises servers and avoid the high implementation costs for onsite server rooms.

  • Lower operational costs: Cloud providers handle the day-to-day operations of an enterprise’s cloud infrastructure, including provisioning, patching, and maintenance. This helps reduce operational costs. There is no need to hire and train IT staff to manage the data or the infrastructure.

Multiple data servers, processors, and accompanying hardware requires someone (at a small business) or a team (at a large enterprise) to oversee, repair, and replace an intricate network of equipment. Again, larger organizations will need an IT team dedicated to managing the system’s health. Many companies see a decrease in IT labor costs when switching to public cloud data storage solutions.

Cloud storage uses less on-premises hardware than an on-premise data system because the vendor owns and manages the data centers. The vendor’s IT specialists handle infrastructure issues and system management – all offsite, and all maintained and managed by the vendor. The cloud storage provider’s responsibility to manage server infrastructure reduces the need for in-house IT staff to maintain hardware.

IT teams are freed up to focus on more valuable tasks. Users (clients) of cloud providers are free from having to handle the day-to-day management and maintenance of the server network.

  • Improved scalability: Cloud storage solutions reduce labor costs because of their scalability. As companies add more servers to their on-premises systems, they need more people to run and manage those storage solutions. Spending on dedicated IT teams increases with an organization’s data storage needs.

The cloud provides ease of scalability. Businesses can expand their data storage plans if they need more space. It’s much easier for organizations to manage cloud tools than on-premises hardware at every step of the process, from management to maintenance.

  • Enhanced security: Cloud providers invest heavily in security, which can help enterprises protect their data and applications. This can help reduce risk of a data breach or security incident.

In addition to these benefits, cloud computing can also help businesses improve their agility and flexibility, as they can quickly and easily deploy new applications and services. This helps businesses stay ahead of the competition and adapt to a changing business landscape.

A Few More Cloud Computing Cost-Saving Facts

Here are some specific examples of how cloud computing can save businesses money:

  • A study by Forrester found that businesses can save an average of 35% on IT costs by moving to the cloud.
  • A study by Gartner found that cloud computing can help businesses reduce their total cost of ownership (TCO) by up to 50%.
  • A study by IDC found that businesses can save an average of $1,200 per year per user by moving to the cloud.

Check out related blog posts to help determine the right cloud services provider, as well as how to compare the different cloud services models.

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