Flexera 2024 State of the Cloud Reveals Spending as the Top Challenge of Cloud Computing

The economic uncertainties have led many organizations to invest in transformation technology such as GenAI. Meanwhile, managing costs remains a top priority. This makes it challenging for organizations to balance between growth and cost management.

With nearly half of the data and workloads in the cloud, managing cloud spending is the top challenge facing organizations, according to the latest report by Flexera, the company that specializes in IT management software, optimization & solutions.

The 13th edition of the annual Flexera State of the Cloud report was based on a survey of 753 cloud decision-makers and executive leaders from various industries including tech, cloud services, and financial services. The report highlights the year-over-year changes to the public, private, and multi-cloud markets. Overall, the report shows a shift toward more strategic and centralized cloud management.

Based on the report’s findings, Microsoft Azure has gained an upper hand on its biggest rival, AWS, in terms of public cloud adoption. This is only the second time ever that Microsoft has pulled ahead in Flexera reports over the years. The two tech giants were followed by Google Cloud and Oracle in the highest cloud adoption rates. Microsoft is also ahead in terms of attracting big spenders with Azure leading in five out of six high-tier spending categories.

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Last year’s report highlighted the growing need for companies to manage cloud spending, and that trend continues this year.

More than a quarter of respondents (29 percent) spend over $12 million annually on the cloud. There’s a 21 percent increase YoY in organizations’ spending $1 million or more per month on cloud.

Half of the organizations have data in the public today, with an expected 7% growth in the next twelve months. Interestingly, SMBs are the highest cloud adopters as enterprises have a lower workload (49 percent) in the public cloud compared to SMBs (61 percent). More than one-third of respondents indicate all non-sensitive data will be moved to the cloud and nearly one-fifth say they will move all sensitive data to the cloud.

While the respondents have plans to migrate data workload to the public cloud, they are also aware of the risks. The top concerns include understanding app dependencies (54 percent), assessing on-premise vs. cloud costs (46 percent), and assessing the technical feasibility of the implementation (45 percent).

“This is a complex year for cloud adoption. Organizations are navigating economic uncertainties by investing in generative AI, security, and sustainability while prioritizing cost management,” said Brian Adler, Senior Director, Cloud Market Strategy at Flexera.

He further added “Cloud adoption continues to grow. The shift toward hybrid and multi-cloud environments underscores the importance of comprehensive cost management, with nearly half of all workloads and data now in the public cloud. FinOps practices and cloud centers of excellence are growing as companies move toward centralized, strategic cloud management.”

The report also shows an increase in multi-cloud usage, increasing to 89 percent from 87 percent last year. Sixty-one percent of large enterprises use multi-cloud security, and 57% use multi-cloud FinOps as cost optimization tools.

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Organizations are taking a centralized approach to cloud with 63 percent of organizations already having a cloud center of excellence (CCOE) and 14 percent planning on creating one within the next year.

Sustainability has been high on the priority list of organizations. However, the Flexera report reveals that 59 percent of organizations prioritize cost optimization over sustainability.

While organizations might have big plans for AI/ML, most companies are still in the experimentation phase. Organizations are experimenting more with AI/ML than with any other PaaS offering. The AI/ML usage is only 41 percent, but Flexera predicts this number to rise significantly in the coming years as organizations start leveraging more GenAI services from public cloud providers.

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