CIOs 'overspend' on cloud

Azul has released The CIO Cloud Trends Survey & Report, providing a look at how CIOs are maximising their cloud investments while addressing the challenges of cost management and resource optimisation. The study of 300 CIOs in the U.S. reveals that 83% are spending an average of 30% over what they anticipated for cloud infrastructure and applications, and only 2% of respondents said that their spending was under budget.

While leadership recognises the cloud’s transformative potential and the cost savings it can deliver, the pressure to control expenses is rising. 43% say their CEOs and/or board of directors have concerns about their company’s cloud spend, broken down as follows: 27% said their CEOs and/or board of directors require favourable market conditions to expand their cloud footprint, 9% are unwilling to approve additional expenses and 5% advocate for reduced cloud spending.

Other key findings from The CIO Cloud Trends Survey & Report include:

Cloud Migration Accelerating Despite Cost Challenges

Organisations have made cloud adoption a core component of IT strategy, and that trend is only accelerating. Notably, the majority (71%) of CIOs say that they currently run more than 60% of their workloads in the cloud and almost half (42%) want to have 81-100% of their workloads in the cloud within five years. As organisations push toward even higher cloud adoption, they will need to focus on strategies to optimise resources, improve efficiency and control expenses.

CIOs Implement Strategic Cost Management Approaches

As cloud spending continues to outpace forecasts, CIOs are adopting various strategies to optimise their expenditures. The top approaches include optimising and modernising application workloads for cloud deployment (52%), leveraging cloud provider cost management tools (51%), taking advantage of enterprise discount programmes (49%), tracking and auditing cloud deployments (45%) and adopting FinOps approaches (32%). Some CIOs are also exploring high-performance Java platforms to reduce cloud computing waste (30%) and newer chip architectures like ARM for better price-performance (29%).

“High-performance Java platforms give CIOs a powerful lever to optimise cloud costs, delivering peak application performance while using fewer compute resources,” said Scott Sellers, co-founder and CEO at Azul. “When every cloud compute cycle impacts the bottom line, running Java more efficiently enables organisations to scale intelligently and cost-effectively.”

Organisations Realise Value Despite Budget Overruns

Despite cost overruns, 80% of CIOs surveyed see cost savings from their cloud infrastructure and applications. This explains why when asked the question “How has your CEO and/or board of directors reacted to your organisation's cloud spend?” 56% of CIOs say their leadership supports current spending levels and would approve further increases, even though 43% report that their CEO and/or board have concerns about their cloud spend levels.

“This paradox – where most CIOs exceed their cloud budgets yet still report cost savings – shows that while cloud spend delivers efficiency at scale, unpredictable costs can still stem from factors such as workload sprawl, underutilised resources and complex pricing structures,” said Sellers. “The key is not just embracing the cloud but continuously monitoring and optimising it to maximise efficiencies without sacrificing application service levels.”

AI/ML Capabilities Drive Cloud Adoption

The primary business drivers for migrating workloads to the cloud include data analytics and AI/Machine Learning capabilities (42%), cost efficiency/lower cost to serve (40%), scalability and flexibility (39%), employee productivity (32%) and business continuity and disaster recovery (25%). Other notable factors influencing cloud migration include competitive advantage (25%), sustainability goals (25%) and faster time to market (22%). Large organisations (1,000 – 5,000 employees) place a greater emphasis on cost efficiency/lower cost to serve and workforce productivity than smaller organisations with 500-999 employees.

Repatriation is Not a Mainstream Plan

While there are some opinions around repatriating cloud workloads back to on-premise environments, only 22% of respondents plan to repatriate their workloads on-premise as part of managing cloud costs next year. Furthermore, only 2% of CIOs said their company leadership is advocating a return to on-premises solutions.

“Our report shows that while organisations are rapidly embracing cloud technologies for their transformative potential, they’re simultaneously grappling with the complexity of managing costs in increasingly cloud-centric environments,” concluded Sellers. “The findings highlight both the tremendous value cloud delivers and the critical need for strategic optimisation approaches as organisations continue their cloud journey.”