Spiralling cloud costs are forcing European businesses to hold off on hiring staff or increasing their budgets for cyber security or new artificial intelligence (AI) projects, research shows.
A poll of 750 IT decision-makers from the UK, France and Germany by cloud company Akamai Technologies suggests that 67% of respondents are bracing themselves for their cloud spending to increase over the next 12 months, while 8% said they expect it to drop.
The top three reasons given by respondents as to why they expect their cloud costs to increase include growing data storage demands (39%), increasing AI use (37%) and inflationary pressure (27%).
To counteract the potential increase in their cloud costs, two-thirds (68%) of respondents said their businesses would need to reduce their spend or hold their budgets flat in key practice areas, including cyber security and staff hiring.
“New AI projects (26%) and cyber security (also 26%) were the areas that suffered the most, followed by IT staff hiring (24%) and hardware upgrades (18%),” the Akamai Technologies report started.
However, while respondents are anticipating an increase in their cloud spend, more than half (57%) said they didn’t expect their organisation’s cloud costs to become unmanageable, while 20% thought the opposite.
Perhaps unsurprisingly, 90% of those polled said they would like to see cloud providers reduce the cost of using their data storage (40%), AI and machine learning (30%) and database services (27%).
“Cloud spending is growing fast – exponentially for some – and it’s holding businesses back from investing in growth and innovation,” said James Kretchmar, global CTO of the cloud technology division at Akamai Technologies.
“This is especially true with AI, where businesses are struggling to squeeze return on investment [ROI] out of their investments. Against this backdrop, cloud hyperscalers continue with contract lock-in and egress pricing, which means keeping cloud costs under control is impossible for many.”
While AI investment is flagged in the report as an area that might suffer as a result of rising cloud costs, 65% of respondents said they expect to increase their spend in this area over the next 12 months.
However, 82% said – despite having this intention – they have not developed a formal AI strategy or a way of measuring ROI for their AI endeavours. In fact, only 11% described their AI projects as self-sustaining from a cost or productivity gains perspective, and just 25% said they have budget to “fully support” their AI initiatives.
On this front, Kretchmar said IT decision-makers need to think differently when it comes to measuring the ROI of AI investments, as it is not possible to do that by relying on the metrics and methodologies they use for other types of IT investments.
“Leaders need to take a hard look at where they’re spending and what outcomes they expect. Traditional ROI models don’t map neatly to AI – productivity alone isn’t enough,” said Kretchmar. “Companies have to prioritise the quality of outcomes and use the right tool for the job. This includes looking beyond the legacy cloud providers to those [designed] for performance-sensitive applications like inference.”
