By Tosin Vaithilingam, Senior Solution Architect, BitTitan
Prognostication in the midst of a brewing economic storm can be dicey. Navigating headwinds—rising inflation, geopolitical tension and war, low consumer confidence, and the fallout of the COVID pandemic—will require business leaders to optimize their IT investments and re-evaluate daily operations.
Amidst record commodity prices, slowing economic growth, and global inflation, some Wall Street prognosticators are warning of a drop in cloud spending. According to the Investor’s Business Daily, “Cloud spending growth could slow from the mid-20% range down to mid-single digits.”
However, other forecasts see a technology change happening as some companies consider moving to the cloud. According to recent research, cloud adoption is picking up speed now more than ever. Forty-eight percent of companies plan on moving 50% or more of their applications to the cloud by the end of 2022, with 20% planning on migrating all their applications. In addition, 47% of organizations say they are now pursuing a “cloud-first” IT strategy, and 30% claim their organizations are already cloud native.
The speed at which it arrived has been surprising for some as technology adoption becomes a main focus for CIOs and company leaders this year. In fact, many CIOs predict that 2022 could see the highest spending growth on cloud computing services for enterprises.
During this time of uncertainty as companies evaluate their cloud spending and IT needs, it is vital that managed service providers (MSPs) and IT teams consider all their cloud computing options and develop disciplined strategies. Companies that ignore current economic trends risk misusing their money on cloud and IT services. In fact, an estimated 30% of cloud spending is wasted, forcing many companies to make cloud cost management a main priority.
Challenges abound: cloud services costs, major decisions about if and when to invest in new cloud technology, and understanding how adapting cloud services can affect your business. Given these challenges, enterprises must review and consider all cloud and IT options to find the proper fit for business growth and company goals.
Seventy percent of organizations either have a digital transformation strategy in place or are currently working on one, with 56% prioritizing their IT plans over the next year. Cloud computing also remains on the upswing. According to Gartner, spending on Platform as a Service (PaaS) grew 20.4% in 2022. In addition, some 70% of companies using the cloud plan to increase their budgets, with 57% of businesses migrating their workloads to the cloud this year. By 2025, it is predicted that cloud computing budgets will hit 51% of IT spending.
That said, many enterprises still wrestle to get a solid grip on cloud spending. Advocate Insiders estimates that “the typical business is wasting as much as 45% of its cloud spend on unused instances, sub-optimal pricing and ineffective planning.”
Taking Necessary Steps
It is imperative that companies optimize their cloud spending in these turbulent times. For IT leaders and MSPs looking to re-evaluate and optimize cloud expenditures, there are many factors to consider, such as costs, technology investments, operational impacts, and timing, and numerous important questions to ask.
When is the best time to invest in new cloud and IT services? How much will it cost to migrate applications to the cloud? How will adjusting our cloud services impact daily and long-term business operations? Would my company benefit from mergers and acquisitions (M&A)?
MSPs and IT leaders must evaluate their own unique situations and consider what actions will benefit their companies, customers, and employees the most. Here are five options companies should consider when facing economic headwinds:
- Keep an eye on the forecast. If you see demand for your services softening, reevaluate your technology needs. Does cutting cloud services make the most sense? Gartner says, “Demand for integration capabilities, agile work processes and composable architecture will drive the continued shift to the cloud,” adding that tech analyst Canalys argues that there is “already a new growth opportunity for cloud on the horizon, in the form of augmented and virtual reality and the metaverse. This will be a significant driver for both cloud services spend and infrastructure deployment over the next decade.” In other words, keep your eye on the prize and adjust accordingly.
- Review cloud spending. Seventy percent of companies using cloud services plan to increase their budgets in 2022. This past year, however, businesses struggled to manage their cloud spending, with many making budget oversights by 24%, on average. If your forecast calls for the optimization of IT costs, consider consolidating and migrating to more accessible and affordable solutions. Cloud spending in this climate should have clear outcomes: optimize necessary technology to achieve business objectives.
- Invest in technology. It may be wise to invest in modern technology now, if possible. With experts predicting inflation will continue to rise in 2023, some IT and cloud solutions might be less expensive today versus tomorrow. In fact, the industry is already starting to see inflation take its toll, with some common cloud platforms, such as Google Cloud, increasing their prices by as much as 50%. Though your organization may be lowering costs because of the downturn, making better investments and leveraging your capital “never goes out of style,” says the Harvard Business Review.
- Work efficiently. If you need to migrate data, ensure you have the right solutions and support to execute a migration effectively. For many organizations, cloud migration can be incredibly costly. Some 75% of data teams say that outdated migration and maintenance processes are likely costing their companies valuable time, money, and productivity with an annual price tag in the multimillions of dollars. If MSPs and IT leaders determine they need to migrate data from one cloud solution to another, they must ensure they have the right solutions and support to do it effectively. If not, they risk wasting valuable time, money, and resources that may be critical during economic headwinds.
- Consider combining forces. One viable option could be to merge with a competitor. Many organizations are already executing and seeing the benefits of M&As, with the value of deals growing by 23% in Q2 2022 compared to Q1 2022. Mergers can provide synergies in IT expenditures or allow you to reduce costs. It makes good business sense. Cloud computing can significantly reduce the time of an M&A deal, often providing easier integration, simpler collaboration, faster completion, and a higher acquisition probability. By moving from on-premises to a cloud-based solution before or during a merger, companies can avoid many common IT roadblocks and increase the chances of success in the challenging M&A landscape.
- Face the headwinds. The numbers show us a way forward. According to Zippia, 94% of businesses currently use cloud services, over 60% of enterprises intend to optimize cloud costs within the year, and 80% of companies report operation improvements after adopting the cloud. With smart forecasting, planning, and forward-thinking strategies, IT teams and MSPs can weather these turbulent times and also plan ahead.
Ninety-three percent of IT industry leaders plan to adopt new cloud technology within the next five years, showing the urgency to have both short-term and long-term cloud adoption plans. And, according to McKinsey & Company, by 2024, most enterprises will aspire to have $8 out of every $10 for IT hosting go toward the cloud.
As recession uncertainty continues, now is the time for MSPs and IT leaders to consider their cloud expenditures and IT investment options. By taking action now and re-evaluating their cloud and digital transformation strategies, they can ensure they are efficiently equipped and ready to handle present and future economic headwinds with ease.
Tosin Vaithilingam is a senior solution architect at BitTitan, where he works on the Customer Success Team dedicated to providing customers with essential migration services such as project scoping, planning, and proof-of-concept. Tosin works closely with BitTitan’s customers to identify their migration needs, address complexities, and develop effective migration plans. His areas of expertise include migrations, solution architecture, mobile device management (MDM), system/server installations, and technology sales.