The year 2023 has thus far been a rollercoaster. In some respects, there is positive news with inflation slowing and the IMF now forecasting 2.9% growth for 2023 – up from a 2.7% forecast in October. Yet there remains a persistent doom and gloom outlook given massive layoffs by large companies especially in the tech sector; the continuing war in Ukraine; ongoing supply chain concerns and energy shortages.
There have been numerous predictions about the state of the cloud and enterprise demand in the coming months. In this two-part series, we summarize some of the latest news and research, and then share ideas and trends for IT organizations when it comes to cloud spend and cloud data management.
The Cloud Bears
The numbers don’t lie and earnings statements from the major cloud provider show that demand has cooled down. As reported on CNBC, Amazon’s cloud revenues grew by 20% in Q4, compared with 27.5% growth in Q3; Microsoft reported 31% growth from cloud (including Azure) in 2022, compared with 35% in 2021.
In a report published last month, The Uptime Institute said that AWS figures represented “the slowest growth in its history.” The Register also covered Google’s position: “Google’s cloud growth was up to nearly 38 percent in Q3 of 2022, from 30 percent in Q1, this is down from a high of 58 percent in Q1 of 2021. While these figures would represent staggeringly positive growth in any other industry, among cloud providers they represent a mood change.”
Many pundits have pointed to these earnings, with a general outlook of malaise for 2023. Yet what does that really mean? It’s hard to imagine companies pulling back massively on cloud plans, given the rapid momentum to modernize and disrupt markets through cloud computing which began with the pandemic.
However, there is talk of repatriation— indicating that in some cases, enterprises have been burned in the cloud and are looking to regain control by bringing workloads back in house. Of course, repatriation brings its own risks, costs and delays: staff time, potential data loss, egress costs and the potential need to buy more servers and storage appliances to house the apps and data on-premises.
Let’s look at a more positive outlook for cloud:
The Cloud Bulls
Unsurprisingly, Microsoft CEO Satya Nadella expressed optimism for a quick return to normal: “At some point, the optimizations will end,” Nadella said on its recent earnings call per CNBC. “In fact, the money that they save in any optimization of any workload is what they’ll plough into new workloads, and those workloads will start ramping up.” Gartner’s forecast for 26.8% growth in cloud spend this year, compared with 25.9% in 2022, seems to support this view.
TechTarget piled on by covering the findings of a recent survey from ESG: More than half of the 742 survey respondents (56%) reported public cloud infrastructure services spending would go up this year and 71% expect to develop and deploy cloud-native applications in 2023 — an increase of about 11% from 2022. Only a small percentage of respondents–4% and 3%–expect public cloud spending on applications and infrastructure services to decline.
Finally, a survey of US and UK IT leaders sponsored by Virtana found that 84% wanted a large portion of their storage to remain in the cloud – even though 54% say that storage is growing at a faster rate compared to overall cloud costs. Most respondents (69 percent) say that storage now takes up more than one-quarter of their total cloud costs, while 23 percent say it accounts for more than half.
A Cloud Strategy for 2023
Here’s one way to look at the market as it stands now:
- Public cloud leaders’ earnings and near-term forecasts are soft, likely due to more conservative spending during an economic downturn;
- Enterprises are not giving up on the cloud and most will maintain or even increase spending this year;
- Cloud data storage costs are rising, and repatriation is likely happening at some level;
- IT leaders will focus on optimizing spend in the cloud and reducing waste ASAP;
- CSPs may look to retain customers with better pricing plans and smarter tools to optimize and track spending and consumption.
The answer is not to turn away from the cloud—but to be more precise and analytics-driven with your approach. Insights from Enterprise Technology Research (ETR), reported in Silicon Angle, indicate that enterprises are targeting excess or wasteful cloud spend. Along those lines, “using lower-cost compute instances such as Graviton from AWS or Advanced Micro Devices Inc. chips and tiering storage to cheaper object stores or deep archive tiers” is a prominent strategy.
We couldn’t agree more!
In my next post I’ll review some specific cloud data management and cloud cost optimization strategies.
Read part two: Reduce Cloud Data Storage Costs and Optimize Cloud Spend.