Digital transformations undercut by wasted cloud-spend

Cloud tech is a crucial component of any DT strategy, but without spend visibility, it’s just money down the drain

There’s no digital transformation without spend, yet many firms aren’t experiencing benefits proportional with their investment, with figures displayed in Flexera’s 2020 Digital Transformation Planning Report revealing that up to 35% of cloud spend is wasted.

Cloud technology is seen as the great digital facilitator, so unsurprisingly for enterprises serious about digital transformation investment in the cloud is already substantial and is only set to grow further. A large proportion of this spend is wasted, however.

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The complexity of licensing and pricing structures of cloud services - be it SaaS, IaaS, or PaaS - can result in debilitating levels of overbuying. Firms invest in technology with expensive functionality perks that they don’t truly need and properly make use of. Licensing terms are also known to vary from vendor to vendor, adding to the complexity and worsening the root problem. 

What’s missing is understanding. Within firms, a lack of expertise around the cloud leads to dramatic increases in costs, negating the benefits of digital transformation. Indeed, for many, a reduction in costs is the main driver for going digital. Flexera’s report found that over 50% of respondents cite the cost implications of software licenses to be the key challenge when investing in cloud software. Faced with a multitude of packages, each more glittering than the last, it’s easy to see how this problem exacerbates.

Considering that digital transformation is an ongoing process with no defined finish-line, costs can easily spiral out of control. Convincing budgetary gatekeepers to continue loosening allowances will become more difficult as wasted investments are highlighted. Suddenly, digital transformations are in danger of grinding to a halt. 

If technology spend is to be optimised and these issues to be avoided, the processes for assessing spend need to be reconsidered. Here, software asset management (SAM) and vendor management can lend expertise to help plug the gap.

Enterprises are also failing to take advantage of automation. Replacing manual processes for tracking licenses and costs with automated processes ensures unused, idle, or underutilised services are identified and shed. Instances that run in higher-cost regions when they could operate in lower-cost regions can also be highlighted, making for more efficient cloud technology.

Ultimately, the challenge of managing cloud costs grows as cloud use also grows. The increased focus on cloud technology must be matched identically by a focus on cloud cost management.

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