Enterprises remain committed to cloud investments but must focus on optimization

Cloud providers, such as AWS and Azure, registered slow revenue growth in the recent quarter (July to September 2022). Economic headwinds such as rising energy costs, the Russia-Ukraine war, inflation, and fears of recession have made many enterprises double-down on controlling spending – even in business-critical areas such as cloud. The demand for value will remain heightened for at least the next 12-18 months. However, recent HFS pulse data reveals that even as times get harder, cloud remains a top technology spend priority.

• HFS Q3 2022, pulse survey shows the cloud among the top three technology investment priorities in the next 12 to 18 months. Cloud has become the core of most businesses. Slow revenue growth among cloud providers is likely to be temporary. Organizations are still migrating to and staying on the cloud.
• While AWS and Azure are experiencing slower revenue growth, financial reports from GCP and SAP (Software as a Service, Platform as a Service, and Infrastructure as a Service) showed good cloud revenue growth during the same quarter, suggest organizations may be spreading their cloud spending around to achieve competitive pricing, and to avoid vendor lock-in.
• Prioritization on public cloud has dipped as enterprises are increasingly showing interest in the hybrid cloud because of the flexibility, speed, security, and cost benefits it bring. Hybrid cloud is emerging as a preferred choice among CIOs/CTO for IT infrastructure modernization compared to public cloud, as it provides them with a more balanced platform and infrastructure architecture and allows them to shift costs to take advantage of lower costs based on usage, compute, storage as needed, security and compliance.

The Bottom Line: Organizations of all sizes continue to assess their IT spending, and cloud is not exempt, in these uncertain times.

However, it is not easy to reduce cloud spending as it’s fundamental to most of today’s businesses and technology delivery architecture. HFS expects to see continued strong demand for cloud. But IT leaders must actively monitor usage and focus on optimizing workloads to get the best possible value.

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