Cloud Spending Slowdown: ‘A Bit of a Misperception’

There’s been a lot of ruckus around a supposed slowdown in cloud computing spending. The hyperscalers’ last three earnings reports seemingly have indicated less uptick among customers — even as the providers’ revenue growth stays in the (ultimately unsustainable) 30% range.

But because recent numbers have not kept pace with pandemic-era demand, analysts and investors are panicking; they see cash cows drying up.

So what’s really going on? According to the MSPs we interviewed, the answer reflects what Channel Futures suspected and posited last summer: long-overdue stabilization.

“I think identifying it as a global slowdown is a bit of a misperception,” said Lemongrass’ Eammon O’Neill. “The spending is still growing. What we are seeing is a slowing of the increase in spend, but it’s still increasing over 30% annually, which is huge for any other industry.”

Lemongrass clients, for example, are not reducing the number of workloads they’re running. Instead, they are optimizing those workloads “to get a better return or reduce their costs.”

Unisys’ Matt Bologna agreed.

“I am not seeing a reduction,” he said. “We are seeing customers looking for optimization of their environments, but I am drawing a distinction between customers drawing down vs. optimizing.”

Same goes over at Mission Cloud. Over the past six months, the MSP has helped a number of users “realize double-digit percentage savings on their cloud spend,” said Jonathan LaCour. The company achieves these ends through cost optimization efforts, savings programs, enterprise commitments and “strategically reduced” consumption, LaCour said.

That last comment is important. Organizations often can’t afford, in terms of productivity and revenue, to axe cloud workloads. Rather, they simply need to make better use of what they have — turning off services when no one is working, for instance, or closing out test buckets that have served their purpose, or streamlining container use. The list could continue ad infinitum.

Over at ClearScale, an ethos prevails, similar to that expressed by its peers. The Amazon Web Services consultancy typically helps customers lower their expenses by 30-35%, said Pavel Vasilyev. Those savings come from expense-optimization strategies, not from removing AWS resources, to the aforementioned point.

“Customers are searching for cost-effective solutions while maintaining optimal performance,” Vasilyev said.

On the next slide, we examine whether any part of cloud cost optimization has meant a shift to independent cloud vendors.