Unlocking the Transformative Potential of Cloud Economics: Navigating Challenges and Maximizing Value

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In the ever-evolving landscape of technology, businesses across the U.S. are increasingly realizing the immense opportunities offered by cloud-based economic models. In fact, U.S. cloud spending is approaching a $100 billion annual run rate and continues to grow by 30 percent annually, thereby generating more demand for the cloud industry.

This transformation promises greater agility, scalability, and cost-efficiency, making it an attractive proposition for companies looking to stay ahead in the digital age. However, to fully harness the potential of cloud economics, tech leaders must first navigate the complexities and challenges that come with this paradigm shift.

Understanding the Landscape: The Promise and Challenges for Cloud Economics

Major cloud service providers such as AWS and Azure are now actively hiring economists and accountants to assist their customers in optimizing their cloud environments and containing costs effectively. This highlights the growing importance of managing cloud resources efficiently, as leaving them running idle can result in unexpected and substantial expenses. Hyperscalers can modify features and pricing without prior notice, leading to unwelcomed financial surprises if businesses aren’t vigilant – this financial misalignment is commonly known as the “bill shock”, where companies find themselves confronted with unanticipated and exorbitant bills.

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In times of crisis, such as during ransomware attacks, different priorities prevail, and hyperscalers often go the extra mile to support their customers. For instance, they may provide greater connectivity and bandwidth at no additional cost, aiding in swift data recovery.

However, transitioning from traditional infrastructure to cloud-based models is not without its challenges. The hybrid model, combining on-premises and cloud solutions, remains popular among organizations during the transitional period. It is essential to have realistic expectations and consider factors beyond just cloud services, including the need to refactor applications and account for additional costs such as personnel and software.

Cloud economics may evolve at a different pace across the U.S., such as depending on the size of a company, and some may take more time to fully embrace this transformation. For instance, large enterprises will have roughly 60% of their environment in the cloud by 2025. In a mature market, businesses can leverage economies of scale and benefit from cost efficiencies by adopting cloud economics. In the interim, organizations can look to service providers to bridge the gap and find cloud models that suit their unique needs.

Embracing Cloud Economics by Tailoring Solutions

It’s important to note that cloud economics may evolve differently across different markets. Varying levels of technological adoption can impact cloud economics differently across different enterprises. Understanding the unique challenges and opportunities of each can help businesses make more informed decisions and leverage cloud solutions to their advantage.

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For specific considerations and localized benefits, organizations can explore the offerings of cloud providers. This approach focuses on verticals where specialized services and expertise can be of greater value.

Strategies for Success: Optimising Cloud Economics for Your Business

As organizations embrace cloud economics, strategic planning and a customer-centric approach become paramount to success. By adopting the right strategies, businesses can ensure a smoother transition, maximize value, and mitigate potential pitfalls.

To avoid potential pitfalls, organizations must be metric-driven and understand the evolving lifecycle of technology and data. By categorizing data based on its lifecycle, companies can optimize costs and storage strategies, ensuring cloud economics align with their business objectives.

Furthermore, it’s crucial to have an exit strategy in place before fully committing to the cloud. Organizations need to be prepared to transition smoothly to alternative providers or on-premises services should the need arise, safeguarding against potential vendor lock-in.

Lastly, to strike a balance between security and cloud economics, businesses should embrace a holistic approach to cloud design. By integrating security, economic considerations, and disaster recovery planning from the outset, organizations can achieve a more sustainable and cost-effective cloud solution.

When used right, cloud economics present a game-changing opportunity for businesses to embrace digital transformation and stay competitive. However, to reap the full benefits, organizations must be proactive in addressing the challenges that come with this transition. By understanding the intricacies of cloud economics, aligning expectations, and embracing a strategic and collaborative approach, businesses can unlock the true transformative potential of the cloud.

About the authors: Dave Russell (right) is vice president of enterprise strategy at Veeam, and Rick Vanover is Veeam’s director of product strategy.

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