A recent survey by CloudZero shows that 6 out of 10 organizations spend more than expected on cloud services. And these organizations will likely have to spend even more in the near future, as the prices for cloud services keep rising. In 2022, we witnessed significant growth in prices for Google Cloud Platform, Microsoft Azure, and Amazon Web Services. The bad news is that the main factors behind this growth have not gone away. That’s why we expect cloud prices to keep growing in 2023.
Why are cloud prices growing?
Here are the most significant factors driving the growth of cloud prices:
- Disruption of the semiconductor supply chain. Data doesn’t live in an actual cloud; it’s stored on data servers that depend on semiconductors. Any disruption to the semiconductor supply chain, whether from COVID-19 or geopolitical cataclysms, increases the cost of cloud services. For example, the global supply of neon gas, which is used in semiconductor lithography, has been disrupted by the Russian invasion of Ukraine, a country that had produced 70% of the global neon gas supply before the start of the full-scale war. The resulting neon gas shortage has increased cloud maintenance costs and, consequently, the cost of cloud services.
- Energy prices. According to Yale Environment360, data centers consume more than 2% of the world’s electricity and generate almost as much CO2 as the airline industry. Growth of energy prices drives the growth of cloud costs.
- Price-based competition is no longer relevant. The market for cloud technologies is almost entirely occupied by the great three: Amazon Web Services, Google Cloud Platform, and Microsoft Azure. As some of the world’s most well-known brands, they don’t need to reduce prices to attract new customers. Instead, they focus on implementing new features, strengthening security, and improving the overall quality of services.
To make things worse, many companies fail to properly manage their cloud assets, further increasing their cloud costs. A recent CloudZero survey shows that 49% of cloud-based businesses struggle to control cloud costs. Moreover, 78% of cloud-based businesses notice cloud cost variance later than they would expect. That’s because many organizations fail to manage their cloud resources efficiently and cannot see their overall spending.
Why do companies fail to control cloud costs?
One of the greatest problems leading to increased cloud costs is a lack of dbt specialists. Dbt is an essential tool for helping businesses transform and efficiently manage their data in a data warehouse. Unfortunately, too many people use it without the required expertise. This increases the consumption of cloud services and, consequently, increases companies’ technology cost. The use of dbt without the required expertise also illustrates that too many companies rely on data-related tools without having a clear understanding of when these tools are helpful and how they work.
This leads to unused or underused cloud resources, known as cloud waste. Around 54% of businesses report that their biggest cause of cloud waste is a lack of insights into cloud usage. Almost 50% of enterprises have challenges controlling cloud expenses, and 53% cite accurate insights into cloud costs as their main cloud-related problem. As a result, 37% of enterprises are unpleasantly surprised with their cloud charges.
A vivid example of this failure to control cloud expenses is when companies struggle to control the cost of implementing data observability tools. These tools help companies ensure data quality and reliability, which are the pillars of data trust. While planning cloud expenses, executives consider only the cost of the data observability tool. They don’t consider that data observability tools run SQL queries to drill through their data. SQL queries heavily consume cloud resources, which automatically increases the cost of cloud services.
And if you think that this price increase is insignificant, consider that the cost of SQL queries run by a data observability tool is often as high as the tool’s subscription fee. So if you’re subscribing to a data observability tool for approximately $100,000 a year, get ready to spend another $100,000 a year running SQL queries.
How can you reduce cloud costs?
The answer is by controlling and reducing your cloud consumption. A good start would be using solutions that are less ravenous when it comes to consuming your cloud resources. For instance, you might switch from data observability tools that run costly SQL queries to a solution like Masthead that observes your data by ingesting data logs. Unlike other tools on the market that run SQL queries in your data warehouse, Masthead only processes logs and metadata. As a result, you get a sustainable and cost-efficient data observability solution that ensures data trust without compromising your data security.
