It’s growing increasingly likely that a recession is on the horizon. Bloomberg economists stated just last July that the probability of a downturn over the next 12 months stands at 47.5 percent, up sharply from 30 percent odds the month prior. Of course, this is worrying news for organizations of all sizes already operating against significant financial uncertainty. Even the cloud sector, which has historically escaped the wrath of rocky economic conditions and thrived during recessions, is experiencing a wakeup call. For example, Big Tech, who has consistently spent aggressively on building out their cloud infrastructures, is showing signs of a dramatic slowdown. As a result, analysts now say cloud spending growth could slow from the mid-20 percent range down to mid-single digits.
Meanwhile, a research report conducted by my company Wanclouds, found that 81% of American IT leaders say they’ve been directed by their C-Suite to either take on no additional cloud spending or reduce it. In fact, for those asked to cut costs, a vast majority say they now plan to do so by as much as half. This is clearly an interesting development in an industry that has historically defied the down economy. But it certainly doesn’t mean that organizations are quashing their cloud strategies altogether. What it does mean, however, is that organizations are viewing their cloud plans through a much more frugal lens, and part of this is finding a way to not only reduce costs, but optimize spending across the board. Here’s some pointers for those actively seeking to do so.
Optimizing Cloud Spending
There has been a drastic shift in the past two years where IT leaders are dedicating more significant portions of their IT budgets to the cloud. As an investment, it makes sense. Not only do cloud-based solutions achieve an average ROI that is four times greater than on-premises solutions, but being a cloud-native organization has proven to dramatically reduce demand on IT staff and therefore enable them to decrease personnel costs substantially.
But one issue, in particular, has plagued cloud users for many years, and it is something they will need to get a grip on as they look to weather yet another financial downturn. That is: keeping track of their cloud spending. Unfortunately, until now, this hasn’t been easy. When my company surveyed over 500 IT leaders across the US this summer, 53 percent said they feel they have been hit with more unexpected cloud costs or spending than what they had planned in the first half of 2022. This suggests that even though they were willing to up their cloud investments, too much of their budget was being spent on hidden charges enabled by a lack of company-wide visibility within many cloud platforms’ billing systems.
To effectively manage their cloud environment during the next recession, it is crucial that organizations find a way to gather real-time and enterprise-wide insights into their spending to optimize costs. But with new pressure from C-Suites to reduce costs, it is clear that IT teams will need to consider other measures to optimize spending.
Consider a Hybrid Cloud Strategy
The hybrid cloud is the future for many companies. In fact, according to Cisco’s 2022 Global Hybrid Cloud Trends Report, 82 percent of IT leaders say that they have already adopted the hybrid cloud. Moreover, half of the respondents say they have organized a central CloudOps and NetOps function to “help ensure their organization’s hybrid cloud strategy meets business objectives.”
This is very much against the de facto standard for traditional IT: classic on-premises infrastructure environments and private clouds. When the COVID-19 pandemic hit and pushed companies to become more agile, it highlighted several security and operational challenges associated with hosting applications in a private cloud. Top of this list of challenges:
- Scalability issues
- High operating costs
- Vendor lock-ins
But private clouds still have their benefits. IT teams are increasingly choosing to use them alongside public clouds as part of a hybrid cloud strategy. Creating this kind of a blended infrastructure allows them to combine the best of both worlds. It also enables organizations to develop a bespoke cloud experience to their needs, which is imperative in a market downturn that continues to test their skill. Indeed, many businesses will find that the hybrid cloud is their most optimal strategy as they look to deploy the most valuable architecture during the next recession.
Invest in On-Demand Disaster Recovery Plan
As enterprises scale their cloud-native journeys, they are counting on cloud platform providers to host and protect their mission-critical applications. Unfortunately, this has been difficult as organizations battle a cybersecurity crisis, health pandemic, and climate emergency in tandem. All of which continue to threaten the security of vital company data and have already contributed to the theft or loss of billions of data records in the past year.
A huge reason why these data loss events are so costly for businesses is that they often lead to downtime that completely debilitates entire organizations for hours, days, or even weeks. In fact, of the nearly two-thirds of businesses that experienced data loss in 2021, 31 percent experienced downtime or unavailability of cloud services for up to 10 hours. And considering the average cost of downtime is $5,600 per minute, it’s unsurprising that even in ordinary times, some businesses remain shut for good.
So as enterprises adapt to this tumultuous economic landscape, they must adopt an effective cloud-based disaster recovery plan that limits downtime and, therefore, the financial losses it can incur. For mid-market enterprises with smaller budgets, Disaster Recovery as a Service (DRaaS) is a great option to automate their backup plans and processes, given how complex and costly it can be to replicate workloads in cloud-native environments.