Cloud is an integral part of almost every company's strategic technology portfolio. As legacy migrations continue and cloud spend increases across every industry, its never been more critical to understand both your specific cloud investments, and the suppliers (AWS) that drive them.
Only those that fully understand these market dynamics will enjoy the competitive advantage that comes with informed insight. Conversely, those who fail to comprehend their waste, overspend and the market dynamics behind it, are doomed to escalating spend, blown budgets, and lagging transformation efforts.
Below we give you that market insight, updates on AWS as the market leader, and ways to proactively manage and control your Cloud spend.
- Executive Update and AWS CEO Poll
- AWS Q4 Summary and Results (and what it means for you)
- AWS Year 2020 and Beyond
- Competitive Landscape
- Cloud Infrastructure Market and Cloud Waste
- Cloud Benchmark and CCO (Cloud Cost Optimization)
Executive Update and CEO Poll:
AWS Executive Changes:
- Jeff Bezos moved to Executive Chair
- Andy Jassy promoted to CEO of Amazon
- New AWS CEO has not yet been named
AWS CEO Snap Poll:
AWS for the Quarter:
Cloud spend was up 32% in Q4 2020 and AWS captured 32% of the market; on pace with their overall market share numbers for the year, meaning they did not cede any ground to rivals.
Q4 2020, cloud infrastructure spend increased 32%, driven by increased digital transformation.
AWS enjoys market share dominance at a 32% share of the market, roughly equal to the combined total of their 3 top rivals. 1*
AWS 2020 and Beyond
For the last six years plus, AWS has been on a massive ascension with significant growth in both revenue and profit, making it the clear market leader.
While the AWS’s growth % is slowing down to 32% per annum (compared to 45-to-50+% per annum for Azure and GCP). AWS operates with a large revenue base, the pace at which it adds $10 billion increment of annual revenue run is accelerating. (Source: AWS 2020 re: Invent conference, Andy Jassy). In fact, it should take AWS another 2 quarters to reach $50 billion run rate.
AWS continues to dominate but Azure, Google and Alibaba are all growing at faster rates, so perhaps there will be some tightening of the market in the years ahead. For now, we see AWS as the major player, with Azure having a strong play especially in Microsoft shops, with Google as a niche player. Alibaba has not shown up much yet in western markets, but that could change in the year ahead.
The cloud infrastructure market grew more than 30% in 2020, to $129 billion from around $97 billion in 2019. (Source: Synergy Research)
Gartner says that 70% of organizations using cloud will increase spending in the cloud, but projects an 18% increase in spend in 2021 when compared with a 33% increase in 2020, and a 42% increase in 2019. We see a higher increase in 2021 mostly due to the improved ease at which legacy workloads can be migrated to the cloud without major transformation efforts, taking advantage of the less costly processing environment, while not requiring as much organizational pain to prepare.
With cloud spend set to be $309 billion for 2021, clients are advised to consider that a third of that spend is pure waste from assets that are purchased but not used, and another third of that spend is from assets that are provisioned with higher entitlements than there is consumption.
All told, this creates a $206 billion opportunity for cloud savings in 2021 alone.
Cloud Cost Pricing Survey and Benchmark
Cloud is expected to grow from $371B in 2020 to over $832B by 2025. At the same time, the industry is already hemorrhaging 27% to 35% in Cloud waste. For many companies, that waste represents innovation and IT transformation that could be funded, or at the very least represents considerable improvement to bottom line financials.
Utilize NET(net)’s Cloud Savings Calculator to get a high-level view of how much you could be saving. Answer a few simple questions, and you will get a PDF deliverable of results and recommendations.
To review your results in greater detail or get more information on NET(net) CCO (Cloud Cost Optimization) Programs, Contact Us to connect with a Cloud subject matter expert. More on that below.
Cloud Cost Optimization (CCO) Services
Overall, enterprise clients waste an average of 25-37% of their cloud infrastructure spend. With some companies spending millions every month, the Cloud waste has a direct impact to a firm’s profit and loss performance.
We find that most overspend originates from one of five areas:
1) Cost Predictability
There are literally hundreds of cloud solutions that can influence your cost. There are several items (e.g., key services and geographies of consumption, instance types, storage class...) that drive your spend and may cause a rapid escalation of costs.
2) Lack of Insight into the Data
Most companies rely on the usage and invoice reports provided by AWS, Azure, and Google to manage consumption, but the complexity and dynamic nature of cloud consumption are a major hurdle toward deriving insightful information from native tools.
3) Over-utilizing on-premise environment to plan cloud deployment(s)
Often firms will deploy their cloud environment by utilizing their ‘map’ of on-premise configurations. This is a natural approach, but one that might result in waste given the marked difference in cloud versus on-premise spend. There are effective ways to compare the two, but this takes insight few firms have developed.
4) Lack of hybrid cloud management and or experience
Managing cloud by itself is not an easy task, but an effective hybrid cloud management plan is another level. When managed and optimized, we find hybrid cloud to be a preferred approach, but it requires careful planning and consideration.
5) Governance: No plans or methodology for continual cost optimization
Continuous management is the key to ensure optimized performance and cost. Our experience shows that firms typically lack the experience, appropriate skill and reports to put it all together. Cloud optimization is typically short-lived without a continuous plan of attack. Said another way, while firms are plugging one hole in the dam, three more leaks have appeared. They are always behind.
NET(net) can review your environment and implement our CCO Program (Cloud Cost Optimization) to effectively manage your cloud spend. We have a tech-enabled services program that is easy to get started with and can rapidly assess your situation without risk of incurring ongoing fees or any other charges.
- We offer an exclusive technology enabled business process that analyzes cloud costs at a level of granularity that no one else can
- Across thousands of workloads we have analyzed, there is an 85% probability that we can show you a 35% to 65% savings in your workloads
- Our analysis shows your precise consumption in comparison to what you pay for and highlights where there is opportunity for cost reduction
- We offer this CCO service to help you first evaluate your Cloud spend and opportunities for savings as a one-time optimization or as an ongoing managed service
To get more information on our CCO (Cloud Cost Optimization) Services, designed to help you maintain a cost-optimized environment for the duration of your cloud contract, Contact Us to connect with a NET(net) CCO subject matter expert.
Founded in 2002, NET(net) is the world’s leading IT Investment Optimization firm, helping clients find, get and keep more economic and strategic value. With over 2,500 clients around the world in nearly all industries and geographies, and with the experience of over 25,000 field engagements with over 250 technology suppliers in XaaS, Cloud, Hardware, Software, Services, Healthcare, Outsourcing, Infrastructure, Telecommunications, and other areas of IT spend, resulting in incremental client captured value in excess of $250 billion since 2002. NET(net) has the expertise you need, the experience you want, and the performance you demand. Contact us today at firstname.lastname@example.org, visit us online at www.netnetweb.com, or call us at +1-866-2-NET-net to see if we can help you capture more value in your IT investments, agreements, and relationships.
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