An increasing number of companies, both small and large, are moving away from having their own specialised servers for computing infrastructure, and are instead investing that money into cloud capacity. While this undoubtedly has its benefits, there are considerations that must be taken into account. Many companies have been purchasing much more computing capacity in the cloud than they are actually using, which leads to a massive amount of overspending.
Why do companies overspend on the cloud?
It is possible that the company does not know exactly how much cloud capacity they will need, when they begin to shift all of their applications online. It may be considered better to overspend initially, to ensure that everything continues to run smoothly, than to risk disrupting the business and potentially losing customers because of an IT failure. The capacity can then gradually be scaled back to what is actually needed, saving money in the long term.
Alternatively, overspending may allow for sudden spikes in activity to occur, without overloading servers or running out of capacity. This may be advantageous, even essential, in some business sectors, where demand can fluctuate greatly.
How much overspending is occurring?
Overspending on cloud capacity is difficult to quantify precisely, but estimates suggest that between 30% and 35% of cloud capacity being paid for is wasted. This means that the majority of companies could cut their cloud spending by a third without having any noticeable negative impact on their productivity. This adds up to a lot of overspending, a waste of money that could perhaps be put to better use elsewhere in the business.