As AI gobbles up mindshare and more IT resources, spending on cloud services continues to surge. But organizations that adopt the right tools to right-size their cloud environments and eliminate idle resources can see significant savings.
That’s one of the chief findings of the 2024 Cloud Usage Report, published by Nutanix. The cloud is growing more important than ever, especially as enterprise AI becomes a business imperative, according to Mayank Gupta, director of product and GTM at Nutanix.
“The cloud is here to stay,” said Gupta.
“It only makes sense to invest in tools which will help you eliminate waste. Every dollar wasted in the cloud is a dollar that’s not being spent on your business applications or on your team.”
Unlike surveys, the Nutanix report examines real consumption data and trends to uncover insights into the real-world cloud landscape.
“With surveys, people might say one thing and do something else,” Gupta noted. “We’re looking at exactly what our customers are doing.”
Growing Cloud Maturity
Among the report’s most surprising findings: Nearly two-thirds (just over 65%) of small and medium businesses are now defined as cloud “experts,” meaning they are using more than 30 cloud services. This rivals the portion of experts at the enterprise level (69%), signifying that smaller organizations have come to rely on tools and systems that they do not have to deploy or manage themselves.
“We see SMBs using a lot of advanced cloud features – not only right-sizing solutions, but also sophisticated cloud tools like load balancers,” Gupta said. “So that was very interesting.
“The cloud has become a lot more pervasive in every business. And it’s become imperative, especially from a business point of view, for small businesses.”
Looking at industries: Manufacturing and retail (over 69%) and technology, media, and communications (69%) have higher shares of expert companies than other sectors. Healthcare came in next (nearly 67%) and it was the only sector with no “beginners” – defined as organizations using 15 or fewer cloud services.
AWS Spending Rises, Azure Spending Soars
Between the first and last quarters of 2023, customers increased their AWS spending by just over 7%. That’s significant because of the large customer user base, said Gupta, but it pales in comparison to the 64% increase in Microsoft Azure spending.
“AWS has always been very entrenched with our customers, so the growth doesn’t show up as dramatically as Azure,” Gupta said.
“In recent years, a lot of people started looking more closely at Azure, especially because of their partnership with OpenAI.”
Unsurprisingly, enterprise customers increased their cloud spending by far more than SMBs. For example, enterprises spent 70% more on Azure resources between the first and last quarters of 2023 compared to a 13.5% average increase among smaller organizations.
AI Is Driving Cloud Growth
The Cloud Usage Report showed how companies have dramatically increased their cloud spending to support their AI initiatives. Between the first and last quarters of 2023, Nutanix customers increased their cloud spending on emerging services, including AI/ML by 76%.
One quarter (25%) of total AI/ML cloud spending went to Azure Cognitive Search, and around one-fifth went each to Amazon SageMaker (21%) and Azure Cognitive Services (20%). Together, these three AI tools help organizations more efficiently search through their enterprise data, develop new applications, and integrate AI and ML features into their existing systems.
Gupta noted that the GPUs that power AI systems have been in short supply since the start of the AI boom, pushing more customers to adopt cloud resources. The coming years could see even higher levels of investment, he added.
“We’re in the very early days of AI adoption,” Gupta said.
“Most organizations are still evaluating which IT environments are optimal for running various AI processes and workloads, and they are still determining which types of AI applications are most relevant and beneficial to their specific industry or business.”
"Case in point, the Nutanix GPT in a Box is an on-prem solution. Some organizations are looking at entirely on-prem solutions for security and data sovereignty"
FinOps Tools Yield Cloud Savings
While cloud spending continues to rise, the Cloud Usage Report shows that implementing the right tools can result in significant savings. According to the report, companies using cloud cost governance tools save an average of $43,800 annually by eliminating unused resources, plus an additional $150,000 in savings through right-sizing underutilized resources.
“If you’ve finished a job, and you’re not using those resources anymore, you’re literally burning money,” Gupta said.
He noted that developers often request the largest possible compute instances needed for a task, but then forget about these cloud resources after their work is done.
“The public cloud is something you rent, and so scaling down will help you save,” he said.
Among enterprise customers, eliminating unused VMs and snapshots accounted for over 47% of cloud cost savings. Eliminating unused datastores accounted for 38% of savings, and eliminating unused network services accounted for nearly 15% of savings.
Gupta noted that the average savings of customers using FinOps tools is enough to pay for an extra IT professional each year.
“This is money that can help you build your cloud team,” he said. “These are not pennies in the couch. These are dollars on the dining table.”
Calvin Hennick is a contributing writer. His work appears in BizTech, Engineering Inc., The Boston Globe Magazine and elsewhere. He is also the author of Once More to the Rodeo: A Memoir. Follow him @CalvinHennick.
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