It’s hard to deny that cloud computing has transformed how businesses operate. With the ability to access powerful computing resources on-demand without having to own their physical infrastructure, cloud computing has allowed businesses to scale, maintain flexibility, and focus their efforts on business operations, rather than complex IT hardware.
However, these advantages have come at a great cost. In fact, most enterprises spend more than $1 million a year on cloud computing. In companies with more than 1,000 employees, cloud costs average between $2.4 million to $6 million every year. According to a survey from 2022, that is 19 percent of these companies’ total expenditure.
Even small to medium sized businesses are spending anywhere from $600,000 to $1.2 million per year in cloud computing costs. What’s even more alarming, however, is that only 3 out of 10 organizations know where their cloud spend is going. And 75 percent of organizations report an increase in “cloud waste” – or the sum of their unused or underused cloud resources.
This “waste” can come in all sorts of forms, such as resources that were purchased but never used, unattached or idle resources left running unnecessarily, resources not being right-sized, incorrect configuration, overprovisioning, and not optimizing committed use discounts.
But the result is the same: organizations are losing a lot of money to cloud computing costs. Common estimates suggest that about 30 percent of cloud spend is wasted, with more than $147 billion wasted in 2022 alone – the most in any year to date.
As a result, more and more companies are beginning to explore alternatives to cloud computing to help reduce costs while maintaining greater flexibility and scalability. With that in mind, here are 4 alternatives worth considering:
1. Hybrid
A “hybrid” cloud approach connects a company’s on-premise private cloud services and third-party public cloud services into a single, flexible infrastructure. In other words, a public cloud is combined with a physical data center, allowing for sending and receiving of data and applications between cloud and on-premise data centers.
Many companies have already adopted this model, reporting greater security, scalability, compliance, and reduced closets. In fact, 82 percent of IT leaders moved to a hybrid approach last year, deeming it the “year of the hybrid cloud.”
2. Multi-cloud
Multi-cloud takes things a step further by allowing organizations to use two or more clouds from different cloud providers. Organizations can choose cloud services from different cloud providers based on a combination of pricing, performance, security and compliance requirements, geographical location, etc. Similarly, a multi-cloud approach provides the ability to rapidly adopt “best of breed” technologies from any vendor – as needed or as they emerge – rather than limiting customers to whatever offerings or functionality a single vendor offers at a given time. In this way, it can help prevent vendor lock-in or becoming too tied to one particular ecosystem, such as AWS, Google or Azure.
Businesses that have adopted a multi-cloud approach have reported strategic benefits for their organization, noting greater flexibility, reliability, and reduced costs. An analysis from Gartner found that moving to a consistent multi-cloud environment is roughly 34% less expensive than a move that would lock businesses into the platforms of major cloud providers.
3. Edge computing
While cloud computing is about processing data in a far-removed data center or public cloud, edge computing is data analysis that takes place at its point of origin in real-time. In other words, it’s the processing of data at the “edge” of the network, closer to where the data is actually being created.
With cloud-based services, many businesses are facing a variety of challenges, such as bandwidth limitations, latency issues, and disruption in internet connectivity. Since edge computing involves processing data locally rather than in the cloud, it can offer a number of benefits, such as reduced latency, improved security, increased uptime, and overall enhanced efficiency. It can also be more cost effective than traditional cloud-based solutions.
4. Micro data centers
Micro data centers are what they sound like: smaller versions of a traditional data center operation. They still have features found in traditional data centers, such as cooling systems, security, humidity sensors, and a continuous power source — just on a much smaller scale.
Part of the benefit of these scaled-down data centers is that they can be deployed essentially anywhere – from a remote site off the beaten path to a small room in a hospital. For example, they might be used in an office to help run corporate apps locally while supporting connectivity. In fact, many micro data centers deployed in an office setting only require one “locker.”
Micro data centers can reduce operating costs and are more cost-effective in general, given that they are prefabricated and smaller than traditional data centers. One report noted that micro data centers can yield a cost reduction of 50 percent over a traditional data center under ideal circumstances. Part of this savings comes from a micro data center’s ability to tap into an existing facility’s electrical power to operate its equipment.
Interestingly, one report estimates that the global micro data center market – which was estimated at $4.7 billion in 2022 – will reach $14.2 billion by 2030, growing at a compound annual growth rate of nearly 15 percent from 2022-2030.
The Bottom Line
As with all technology, the cloud computing landscape is continuing to change and evolve. Interestingly, Gartner estimates that 75 percent of enterprise-generated data will be processed outside of the cloud or a traditional centralized data center by 2025.
While organizations may have been confined to the “big three” — Amazon Web Services, Microsoft Azure, and Google Cloud — for their cloud computing needs in the past, today they have more flexibility than ever in how they manage their data and develop their infrastructures.
Given the exorbitant fees, increased cloud “waste”, and limited control of traditional cloud computing, we’ll likely see more companies pivoting to a new solution — whether it’s hybrid, multi-cloud, edge computing, micro data center, or some combination therein.