Cloud Costs: How Lack of Formalized Management Wastes Money

CloudZero is the proactive cloud costs efficiency leader and its research report “How Cloud Efficient Are Software Companies in 2024?” draws on hundreds of interviews with cloud and finance professionals.

CloudZero is launching an industry-leading cloud cost benchmarking tool that will enable SaaS companies to gauge their efficiency relative to industry peers.

This research report establishes the fact that SaaS companies are still immature in managing cloud costs, which is the core reason why the cost goes up, leading to a decrease in profit margins. The full report can be downloaded here. Finally, CloudZero is launching an industry-leading cloud cost benchmarking tool that will enable SaaS companies to gauge their efficiency relative to industry peers.

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Gartner has an estimate: all that cloud spending will reach $675 billion this year, given that AI adoption. It is obvious that such large spending is not making organizations more cloud-efficient. The missing link is an innate understanding of how cloud expenses relate to business outcomes.

Key findings from report include:

Only 39% of companies have formalized CCM programs, meaning a lack of proactive cloud cost management.
73% say cloud service provider costs are at least 20% of total cost of goods sold with 28% at over half.
90% said at least 10% of costs cannot be tracked to the right sources.
Currently, advanced CCM practices used by a few companies include comprehensive cost allocation (9%), cloud cost chargeback (under half), and software code optimization (28%).

Besides, the running of cost efficiency in the overall cloud has been challenging to portfolio organizations since there existed no benchmark across the industry. The new Cloud Efficiency Rate (CER) from CloudZero is the first-ever unified benchmark that drives cloud efficiency in businesses providing SaaS. The top quartile CER sits at 92%, indicating that only $0.08 of every dollar of revenue goes into cloud services. The financial rewards of effective CCM are high.

CloudZero CEO Phil Pergola added, “For SaaS companies, cloud expenses are typically one of the top three budget items, yet most are missing rigorous processes to manage cloud efficiency or understand its impact on unit economics at a detailed level. In the absence of such, they risk losing a significant amount of gross profit. Clearer visibility and management over their Cloud Efficiency Rate allows cloud native organizations to become more profitable by increasing both their top and bottom lines.”

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