Report: Lack Of Formalized Cloud Cost Management Leaves Money On The Table

CloudZero launches first cloud cost benchmarking tool to help companies drive cloud efficiency

BOSTON, Aug. 13, 2024 /PRNewswire/ -- CloudZero, the globally trusted leader in proactive cloud cost efficiency, today released the findings of its research report, "How Cloud Efficient Are Software Companies In 2024?" From interviewing hundreds of cloud operations and finance professionals, the survey found that most SaaS companies lack maturity when it comes to cloud cost management (CCM). That lack of maturity leads to increased costs and reduced profit margins. The report is available for download here. Additionally, CloudZero is launching the first-of-its-kind cloud cost benchmarking tool to help SaaS companies understand how efficient they are compared to their peers.

Cloud spending is expected to hit $675 billion this year, according to Gartner, and increased AI adoption will drive spending even higher. Although organizations continue to ramp up cloud spending, they're not getting more cloud efficient. What's missing is a solid understanding of how those costs tie back to business outcomes.

Key findings from CloudZero's report include:

• Most companies don't proactively manage cloud costs — just 39% of companies have implemented formalized CCM programs.
• 73% of companies report that cloud service provider costs represent at least 20% of their total cost of goods sold (COGS), and 28% report cloud costs accounting for more than half of their COGS.
• For nine out of 10 companies, at least 10% of their costs can't be traced to the correct sources.

A lack of formalized CCM programs also means companies aren't making the most of the advanced, powerful CCM approaches now available — including complete or near-complete cost allocation (just 9% say they're using this), cloud cost chargeback (under half), and software code optimization (just 28%).

Additionally, organizations have struggled to calculate overall cloud cost efficiency, complicated by a lack of an industry-wide benchmark for this measure. CloudZero's new Cloud Efficiency Rate (CER) is the industry's first unifying benchmark for cloud efficiency for SaaS businesses. This report shows that top-quartile CER is 92% — meaning that only $0.08 of every dollar of revenue goes to cloud service provider(s). The finding underscores the positive financial impact CCM can have.

Phil Pergola, CEO of CloudZero, said, "For SaaS companies, the cloud is typically a top-three budget line item — yet most don't have rigorous processes for managing their cloud efficiency or understanding the relationship to their unit economics at any level of granularity. Without it, they're leaving a substantial amount of gross profit on the table. By better understanding and managing their Cloud Efficiency Rate, cloud-native organizations can improve their profitability — impacting both the top and bottom line."

About CloudZero

CloudZero is the leader in proactive cloud cost efficiency. We enable engineers to build cost-efficient software without slowing down innovation. Our next-generation cloud cost optimization platform automates the collection, allocation, and analysis of cloud costs to uncover savings opportunities and improve unit economics. We are the only platform that enables companies to understand 100% of their operational cloud spend and take an engineering-led approach to optimizing that spend. CloudZero is used by industry leaders worldwide, such as Coinbase, Klaviyo, Miro, New Relic, Nubank, and Rapid7. Visit cloudzero.com to get started today.

SOURCE CloudZero