Cloud Computing Isn’t as Cost Effective as Hoped. So What’s Next? | WSJ Tech News Briefing

This is your

tech

nology

briefing

for Monday, October 3. I'm Zoe Thomas for The Wall Street Journal. Many companies were sold

cloud

computing

as a

cost

-

effective

way to store data and quickly scale up or down their IT capabilities, and many bosses got on board, but now many feel that Cost savings they were promised haven't really been worth it, according to a KPMG survey, roughly two-thirds of a thousand senior

tech

nology leaders at U.S. companies say they are yet to see a significant return on their

cloud

investments, so, Where does that leave businesses and

what

does it mean for the future of the cloud?

Joining us for discussion is Wall Street Journal CIO Journal Reporter Isabelle Bousquet Hi Isabelle, thanks for joining me, yes, thank you very much. Zoe, so why are

cost

s higher than expected for ctOS? Yes, I think there are some reasons for that. The first is that companies rushed to the cloud without thinking much strategically about where they were going to put certain applications or how much data they actually contained. was going to need in the cloud and it was kind of a crazy push over the last decade that the pandemic also accelerated a law to get as much information as possible in the cloud as quickly as possible, sometimes they were paying for the same thing in two different clouds and they didn't necessarily need everything they were paying for or they were processing data in multiple places and not really doing things in an optimal way.

This takes us back a little bit, I mean, 10 years ago, when the first push to move to the cloud was happening,

what

was the pitch that cloud providers were making to enterprises? Basically the idea behind the cloud is that instead of paying for your own local data center as a place where you will host all your data and all your applications, you would basically rent server space from companies like Amazon or Microsoft and the argument It was essentially that you would only pay for what you used and that was a really useful way to scale up and down, especially to meet surges and demands that weren't necessarily expected.

I think Black Friday could be a good example for similar retail businesses, if you see a lot of Russian traffic on your website and you are in the cloud, the cloud will automatically scale to meet that demand and at the same time if you have a week where maybe you're not getting a lot of traffic, you're not paying for the amount of

computing

capacity that you would need if you were getting a lot of traffic, and then as time went on there was a lot of other capacity down the line. On top of that, it has a lot to do with AI and the ability to do interesting analytics on top of the data that is stored in the cloud and I think in the early days of the cloud there was also the idea that you would choose one of the cloud providers. the cloud and it would be their primary cloud, so many companies created applications that were specific to the primary cloud that they were using and over time they realized that there are certain applications or certain capabilities that different cloud providers offer. and they really wanted to be able to use certain capabilities from multiple cloud providers, not just one, and they didn't want to get locked in, so I think when they started using more cloud providers they realized that, oh no, a lot of the applications that we created specifically for what we thought was going to be our main cloud provider, now we have to rebuild and that's where a lot of the costs also came from, in that sense I mean what measures are companies taking to reduce their costs.

It's like some clouds have tiering systems, so basically companies that put everything at the highest level of cloud capabilities can take a step back and realize that maybe some of these things might be at a higher level. lower, maybe we don't need the highest level of compute capacity, the other piece really has to do with interoperability of multiple cloud providers and making sure that they don't have duplications between clouds, making sure that they don't pay for what same twice. Do we expect companies to do a complete reversal, maybe pull? these things come out of the cloud and just start storing their own data again.

No, I don't think we'll necessarily see that happen. I think what we're in now is I would almost call it a second phase of cloud migration. a little more measured and a little more strategic and companies just understand a little more what the costs can be here the year and how high they can be and I think that's something they didn't really understand in the first phase. of cloud migration that was kind of a mad dash, so what is the outlook for the cloud industry? There's still a lot of interest in cloud companies that still think cloud is the future and definitely the place to be, but there's not as much mass.

The surge in demand that we were seeing, let's say, at the beginning of the pandemic and I think another part of that that's maybe important to recognize is what's happening with the economy right now. There has been a lot of talk about whether budgets are working. will decline dramatically if we enter a recession and IT leaders will be under more pressure to demonstrate return on investment. Well, that's our reporter Isabel Busquet, thanks for joining us Isabel, yeah, thank you very much again Zoe and that's it for today's tech

news

briefing

. For more technology stories, visit our website wsj.com.

I'm Zoe Thomas for The Wall Street Journal, thanks for listening.