Only 47% of the current cloud commitments has been utilised and over $300 billion in corporate cloud commitments remain untapped, said a study by Infosys Knowledge Institute (IKI), a research arm of Infosys.
The report indicated that while companies will continue to invest in cloud, less than half of the committed spend is actually being utilised. “While this does not indicate a near-term problem, companies that fail to meet their cloud contracts stand to face higher costs as cloud providers renegotiate contracts,” said the report.
It added: “In 2022, Google Cloud earned a $26.3-billion revenue for its parent Alphabet, but reported a $64.3-billion revenue backlog primarily related to Google Cloud and unused capacity from customers. Amazon’s AWS flagged $110.4 billion of unspent commitments at 2022-end, noting that customer usage drives revenue. In July, Microsoft reported $53.8 billion in unearned revenue, mainly from contracted cloud services not yet in use.”
The report titled, Cloud Radar 2023, surveyed over 2,500 respondents from companies across the US, the UK, France, Germany, Australia, New Zealand and the Nordic countries. The report stated how corporates are now looking at cloud for organisational growth and transformation, than just for cost optimization.
Shyam Vijayan, associate vice president, Infosys cloud services, said, “When money pledged has not been spent, it created problem for both cloud clients and their providers.” If clients don’t spend their committed expenditure by the end of the contract period, they must pay the balance or renegotiate the contract, often on unfavourable terms.
“Cloud providers face problem when numerous clients fall behind on their committed and planned utilisation”, said, Mukesh Nakra, associate VP, cloud services, Infosys. “Building cloud capacity at data centre is a 6-9 month timeline, and requires capital investments. The provider’s capital outlay is predicated on the fact that clients will spend that money. But if clients don’t follow through, the provider is not going to get the return on that investment.”
The research also highlights the shift of cloud utilisation from beyond storage and cutting costs to utilising cloud to gain access to new technology and capabilities, enable new revenue streams and replace or update current systems.