Companies waste $62 billion on the cloud by paying for capacity they don't need, according to a report

  • Most companies think moving to the cloud will save them money on IT costs, but that’s not the always case, according to researcher Jonathan Koomey.
  • More than 80% of on-premise data centres have way more space than is necessary, which translates to higher costs with cloud providers like Amazon Web Services (AWS), Koomey found.
  • This unnecessary spending costs companies around the world an estimated $US62 billion annually.

Many companies think that moving their data centres onto the cloud will save money. But merely moving from in-house storage to a cloud provider like Amazon Web Services (AWS) doesn’t actually cut costs in most cases, according to a new report.

The majority of companies migrating their systems to the cloud have the wrong idea of how much capacity they actually need. The companies are over-estimating the amount of cloud capacity they need to pay for because the in-house data centres they have been relying on are poorly configured, says the report by Stanford researcher and lecturer Dr. Jonathan Koomey.

More than 80% of in-house data centres have way more storage space than is necessary, Koomey found in his study. Since many companies don’t do routine checks to see how much storage they are using, they end up paying for extra electricity, cooling, licensing and maintenance for storage that never gets used, Koomey said.

That extra cost rolls over when companies move onto the cloud, Koomey found, resulting in companies paying an average of 36% more for cloud services than they actually need to. Given Gartner’s projection that data storage will be a $US173 billion business in 2018, companies globally could save $US62 billion IT costs just by optimising their workloads.

Koomey’s report analysed data from 20 different companies, whose information was provided by TSO Logic, a software provider that analyses how data is stored on the cloud. (TSO Logic did not fund the study).

He found that only 20% of companies would save money if they transferred their server data directly onto the cloud, whereas 80% would see an increase in annual costs. However, 100% of the sample group would save if the companies migrated after figuring out how much server space they actually use.

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