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With cloud spending increasingly under the microscrope, transparency has never been more important.

This past year has been a mixed one. Spending on cloud computing went up as companies struggled to cope with everything thrown at them by the pandemic, writes Blair Lyon, Vice President Cloud Experience, Linode. Worldwide end-user spending on public cloud services is forecast to grow 18.4% in 2021 to total $304.9 billion, up from $257.5 billion in 2020, according to Gartner, Inc.

Through it all, companies turned to the cloud to keep their operations going — and, for many, those implementations were put in place quickly. Over the next year, companies will need to reevaluate the moves they made in the chaos of 2020 to keep costs under control. And with inevitably more spending poured into the cloud, developers, IT operations staff, and business teams will likewise need to rethink their roles.

Almost every company has been affected by the pandemic in some shape or form – looking at data from Sumo Logic, technology, media and entertainment companies saw the amount of data they create go up by 20% month on month. The effect will be permanent too: according to PwC, 61% of CEOs think their businesses will be more digital, a change accelerated by the pandemic. For many, it forced their hands on deploying to the cloud – some used it as an opportunity to do what they had always wanted, others had no choice as they could not source the servers or other hardware they normally rely on.

Cloud cost management is going to be under the microscope in 2021, with cost estimates so often deeply inaccurate.

Blair Lyon on cloud cost management
Blair Lyon, VP, Linode.

This year will see companies reviewing IT investment decisions they were forced to make in response to the events of 2020, and adjusting their cloud spending now that they have better hindsight and a somewhat clearer vision of what’s ahead.

Why will this be needed? For some companies, the world will move back to relatively normal conditions, while others will continue to face a tough market environment. Higher spend levels on cloud will continue to be necessary for some, while others will need to flex their spend to match the market. Either way, getting the right level of cloud spending in place to support their level of business will be essential. This review process can also help them think about what might happen if business goes up or down over time.

The majority of cost estimates on cloud spending are not accurate. While we can all try to predict what we will use over time, resource demand will go up or down based on real world activity. Areas like data transfer can be incredibly expensive and unpredictable.

For developers, 2021 will see more questions around cost levels and spending before projects can get started. For those responsible for IT projects, getting more visibility into what developers are doing will also be on the agenda. Preventing overspending through better cost control and forecasting will be an area where IT team leads spend more time in the new year.

For cloud service providers, 2021 will be the year of being more open on what costs are involved in running services. This will lead more cloud companies to try and simplify their pricing over the next few years. For some, transparency on pricing will be a key point to differentiate themselves in the market, as cloud cost management becomes a growing priority for customers.

According to Gartner, multi-cloud adoption is continuing to grow as companies look for the best fit for their business, redundancy, and to avoid vendor lock-in, with an estimated two-thirds of organizations adopting multi-cloud by 2024. However, while lock-in in general is a driver to adopt multi-cloud, cost control and visibility will be more tangible reasons for multi-cloud growth in 2021.

The reason for this is that basic cloud services have become commoditized – storage and compute can be sourced from multiple cloud providers and work alongside each other. Higher up the stack, the emergence of Kubernetes services should in theory make it easier to move application workloads between cloud services. In practice, this may be more challenging as different services have their own dependencies that have to be considered.

To make this work, developers will have to look at how they choose services that are fungible – in other words, that can be easily replaced by others that do the same job – and where they can pick elements that are specific to one cloud service. This is a balancing act over time between getting the right level of performance at the right level of cost. However, it can help avoid getting too dependent on any one cloud provider.

Everyone is familiar with the Big Three hyperscale providers – AWS, Microsoft and Google. They are the primary public cloud vendors for 46 percent of the market, according to a 2020 Forrester research study. This leaves more than half of the market available for other providers to serve. At the same time, 30 percent of companies have already forecast that they will expand their spending on cloud.

The availability of strong alternatives to the three hyperscalers will increase in importance in 2021, as companies investigate how to keep their IT costs down and make the most of their staff with skills around specific cloud services.

See also: JPMorgan CIO Lori Beer on a “complete rethink” and a mammoth shift to the cloud

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Blair Lyon

Blair Lyon is Vice President of Cloud Experience, Linode

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