Companies Wasting Money on Unused Cloud Capacity

There are many benefits to switching to cloud computing, although one of the most important reasons for switching to the cloud is to save money.

The cloud allows companies to avoid paying for expensive on-premise hardware. Purchasing servers requires a high capital expenditure, which can be avoided by using the cloud. More hardware also needs to be purchased than is actually necessary to make sure there is sufficient capacity to cope with the peaks, and also as backup for hardware failure. With cloud computing, the hardware cost is the service provider’s problem.

Savings can also be made on staffing. Without the need to maintain equipment, fewer man hours are required and IT employees’ time does not come cheap. There are also savings to be made on power. Running IT equipment requires considerable spending on energy.

Each company that transitions to the cloud will end up paying some of those costs, but the cloud provider shares their hardware and staff costs with many clients. It is therefore considerably cheaper using the cloud.

The cloud is also elastic. If capacity needs to be increased, a company can easily scale up their cloud services at any time. Cloud capacity can also be reduced when no longer required.

However, companies cannot work right on the limit and have the exact cloud capacity that is required. There are times when greater capacity is required, so there must be a buffer. Companies end up paying for much more capacity that then need for much of the working week. For a large percentage of the time, much of the capacity that is paid for is redundant and is not in use. Essentially this means that for much of the year, companies are leaving the lights on when there is no one home, except in the case of cloud capacity, much more money can be lost.

Figures from ParkMyCloud, a provider of an innovative cloud cost saving solution, highlights just how much this wastage equates to. Each year, $203.9 billion is spent on the public cloud, of which $22.4 billion is spent on infrastructure-as-a-service (IaaS).

An analysis of IaaS spending shows that 66% is spent on compute resources, with the remaining 44% on storage space. While the capacity required for storage is unlikely to change considerably on a day to day basis, the same cannot be said for compute resources. Compute resources are needed for staging, testing and development work – tasks that do not run 24/7. In fact, for most of the time, those compute resources are not in use, yet companies have to pay for the capacity.

Even if the compute resources are only needed for 40 hours a week – which is unlikely as no company will operate at 100% efficiency – that means 76% of spending on those resources is wasted. Cloud wastage on the public cloud equates to an incredible $5.6 billion each year (based on current cloud usage).

Compute infrastructure is usually charged by the hour, so most companies will be paying an hourly rate for capacity that is not being used. However, by scheduling off times for servers, companies are able to efficiently use the cloud and only pay for capacity when they need it.

If you want to enjoy the benefits and cost savings that the cloud offers, there is no need to pay for capacity that you don’t need. If you are, it’s time to start turning off the lights when there is no one home and use a solution that allows you to cut out unnecessary cloud spending.

Author: Richard Anderson

Richard Anderson is the Editor-in-Chief of