Coronavirus Fueling Cloud Spending: 2020 State Of The Cloud Report

‘With employees working from home and more business interactions going digital, more than half of enterprise respondents said their cloud usage will be higher than originally planned at the beginning of the year due to the pandemic,’ says to Jim Ryan, CEO of Flexera, which produced the ninth annual cloud report.

A majority of enterprises see their cloud usage exceeding plan this year due to impacts of the coronavirus (COVID-19) pandemic, according to a new report.

Fifty-nine percent of enterprises expect their cloud usage will be slightly or significantly higher than planned, according to the ninth-annual Flexera 2020 State of the Cloud Report. Half of small and medium-sized businesses also expect their cloud usage to escalate.

Organizations’ cloud journeys are even more important for their businesses as they face unprecedented operational impacts due to the pandemic, according to Jim Ryan, CEO of Flexera, a software asset management company based in Itasca, Ill.

A portion of the increased cloud demand is a result of extra capacity required for current cloud-based applications to meet increased demand as online usage grows, the Flexera report states. Other organizations may be accelerating their migrations from data centers to the cloud in response to reduced headcount, difficulties in accessing data center facilities and delays in hardware supply chains. And some may determine that public clouds offer more reliable business continuity, according to the report, formerly known as the RightScale State of the Cloud Report.

“With employees working from home and more business interactions going digital, more than half of enterprise respondents said their cloud usage will be higher than originally planned at the beginning of the year due to the pandemic,” Ryan said. “Companies plan to migrate more services to cloud, yet they’re already exceeding cloud budgets. They will need to focus on optimizing workloads as they migrate in addition to cost management and governance to ensure operational efficiency.”

Flexera conducted the survey of 750 cloud decision-makers and users from around the world in the first quarter of this year, in still the early days of the coronavirus spreading outside of its origin in China. It added the coronavirus question in March, while the survey already was underway, and 25 percent of the last respondents answered it.

Public cloud usage overall continues to grow dramatically, according to Flexera, which found that more than half of all enterprise workloads and data are expected to be in public clouds within 12 months.

Here’s a look at other key findings from the Flexera 2020 State of the Cloud Report, including survey respondents’ adoption of public clouds, multi- and hybrid cloud strategies, container use, cloud spending and cost-optimization, and how they’re leveraging managed service providers. The responses came from 554 enterprises and 196 small and medium-sized businesses (SMBs).

Public Cloud Adoption

Amazon Web Services (AWS), Microsoft Azure and Google Cloud remain the top three public cloud providers for respondents, with Azure “rapidly narrowing the gap” with No. 1 AWS in terms of the percentage of enterprises that are using it and the number of virtual machines enterprises are running in it, according to the report.

Seventy-six percent of enterprises said they use AWS, compared to 67 percent in 2019, while 69 percent of respondents said they’re using Azure, up from 60 percent last year.

Google Cloud, meanwhile, saw the fastest growth in adoption since the 2019 Flexera survey: 34 percent of respondents are using Google Cloud, compared to 20 percent last year.

“Among enterprises, Azure has nearly closed the gap with AWS in the breadth of adoption,” the report states. “Oracle has moved into the No. 4 spot, followed by VMware Cloud on AWS. Over a quarter of respondents are experimenting with Google Cloud and VMware Cloud on AWS, which can drive higher adoption in future years.”

Twenty percent of enterprises reported more than $12 million in annual public cloud spending, while 74 percent spend at least $1.2 million annually.

Respondents are running 53 percent of their workloads in public clouds, and that number is expected to reach 60 percent within 12 months, according to survey respondents, who said understanding application dependencies was their top challenge in terms of cloud migration.

“In the past, some organizations hesitated to put certain types of data in public cloud,” the Flexera report states. “This year’s survey found that many respondents are willing to put even sensitive data in the cloud. More than half of respondents will consider moving at least some of their sensitive consumer data or corporate financial data to the cloud, which reflects increasing confidence in the security practices of the cloud providers.”

Multi-Cloud And Hybrid Cloud Strategies

Multi-cloud continues to be the dominant cloud strategy and has been adopted by almost all enterprises, with a mix of multiple public and multiple private clouds as the most common approach, according to the report.

Ninety-three of enterprise respondents indicated they had a multi-cloud strategy, and 87 percent employ hybrid cloud strategies, using both public and private clouds.

“Of the portion of enterprises with a hybrid cloud strategy, 86 percent report incorporating multiple public clouds in the mix, while 60 percent report using multiple private clouds,” the report states. “Overall, the most common approach is a mix of multiple public and multiple private clouds, with 53 percent reporting that they are taking this approach.”

The respondents use 2.2 public clouds and 2.2 private clouds on average. Six percent of respondents use a single public cloud, while 1 percent use just one private cloud.

Fifty-five percent of organizations said they silo applications on different clouds, while 41 percent said they integrate data between clouds.

Just a third of organizations said they take advantage of multi-cloud management tools, although they’re “essential to managing cloud resources cost effectively and ensuring strong governance and security,” according to Flexera.

“Multi-cloud architectures are more complex and, therefore, more challenging to manage,” the report states.

Container Use

The use of containers is now mainstream, according to Flexera’s report, with65 percent of respondents saying they’re using Docker for containers and 58 percent using Kubernetes, a container orchestration tool that leverages Docker.

Fifty-one percent of respondents said expanding their use of containers was a top cloud initiative for this year.

“The quest to reduce cost as well as the increasing adoption of DevOps is driving up the use of containers,” the report states.

AWS, Azure and Google container-as-a-service offerings are seeing significant growth. Fifty-four percent of respondents use AWS’ ECS/EKS container service, and another 24 percent plan to use it. Forty-six percent use Azure Container Service, up from 28 percent last year, and 24 percent use Google Container Engine (GKE), compared to 15 percent last year.

“Container usage can…help control costs, because they allow more efficient use of infrastructure,” the report states. “Consequently, they offer a more cost-effective way to deploy workloads in the cloud.”

Forty-one percent of respondents said a lack of resources/expertise is a top container challenge, however.

“Because of the relative newness of container technology, organizations face a number of challenges,” the report states. “The top container challenges are the lack of resources/expertise, migrating traditional apps to containers and security. The resource challenges can be attributed to the relatively recent adoption of container technology. Migrating traditional applications to containers is problematic, because containers are optimized for microservices while traditional apps are not.”

Cloud Spending

Seventy-nine percent of survey respondents said that managing cloud spend is a top challenge – second only to security – while advanced cloud users said it was their No. 1 challenge.

Respondents said their organizations are over budget for cloud spending by an average of 23 percent, and they expect their cloud spend to jump 47 percent in the next year.

“This means getting a handle on forecasting and cost optimization is more critical than ever,” the report states.

Optimizing their existing use of cloud was recorded as the top initiative for respondents for the fourth consecutive year. Seventy-three percent of organizations plan to optimize their existing use of the cloud to save costs, and 77 percent use cost efficiency and savings to measure their cloud progress.

“Optimizing usage is a cost control measure,” the Flexera report states. “Organizations are leveraging automated policies to continually scan and optimize their cloud costs.”

The respondents estimated that 30 percent of their cloud spend is wasted, but Flexera believes that figure likely is higher, because many organizations tend to underestimate the amount of waste.

“In working with customers to identify waste, Flexera has found that, on average, actual waste is 35 percent or even higher,” the report states.

Organizations don’t take advantage of all cloud providers’ discounting options, but 51 percent said they’re starting to leverage automated policies to shutdown workloads after hours, and 49 percent said they’re beginning to right-size instances.

Fifty-six percent of organizations also said that understanding the cost implications of software licenses for use in the cloud is a challenge.

Other Cloud Challenges

Eighty-one percent of organizations said security is their top cloud challenge, 77 percent cited governance, and 77 percent also pointed to a lack of resources/expertise, with the latter being the top challenge for cloud beginners.

While challenges such as cloud migration and managing multi-cloud environments get easier as organizations mature and gain experience, others -- including security, cost management, governance and compliance -- remain significant even in organizations with advanced cloud maturity levels, according to Flexera.

“One possible reason for this phenomenon is that the factors driving these challenges present moving targets,” the report states. “Hackers continue to increase their sophistication, requiring constant attention to cloud security. In addition, new legislation and regulations continue to appear, particularly in industries such as financial services and healthcare, as legislators attempt to catch up with technology.”

Leveraging Managed Service Providers

Flexera surveyed respondents about their use of management service providers (MSPs) for managing their public clouds for the first time in the 2020 survey.

Almost half said they outsource at least some of their cloud work, and 26 percent said they use MSPs for most of their public cloud use.

Thirty-four percent of respondents, meanwhile, said they had no plans to use MSPs, while 13 percent plan to use MSPs, and 6 percent plan to decrease their use of MSPs.

The survey showed that enterprises are more likely to use MSPs than are SMBs. “One possible reason for this disparity is that enterprises traditionally have more experience in outsourcing, such as in running their data centers or service desks,” the report states.