ProsperOps 2024 Report on Cloud Cost Optimization Finds Half of Amazon Web Services (AWS) Customers Not Utilizing Commitment-Based Discounts
The median Effective Savings Rate (ESR) on cloud compute costs was 0%, suggesting that AWS organizations are throwing away billions on wasted cloud spending.
AUSTIN, Texas, January 25, 2024 (Newswire.com) - ProsperOps, the leading FinOps rate optimization platform for AWS, today released its inaugural Effective Savings Rate (ESR) Benchmarks and Insights Report, analyzing the state of cloud spending, savings performance, and waste. The study, which combines twelve months of research into hundreds of AWS organizations representing more than $1.5B in annualized AWS compute usage, found that 53% of organizations do not use AWS Saving Plans or Reserved Instances, suggesting that AWS customers are throwing away billions of dollars in wasted cloud spend.
ProsperOps research found that approximately 50% of the average AWS bill is comprised of compute services, like Elastic Compute Cloud (EC2), Fargate, and Lambda. Last year, Amazon Web Services (AWS) generated $88 billion in annual revenue, so roughly $44 billion was spent on cloud compute services. According to the ESR Benchmarks and Insights Report, fewer than half of all organizations analyzed were actively using commitment-based discounts to reduce their cloud costs.
“Our platform’s maximum achievable ESR ranges between 50-60% on cloud compute spend,” commented Chris Cochran, Co-founder and CEO of ProsperOps. “If $40 billion is spent each year on AWS compute services, companies could be throwing away, or wasting, more than twenty billion dollars.”
The need to optimize cloud spending and reduce waste cannot be understated. Last year, a survey revealed that 94% of enterprises report wasting money in the cloud. Within the ESR Benchmark and Insights Report, organizations can compare their savings performance against industry peers to understand the relative success of cost optimization initiatives and prioritize other FinOps activities accordingly.
Additional findings revealed that the median ESR across all organizations was 0%, meaning many AWS customers leave money on the table by simply paying on-demand rates. Even at the 75th percentile, the average ESR was only 23%, suggesting that even sophisticated organizations with mature and established cloud FinOps practices have room for improvement.
“Hyperscalers like AWS and Google Cloud Platform offer commitment-based discounts to help organizations manage their cloud costs. However, managing and optimizing these discount instruments is highly complex, making it impossible for any human to maximize savings,” added Chris Cochran. “Many organizations have elastic compute consumption patterns but have a discount portfolio full of inelastic commitments. Without automation, enterprises cannot fully optimize savings programs and effectively control cloud costs.”
As more companies realize the importance of cloud cost optimization, they will not only try to reduce waste internally but also look for automated platforms, such as ProsperOps, to reduce the complexities of managing commitment-based discounts and cloud spend. According to Everest Group, Savings Plan and Reserved Instance automation adoption is expected to increase by 80% in the next 3 years (Everest Group 2023 Report - FinOps for Enabling Value in Cloud).
“When crafting FinOps metrics,” says Titus M, Practice Director at Everest Group, “focusing on median ESR, relative percentiles, and their link to cloud usage empowers organizations to make informed decisions and significantly reduce cloud spend. By comparing Savings Plans and Reserved Instances, companies can pinpoint both the cost savings and potential risks associated with these discounts, ultimately refining their rate optimization strategies.”
Download the 2024 Effective Savings Rate Benchmarks and Insights Report, here.
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Methodology
ESR Benchmarks and Insights Report analysis includes an in-depth review of thousands of data points from AWS Cost and Usage Reports. Data includes anonymized usage, coverage, and spend information collected from hundreds of AWS organizations over a contiguous 12-month period, starting after December of 2022.
About ProsperOps
ProsperOps is the leading automated platform for cloud financial management. Founded in 2018, ProsperOps provides an intuitive, autonomous cost optimization experience for Amazon Web Services (AWS) that automatically manages AWS discount instruments to maximize compute savings and minimize commitment risk. By removing the effort, latency, and risk associated with manually managing rigid, long-term discount instruments, ProsperOps simplifies cloud financial management. ProsperOps is a founding member of the FinOps Foundation and a FinOps certified platform, AWS Cloud Management Tool Competency & ISV-Accelerate Partner, and 2021 Gartner Cool Vendor in Cloud Computing. ProsperOps is backed by H.I.G. Growth Partners, Snowhawk, and other strategic investors. Learn more and get started at www.prosperops.com.
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Source: ProsperOps
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Tags: aws cost optimization, cloud cost optimization, cloud financial management, finops
