As cloud costs rise, startups making spend-optimization technology see sunny days ahead – Marketingwithanoy

The pandemic forced businesses to accelerate their digital transformations, which in turn accelerates cloud adoption. According to a 2021 study by O’Reilly, cloud adoption is steadily increasing across all industries, with 90% of organizations now using cloud computing, up from 88% in 2020.

At its best, the cloud, vague as the term is, promises to ease the transition from offline, manual processes to managed automation. For example, the cloud allows sales commissions previously tracked by spreadsheets to be calculated automatically and paid on time. In a more futuristic scenario, cloud-based technologies could allow someone to remotely monitor and tune the HVAC of an entire building.

But the cloud has one major drawback, and it comes down to cost: More than a third of businesses have cloud budget overruns by up to 40%, according to a recent poll by Observability software vendor Pepperdata.

This challenge has led to a cottage industry of companies developing software designed to optimize cloud costs on the fly. These cloud cost optimization providers range from fledgling startups to mature acquisition targets, who are promoting their use of technologies such as AI to detect which cloud services customers are using and reduce spend where possible.

“You can’t really separate cost management from the rest of cloud management,” Gartner analyst Craig Lowery told Marketingwithanoy via email. “About five years ago, cost management was very important because it was the most painful and least understood aspect of cloud adoption. Today, cost management is much better understood and security and compliance have become just as important, if not more important. [It’s] considered tables for a cloud management solution.”

Several years ago, while still nascent, the market consolidated as incumbents in adjacent industries saw the opportunities presented by cloud cost optimization. Microsoft acquired Cloudyn in 2017, which provided tools to analyze and forecast cloud spend. In 2019, Apptio acquired Cloudability, a provider of cloud spend management, while VMWare and NetApp bought CloudHealth and Spot (formerly Spotinst) respectively within a few years.

The consolidation isn’t necessarily over, as evidenced by Intel’s $650 million purchase of Granulate in April. But the dust begins to settle.

“The consolidation phase has been completed as most of the startups have been acquired and cloud management companies have moved on to solve broader issues,” Lowery continued. †The differences in these companies’ cloud management products stem from the way all cloud management functions work together, not something specific to cost management. They all handle cost management in much the same way, although there are some minor differences in function and functionality.”

Unsurprisingly, Yuri Frayman, the CEO of Cloud optimization startup Cast AI, has contested the idea that his business isn’t differentiated enough. Cast AI is one of the few vendors that can both show cloud costs and automatically lower them, he claimed, adding that it has capabilities to optimize cloud-native apps for providers including Amazon Web Services, Google Cloud and Microsoft Azure.

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