2024 will see more conscientious cloud investments as enterprises seek to balance continued belt-tightening with AI hype.
Despite an unprecedented slowdown in hyperscaler growth in 2023, cloud spending will continue to be a top consideration for CIOs in 2024. In fact, many of the predictions we made last year still hold true for 2024. Enterprises will continue to choose their deployment models based on the specialized services they offer. Cloud cost takeout and optimization will remain a top priority. And cloud will continue to drive additional hype for tech trends.
With increased awareness of cloud capabilities and increased access to new technologies, enterprises will drive more business value in 2024 by strategically investing in their cloud initiatives. Here are the top three trends to look about for:
- Cloud FinOps will expand its scope and role. The increased scrutiny on spending in 2023 brought cloud FinOps to the top of cloud priorities for many enterprises. Leaders needed a way to optimize hyperscaler (e.g., AWS, Azure, Google Cloud) spend, particularly for IaaS and PaaS services. In 2024, enterprises will expand the scope of their cloud FinOps initiatives to include on-prem/private cloud cost optimization, cloud software (i.e., SaaS) optimization and cost management for AI development (MLOps). Companies will also use it to help calculate total cost of ownership (TCO) and return on investment (ROI) for cloud migrations and decisions and how they identify revenue-generating opportunities through cloud architecture changes.
- Widespread adoption of AI will fall short of expectations. Despite the tremendous hype around AI in 2023, many enterprises will be slow to invest in large-scale adoption of AI services due to the many associated challenges and risks, including data residency, security, cost, availability and skillsets. However, use-case-driven deployment and experimental evaluation of AI services will continue to expand through 2024. Cloud spend on AI will be limited in 2024 until the experiments indicate a proven ROI.
- AI-driven IT operations (AIOps) will be the new standard for operations. 2023 saw several proven AI-driven IT success stories that saved enterprises 30-60% on operations spend. This is largely due to sophisticated AIOps platforms that have entered the market. In 2024, the industry should expect significant adoption of these enhanced capabilities with most IT operations initiatives incorporating AI. The ability to analyze large volumes of data and recognize patterns in real time will significantly improve core operations functions like root cause analysis (RCA), anomaly detection, IT service automation, full-stack availability monitoring, capacity planning and IT service management.
While these three trends are relevant regardless of geography, industry and enterprise size, several trends will gain significant traction in certain specific market segments:
- Cognitive infrastructure will drive decisions and investments for mature enterprises. Increased demand for AI/ML services, smart IoT devices and advanced big data analytics also drives demand for the underlying hardware and infrastructure that powers these capabilities. Many technologically mature enterprises are looking to train and run their AI models within their own data centers due to risk and cost considerations. This means enterprises will look to strengthen their access to chip providers like NVIDIA and AMD and will be deliberately considering underlying hardware for their AI decisions.
- Sustainability will increasingly influence hosting decisions. In recent years, “green computing” has received notable recognition in all sectors of business including IT, causing hyperscalers to respond with investments into carbon tracking services, energy efficient data centers and e-waste management, among others. The U.S. market, however, is less likely than the rest of the world to see the influence of this trend in 2024. A recent ISG Sustainability study found that sustainability ranked on average 13th out of 15 IT priorities in the U.S. compared to second out of 15 in EMEA.
- Data localization and regulations will impact cloud providers and strategy. All the major cloud providers have announced plans to launch additional regions and availability zones in response to calls for increased privacy and performance that require data to reside in specific geographies, particularly in Europe. This will drive regional competition and differentiation between the hyperscalers and influence deals driven by regulations.
- Edge computing will closely integrate with hybrid cloud in industries with heavy OT footprints. Advanced network capabilities like private 5G, cloud-edge integration and edge-as-a-service (EaaS) are increasing edge adoption and expanding the hybrid-cloud aperture in many enterprises with large OT footprints such as manufacturing, retail, utilities, etc. In 2024, enterprises will increasingly converge their IT and OT management as hybrid cloud management platforms and services seamlessly extend to the edge.
- Enterprises with global cloud providers must be cognizant of geopolitics. Cloud computing is not immune to major geopolitical events. As data residency, privacy, availability, resiliency and data security continue to play major roles in technical decision-making, current geopolitics will influence cloud adoption. Enterprises will factor in geopolitics to determine which cloud providers to use, which regions to host their cloud instances, and where their delivery teams will reside.
The cloud landscape in 2024 will be defined by smarter, more strategic investments rather than by cost-cutting alone. Enterprises will expand cloud financial operations, approach new AI initiatives with a pragmatic approach and integrate proven AI-driven IT operations as a norm. These initiatives will not only cater to cost optimization but also unlock new avenues for innovation, efficiency and competitive advantage.
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About the authors
Anay Nawathe
