Cloud cost conundrum: Rising expenses hinder AI innovation in Europe

As businesses across Europe continue to invest heavily in AI, a harsh reality is setting in: the costs associated with cloud infrastructure are skyrocketing, forcing companies to make tough decisions about where to allocate their IT budgets. In my role, I've seen the challenges that businesses face in balancing their cloud spending with other critical IT investments. The research we conducted reveals a concerning trend: only 35% of EMEA businesses are satisfied with their current cloud providers, and a significant 67% anticipate that their cloud costs will rise over the next year. 

The Impact on AI, Cybersecurity, and IT Investments 

The impact on AI innovation is particularly noteworthy. Despite high ambitions for AI, with 65% of businesses planning to increase their AI investments, the execution is lagging. Most businesses are investing in AI without a clear strategy or framework for measuring return on investment (ROI). A staggering 82% have not implemented a strategy for tracking the ROI of their AI projects, and only 11% report that their AI projects are currently self-sustaining. Furthermore, the rising cloud costs are forcing businesses to make difficult trade-offs, with 68% reporting reduced spending in other areas. Specifically, 26% are cutting back on new AI projects, 26% on cybersecurity, and 24% on IT staff costs. 

To address these challenges, businesses must adopt a more nuanced approach to AI investments. This includes prioritizing the quality of outcomes and selecting the right tools for the job. For instance, leveraging edge-native architectures can help manage computing demands and control costs. By running AI inference at the edge, businesses can reduce latency and achieve more scalable and efficient execution. Additionally, the current geopolitical climate is driving demand for enhanced data sovereignty features, with 67% of respondents seeking cloud providers that offer these capabilities. The EU AI Act is also influencing investment decisions, with 57% prioritizing AI governance and compliance tools, and/or EU-based suppliers. 

A Path Forward 

As we move forward, it's clear that businesses need to reassess their cloud strategies and explore alternatives that can help mitigate rising costs. This might involve looking beyond traditional cloud providers to those that are architected for performance-sensitive applications like AI inference. By doing so, companies can unlock greater efficiency and value from their AI strategies. Notably, only 14% of respondents are exploring cutting-edge AI applications or consider themselves to have fully embraced AI across their business, indicating a significant opportunity for growth and innovation. 

The key takeaways from our research are clear: 

• Rising cloud costs are forcing businesses to make difficult trade-offs between cloud spending and other IT investments. 

• The lack of a clear AI strategy and ROI framework is hindering the realization of value from AI investments. 

• Adopting edge-native architectures and exploring alternative cloud providers can help businesses better manage costs and improve AI outcomes. 

By understanding these challenges and adapting their strategies accordingly, businesses can navigate the complexities of cloud costs and AI innovation, ultimately driving growth and success in an increasingly competitive landscape.