Expensive AI applications drive cloud computing spending

Corporate spending on cloud computing is rising at double-digit rates as CIOs and other tech leaders embrace advanced capabilities like artificial intelligence that cost more than run-of-the-mill business applications, new data shows. market.

In addition to the inherent costs of the technologies themselves, which are typically purchased as subscriptions, many of these applications tend to consume computing power, driving up cloud usage bills, industry analysts said.

Daniel Grider of Home Depot.


Photo:

home depot inc.

“We continue to invest in technologies that allow us to operate faster and at larger scale,” said Daniel Grider, head of infrastructure and operations at

house deposit Inc.

“Cloud-enabled solutions are a key element to that, and we’re seeing these benefits online and in store.”

Businesses around the world are expected to spend an estimated $494.7 billion on cloud computing this year, 20% more than in 2021, with such spending on track to reach $600 billion by the end of 2023 , information technology research and consulting firm

Gartner Inc.

he said in a report released Tuesday.

Spending on infrastructure as a service, a type of cloud computing service that provides businesses with on-demand computing, storage, and networking resources, is forecast to show the highest growth of any cloud category in 2022, at 31%. , according to Gartner. saying.

Close behind, he said, is an expected 26% increase in spending on cloud-based platform services used to build, test, deploy and update enterprise software applications, including sophisticated AI, business intelligence and Internet of Things capabilities. things.

Gartner expects cloud-based platform services to generate $109.6 billion in corporate spending this year, up from $86.9 billion in 2021, with spending levels inflated by advanced applications.

“It’s the willingness of CIOs to buy higher-value features that’s driving the growth in public cloud spending,” said Sid Nag, vice president of Gartner’s Technology and Services Providers group.

Technology leaders and industry analysts said the value advanced software tools provide, such as leveraging data to drive customer services or drive more informed business decisions, can make them an easy sell to CEOs and corporate boards that oversee information technology budgets.

That has been especially true since the Covid-19 pandemic began in 2020, when many companies invested heavily in digital tools and technologies to adapt to remote work, lockdowns, store closures and other conditions. Many companies want to make sure they get the full value of these investments, tech leaders and analysts said.

Another reason these apps tend to be more expensive is that it can be difficult to compare prices between technology vendors, said John Annand, senior director of research at IT research firm Info-Tech Research Group. The lack of interoperability can also make it expensive to switch technology providers, he said.

“This reduces any downward pressure on the price as the potential cost of switching grows and grows,” Annand said.

write to Angus Loten in angus.loten@wsj.com

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It was featured in the April 21, 2022 print edition as “AI Applications Drive Cloud Computing Spending.”

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