Capgemini report highlights challenges in managing On-Demand technology costs

As organizations pursue digital transformation, a new report from the Capgemini Research Institute highlights the growing reliance on On-Demand technologies, including public cloud services, Software-as-a-Service (SaaS), and Generative AI (GenAI). Despite recognizing these technologies as critical for enhancing agility and competitiveness, organizations are increasingly challenged by rising costs and operational complexities.

The research reveals that nearly 80% of organizations identified public cloud, SaaS, and GenAI as essential for growth. However, budget overruns have become commonplace; three-quarters of respondents exceeded their public cloud budgets by an average of 10%, with overspending reported by 68% on GenAI and 52% on SaaS. Insufficient cost visibility and resource underutilization are among the identified issues leading to financial strain.

Karine Brunet, CEO of Cloud Infrastructure Services at Capgemini, stated, “The surge of On-Demand technologies has reshaped how leading businesses operate. While costs are projected to double over the next few years, organizations must achieve better transparency and control over expenses.” She emphasized that aligning cloud strategies with broader business objectives is crucial for realizing value and navigating the increasing complexities.

Advanced adopters of On-Demand technologies are reportedly experiencing benefits like cost savings and accelerated innovation processes. Conversely, less mature organizations face heightened challenges, including excess spending, shadow IT, and concerns related to cybersecurity. The report highlights that only 29% of organizations saw expected savings from SaaS investments.

To address these challenges, the implementation of robust Financial Operations (FinOps) frameworks is essential. Currently, only 37% of organizations actively evaluate the effectiveness of their cloud cost management tools. Despite 76% planning to develop FinOps teams, many remain positioned narrowly, lacking holistic coverage across all technology categories.

In conclusion, while On-Demand technologies are increasingly central to IT spending, organizations must refine their approach to cost management and governance to fully optimize their investments and ensure strategic alignment.