Optimizing cloud demand management: A strategic approach to cost and sustainability

words by Ruzual Bopari

As organizations race to harness the power of AI, big data, and scalable digital services, cloud computing has become indispensable. But for Chief Product & Technology Officers (CPTOs), Chief Information Officers (CIOs), Chief Sustainability Officers (CSOs), Chief Procurement Officers (CPOs), and Chief Financial Officers (CFOs), this growth brings a new challenge: managing cloud demand in a way that is both financially and environmentally sustainable.

Global cloud spending is projected to reach $1 trillion in 2024, with cloud infrastructure services growing 20% year-over-year, largely due to AI expansion (Forbes, Canalys). This growth comes with significant environmental costs – but how can businesses tackle this challenge?

The cloud boom: A double-edged sword

Cloud computing offers numerous advantages, including scalability, resiliency, and the financial benefits of outsourcing services as an operational expenditure rather than maintaining in-house infrastructure.

Yet, as with any resource that is easily accessible, unchecked usage can lead to unintended expenses. Just as modern plumbing led to a six-fold increase in domestic water consumption between 1960 and 2014 (World Resources Institute), the scalability of cloud computing has fueled the exponential growth of big data and AI, creating new sustainability and financial challenges for businesses.

Like unmonitored SaaS spend, ungoverned cloud consumption can spiral quickly. Organizations often overprovision computing power, forget to decommission test environments, or allow auto-scaling features to drive up costs unexpectedly – all without central visibility. Companies often provision 33% more cloud resources than they use, and eliminating this waste could reduce cloud spend by nearly 50% (CSAT). These inefficiencies can lead to substantial financial leakage if left unchecked. 

The ICT sector, including cloud computing, accounts for 1.8% to 3.9% of global greenhouse gas emissions (CNCF). Data centers, critical to this ecosystem, require massive amounts of water for cooling – U.S. facilities alone consumed over 75 billion gallons in 2023, equivalent to four months of London’s water usage (Financial Times). Additionally, frequent hardware turnover contributes to a rising e-waste crisis, which is growing five times faster than recycling efforts (UN).

The rapid expansion of data centers is also reshaping communities. While they attract significant investment, their high energy demands strain local grids, and concerns over land use and environmental sustainability are increasing. While highly automated data centers offer operational efficiency and cost advantages, their limited job creation can raise concerns in communities expecting broader economic contributions. Microsoft’s planned $1.4 billion data center investment in Texas, for instance, is expected to deliver relatively few permanent roles (Express News). As cloud computing and AI continue to scale, organizations must implement sustainable procurement and energy strategies to prevent long-term strains on local resources and infrastructure.

Cloud computing is growing into a challenge that demands C-suite attention – particularly from Chief Product & Technology Officers, Chief Information Officers, Chief Sustainability Officers, Chief Procurement Officers, and Chief Financial Officers. Without effective strategies for procurement, demand management, and sustainability strategies, organizations risk losing control.

Procurement’s critical role in cloud sustainability

The rising financial and environmental costs necessitate proactive measures to ensure cloud adoption aligns with organizational goals and sustainability commitments.

Procurement functions must play a central role in mitigating these challenges:

Cloud providers are pushing forward with sustainability-focused initiatives. Microsoft and Google committed to powering their data centers with 100% renewable energy and achieving carbon-negative operations by 2030. Additionally, tools like the AWS Customer Carbon Footprint Tool, Azure’s Emissions Impact Dashboard, and Google’s Carbon Footprint Tool help organizations track and reduce their cloud-related emissions. 

While such infrastructure is available, procurement teams should push for transparency with suppliers – requesting access to these tools and understanding their full capabilities, setting expectations around reporting cadence, and integrating emissions data into supplier performance metrics. This ensures outcomes are measurable and impactful. Procurement teams should also enforce sustainability metrics in supplier SLAs, request emissions data regularly, and work cross-functionally with IT and finance to ensure visibility into cloud usage. By embedding environmental KPIs into contracts and performance reviews, procurement can turn sustainability goals into enforceable standards.

FinOps: Optimizing cloud usage and costs

From a financial lens, FinOps provides CFOs and CIOs with the tools to regain visibility and control over a decentralized cost center. Without it, cloud spend can quietly erode margins and derail forecasts – even with sustainable providers in place. While Procurement can drive sustainable sourcing, businesses can adopt FinOps practices to better manage internal cloud usage. As an emerging discipline that optimizes cloud financial management, FinOps allow businesses to enhance demand management, control costs, and reduce environmental impact. Third-party consumption-based software typically hosted in the cloud (e.g. Logging, Observability, APM, SIEM) can add 10-20% on top of cloud spending; curbing their usage has the double benefit of cutting costs and reducing the environmental footprint.

The most effective way to reduce impact is through diligent cost controls and governance via Engineering and FinOps teams. Some actions to tackle common inefficiencies include:

• Regularly review and clean up development environments by deleting unnecessary or outdated data or shifting it to lower-cost “cold storage”
• Set limits on compute usage for testing to prevent runaway and unpredictable consumption spikes

Procurement and FinOps: A unified strategy for sustainable cloud growth

By pairing procurement and FinOps effectively, organizations can achieve a rare 'win-win' opportunity enabling them to cut expenses while advancing sustainability goals. By minimizing unnecessary cloud consumption, companies can boost efficiency, drive long-term cost optimization, and lower emissions. 

By taking a strategic approach to procurement, organizations can balance the benefits of cloud computing while minimizing its environmental and financial impact. This means investing in sustainable procurement practices, implementing robust cloud governance policies, and leveraging AI-driven monitoring tools. This isn’t just a cost-cutting exercise for businesses – it’s an opportunity to also strengthen their sustainability credentials in an increasingly climate-conscious market, ensuring long-term resilience in the digital era.