Cloud Cost Optimization: Key Insights from the 2024 ESR Report

Setting the Stage for Cloud Savings

With public cloud spending expected to reach $200 billion by the end of 2023, cloud cost optimization has become an essential part of financial planning for organizations of all sizes. The 2024 Effective Savings Rate (ESR) Benchmarks and Insights Report, developed in partnership with ProsperOps, offers a fresh look at the benchmarks and best practices in cloud rate optimization. This report analyzes more than $1.5 billion in annual AWS compute usage to provide valuable insights into how companies can maximize their cloud investments.

What is Effective Savings Rate (ESR)?

One of the most insightful metrics introduced in recent years, Effective Savings Rate (ESR) is a straightforward way to measure the actual cost savings achieved through cloud rate optimization. Similar to ROI in finance, ESR provides a clear picture of how well an organization optimizes its cloud spending. ProsperOps has integrated ESR into its platform as a core performance metric, ensuring that customers get the most out of their cloud investments.

Key Findings from the 2024 ESR Report

1. Hidden Savings Potential
   Many organizations are missing out on potential savings: the median ESR for cloud compute services stands at 0%. By not leveraging discount tools like AWS Savings Plans or Reserved Instances, companies leave significant savings on the table.

2. Discount Tools Underutilized
   Surprisingly, 53% of AWS organizations aren’t using any commitment-based discounts. With automation through ProsperOps, organizations can efficiently manage commitments in real-time, adapting to usage changes and ensuring they capture these savings.

3. Growing ESR Rates Amid Operational Efficiency Push
   Cloud usage patterns changed significantly in 2023, with a general increase in ESR rates as companies emphasized cost efficiency. However, to ensure these gains are sustainable, organizations need to balance rate optimization with engineering initiatives to avoid only reducing usage.

4. Correlation Between Usage and ESR
   Companies with higher cloud spend typically see better ESR outcomes. This is likely because these organizations have dedicated resources to manage cloud spending and can optimize commitments to take full advantage of discounts.

Why Your ESR Matters

ESR is now a core metric for both the FinOps Foundation and AWS, making it a benchmark of cloud cost optimization maturity. In the next post, we’ll dive deeper into practical steps to maximize your ESR and discover how even small improvements can lead to significant financial benefits for your organization.

Stay Tuned for Part 2
In the next post, we’ll go deeper into how automation and practical strategies can improve your ESR, giving your team the tools to maximize savings without the burden of manual commitment management. Don’t miss it!

If you’re ready to find savings in your cloud spend and gain valuable insights into your cost optimization potential, don’t wait. Sign up here to get started with a customized analysis and see where your organization stands!