Q1 2023

Vantage Cloud Cost Report

How Businesses are Allocating Cloud Spend in Q1 of 2023

Fresh off the quarterly earnings for Amazon, Microsoft, and Google — where cloud spend is slowing as companies focus on cost optimization — we are releasing the Q2 2023 Cloud Cost Report, our analysis into cloud usage based on Vantage usage. Vantage is a cloud cost management and optimization platform with a unique view into industry trends thanks to thousands of connected infrastructure accounts across 11 billing integrations. For the first time this quarter, we are highlighting cross-platform spending patterns. To discuss this report in more detail, join our growing Slack Community of over 1,000 engineering leaders, FinOps professionals, and CFOs. View past reports here.

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Cloud Spending Profiles Return to Normal

On Demand spend as a percentage of all compute spend came in at just 31.36% at the end of Q4, but rebounded 13 points this quarter to represent 43.35% of EC2 compute costs.

This is in line with spending patterns earlier last year, and suggest the cloud infrastructure market is recovering after low growth rates to end 2022. While AWS earnings forecast lower growth rates, Azure and Google Cloud both reported Q1 growth and guidance that exceeded expectations.

Sparks of AI Costs? Not Yet.

One indicator for AI costs is GPU spending as a share of EC2 costs. This was relatively flat from Q4, albeit a couple percentage points higher than Q3 of 2022. These costs were not yet detectable in our data, and we suspect GPU supply constraints may have played a role. Vantage launched its OpenAI cost integration earlier this month, which will help increase cost visibility into this emerging industry.

One trend we did notice? Spending on inf1 instances was the highest ever recorded in March 2023, growing 500%+ from February. Our guess is that next quarter's numbers will reflect the AI wave. Microsoft is attributing 1% of growth for Q2 to AI. Sign up for the Q2 report at the bottom of the page.

Top 10 Services across AWS, Google Cloud, and Azure

We are breaking out cloud spending across multiple clouds in this report for the first time. After launching support for Google Cloud and Azure in 2022, this graphic provides a preliminary look at how spending on services stacks up across clouds. For a complete view of the rankings of every AWS service, refer to the Cloud Cost Leaderboard.

Although the ranking of services differs little across clouds, the pattern is that Compute, Data, Storage, Monitoring, and Bandwidth drive share of costs, in that order. BigQuery is famously the jewel of Google Cloud at the #3 spot, while EC2 remains the king of compute at AWS. On Azure, Databricks actually shows up in the list of top services due to its unique integration with Microsoft. AWS has no data warehouse in its list of top services.

S3 Optimization Hits a Ceiling

In Q4 we recorded a sharp uptick in organizations on Vantage using Intelligent Tiering, with 16% of S3 costs coming from tiers which are managed with Intelligent Tiering. For Q1 we are reporting almost the exact same percentage breakdowns in costs across S3 storage tiers.

This is an indication that Intelligent Tiering has some diminishing returns where 2/3 of an average company's storage costs in S3 may not be helped by turning it on.

S3 Storage Class Share of Costs S3 Intelligent Tiering
Standard Storage 64.40%
Standard Infrequent Access 10.94%
Standard Frequent Access 9.62% Yes
Glacier Flexible Retrieval 5.80%
Archive Instant Access 3.30% Yes
Infrequent Access 2.43% Yes
Glacier Deep Archive 1.03%
One Zone Infrequent Access 0.84%
Archive Access 0.53% Yes
Other 1.11%

Graviton Adoption on EC2 Accelerates to over 5% of Spend

Graviton adoption is increasing faster on EC2 than when we first started recording this metric in the Q3 report in 2022. Intel has also made a comeback in this dataset with the release of the first new Intel based EC2 instances in 2 years (more on that below).

“Server and networking markets have yet to reach their bottoms as cloud and enterprise remain weak.”
- Patrick Gelsinger, CEO at Intel

While Intel's market share in our dataset remains strong, custom chips like Graviton and an upcoming one from Microsoft are a significant challenge. Intel posted its largest quarterly loss ever in its Q1 earnings.

Data Warehouse and Caching Spend Increased in Q1

Compared to the holiday season where we observed greater on-demand database costs pared with well-committed data warehouse spend, Q1 saw increased on-demand ElastiCache and Redshift spending. With Autopilot, many companies loaded up on reservations which were subsequently sold off in Q1. This behavior matches the trend in the graph which shows RDS, ElastiCache, OpenSearch and Redshift on-demand cost as a percentage of all spend on those services.

GP3 Volume Upgrades are in Full Force

GP3 storage volumes for RDS had only just come out in the Q4 report and so GP2 volumes were the majority of block storage spend. In that report we noted what others like Corey Quinn said, namely that the GP3 volumes cost the same as GP2 volumes on a price/performance basis.

Nevertheless, Vantage customers adopted GP3 on RDS for their workloads, and GP2 saw a sharp drop, falling below the high performance IO1 drives as the volume of choice for RDS. We are still a long ways from GP2 being completely deprecated, and questions remain if the economics of GP3 may slow its adoption curve.

Upgrade Cycles can be 3 Years

The most notable change in the mix of instance types generating costs for Q1 is the emergence of the c6, r6, and m6 instance types as rapidly starting to consume workloads from the 5 series instance types. m5 and c5 instances both had sharp drops in their share of spend.

The introduction of new c6in instances and r6in based on Intel Ice Lake processors certainly helped, as x86 workloads had new options to upgrade to.

Datadog vs AWS

As a second look at multi-cloud workloads, Datadog offers nearly 20 observability, security, and telemetry products. AWS has a different mix of services targeting the same workloads. Teams are spending money on Metrics, APM, and Security in that order.

We can see why observability continues to be a hot space as costs from various CloudWatch categories dominates the monitoring cost leaderboard. Indeed, CloudWatch is the #7 service for costs on AWS the other cross cloud comparison graphic in this report. By anticipating a healthy spend for observability tooling, you can be ready to take advantage of committed use discounts from Datadog.

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