TLDR: A new global study by the Capgemini Research Institute reveals that organizations are facing substantial FinOps gaps in their adoption of public cloud, Software-as-a-Service (SaaS), and Generative AI (Gen AI) technologies. The report, titled ‘The On-Demand tech paradox: balancing speed and spend,’ highlights rising costs, increasing complexity, and critical governance deficiencies that are jeopardizing the return on investment from these essential digital transformation tools. Key findings indicate widespread budget overruns, underutilized resources, and a lack of holistic FinOps strategies, despite the growing reliance on on-demand technologies.
As industries rapidly accelerate digital transformation, organizations are increasingly adopting On-Demand technologies, including public cloud, Software-as-a-Service (SaaS), and Generative AI (Gen AI), to foster innovation, enhance agility, and maintain competitiveness. However, a recent global study from the Capgemini Research Institute, ‘The On-Demand tech paradox: balancing speed and spend,’ exposes significant challenges. The report indicates that escalating costs, inherent complexity, and critical governance gaps are undermining the potential returns from these investments.
The study reveals a growing struggle among organizations to manage technology costs effectively, primarily due to insufficient cost visibility, underutilized resources, and outdated mindsets. The shift from capital-intensive IT investments to flexible, consumption-based models is evident, with IT and technology spending projected to rise. The share of On-Demand tech in IT budgets is expected to increase from 29% to 41% within the next year. A substantial majority of executives, 77%, consider cloud scalability and performance vital for business growth and differentiation, enabling faster innovation and market entry.
Karine Brunet, CEO of Cloud Infrastructure Services at Capgemini and a member of the Group Executive Committee, commented on the findings: “The surge of On-Demand technologies – such as Public Cloud, SaaS, and Gen AI – has reshaped how leading businesses operate. These tools offer unparalleled convenience, but they come with a financial implication. While On-Demand technology expenses are projected to double over the next three to four years, organizations must find a way to gain transparency and control over costs while elevating value. Those that align their cloud strategy with their overall business goals are well positioned to harness this opportunity. By designing scalable, modular, cloud-native and frugal architecture, they are set-up to drive sustainable value through smarter FinOps, integrated governance, and AI-driven automation.”
The report details several key challenges faced by organizations:
Soaring Costs and Complexity: A significant 82% of executives report substantial increases in cloud, SaaS, and Gen AI costs, driven by factors such as inflation, AI adoption, and the demand for digital infrastructure.
Budget Overruns: A majority of organizations exceeded their budgets, with 76% overspending on public cloud (by an average of 10%), 68% on Gen AI, and 52% on SaaS. Underutilized resources and decentralized procurement are identified as primary causes.
Shadow IT and Security Risks: Business units are increasingly driving technology spending, accounting for 59% of Gen AI and 48% of SaaS expenditures. Alarmingly, 12% of all SaaS spending remains unmanaged, and 98% of executives admit to bypassing IT for tech purchases, leading to inefficiencies and potential security vulnerabilities.
Limited ROI Realization: Despite considerable investments, only a minority of organizations achieved their expected returns: 29% realized anticipated SaaS cost savings, 33% saw desired cloud service quality, and 38% experienced faster innovation with Gen AI.
FinOps, a crucial discipline for optimizing costs and maximizing the value of On-Demand technologies, remains underdeveloped. While 60% of organizations utilize cloud cost management tools, only 37% effectively evaluate their efficacy or act on the insights generated. Although three-quarters (76%) of surveyed organizations have or plan to establish FinOps teams, most are narrowly focused and operational. A mere 2% of organizations with a dedicated FinOps function holistically cover cloud, SaaS, and Gen AI, and only 42% influence broader business decisions.
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Furthermore, the study highlights environmental concerns, with over half (53%) of organizations acknowledging that suboptimal On-Demand tech usage contributes to excessive energy consumption and increased carbon emissions. Despite this, only 36% have a strategy to integrate sustainability into their FinOps practices. The report suggests that adopting energy-efficient architectures, optimizing computing and storage, deactivating idle resources, and scheduling workloads can simultaneously reduce costs and carbon footprint.
