Flexera warns AI cloud costs strain technology budgets

Flexera has published research showing that every organisation surveyed uses generative AI public cloud services. It also found that 85% now see managing cloud costs as their main cloud challenge.

The findings point to growing pressure on technology budgets as companies juggle hybrid cloud estates, AI spending and limited visibility over usage. Some 17% of organisations exceeded their public cloud budgets in the past year, while estimated wasted cloud spend rose to 29%, reversing a five-year decline.

Hybrid cloud has become the dominant operating model in the survey. Flexera found that 69% of organisations now use a hybrid cloud approach, rising to 78% among those with more than 5,000 employees.

Spending patterns also point to larger, more complex estates. Among organisations spending more than USD $500,000 a month on cloud, 79% operate hybrid environments.

The report suggests AI is adding a new source of cost volatility. While all respondents said they use generative AI public cloud services in some form, 45% described that use as extensive and 30% said cost unpredictability was one of the biggest challenges in scaling AI workloads.

Chris Andersen, Chief Financial Officer at Flexera, linked those pressures to broader changes in how finance teams track technology spending.

"The conversation around cloud costs has shifted significantly. It has moved from spending more on technology to solve problems to managing increasingly complex environments that have often evolved organically over time.

"Many organisations have not intentionally designed hybrid or multi-cloud strategies. Instead, these environments emerge through acquisitions, new business requirements or teams independently adopting different platforms. As a result, finance leaders are being asked to manage technology estates that are much harder to monitor and optimise.

"The challenge is that complexity itself creates inefficiencies. The more environments organisations operate across, the harder it becomes to maintain visibility into what resources are being used, whether they are delivering value and where opportunities exist to reduce unnecessary spend," Andersen said.

The survey also points to a more formal approach to cloud oversight. Flexera found that 71% of organisations now have a Cloud Centre of Excellence, while 63% have established dedicated FinOps teams.

Governance spread

Responsibility for cloud governance is also moving beyond specialist infrastructure teams. According to the research, business units and software asset management teams are taking a larger role in overseeing cloud usage and costs.

Managed service providers are adjusting their offerings in response to AI-related demand. Nearly half plan to offer AI consulting and SaaS management services, while two-thirds are adopting AI for cybersecurity use cases.

The data also shows a divide between larger and smaller organisations in the use of outside providers. Enterprise use of managed service providers rose by three percentage points from a year earlier, while use among small and medium-sized businesses fell from 48% to 39%.

Andersen said the shift in AI spending could change the balance of costs on company profit and loss statements.

"There is enormous pressure on organisations to invest in AI quickly enough to remain competitive, but AI costs behave very differently from traditional technology spending. Usage can scale rapidly across cloud environments, making costs far harder to predict and control.

"People costs have traditionally been the largest line item on the profit and loss statement for technology companies. If AI develops as many expect, technology spend could eventually overtake that. Yet most organisations are nowhere near as disciplined in managing technology costs as they are people costs.

"Companies know exactly who works for them and what those people cost. Far fewer can say the same about every cloud workload, SaaS agreement or AI tool operating across the business. That becomes a serious financial challenge once AI usage starts scaling.

"The organisations best positioned to succeed will be those that simplify where they can, improve visibility across increasingly hybrid environments and establish clear accountability for technology spending. Without that discipline, complexity itself becomes a driver of unnecessary cost," Andersen said.

The research was based on a survey of 753 technical professionals and executive leaders worldwide, including cloud decision-makers and users across industries, organisation sizes and functional roles.