How Much of Your IT Budget Should Go to Cloud?

Cloud services now represent 45% of total IT budgets. Public cloud end-user spending hit $723.4 billion in 2025, up 21.5%, and Gartner forecasts similar growth into 2026. Benchmarks, growth data, and optimisation strategies.

45%

Cloud % of IT Budgets

All company sizes, 2026

$723.4B

Public Cloud Spend 2025

Up 21.5% YoY (Gartner)

$301B

Cloud Infra + Platform 2025

Up 24.2% YoY (Gartner CIPS)

31%

SMB Cloud Share

Of SMB IT budgets

Global Public Cloud Market: Gartner Figures

Measure	2024 Spend	2025 Spend	YoY Growth	Description
Total public cloud end-user spending	$595.7B	$723.4B	+21.5%	All public cloud services: SaaS (largest segment), IaaS, PaaS, desktop-as-a-service and BPaaS
Cloud infrastructure and platform services (CIPS)	-	$301B	+24.2%	Gartner's combined IaaS + PaaS category. Compute, storage, AI/ML platforms; fastest growing due to AI demand

Source: Gartner public cloud end-user spending forecast, November 2024 press release, the most recent release with public segment-level figures. The same forecast projects growth accelerating to roughly 21.3% in 2026 on AI integration demand; the full per-segment 2026 table sits behind the Gartner subscription paywall.

Cloud Cost Optimisation Strategies

Reserved Instances / Committed Use Discounts

Save 30-40%Effort: Low

Pre-commit to 1 or 3-year usage in exchange for deep discounts. Best for predictable steady-state workloads. Available from AWS (RIs, Savings Plans), Azure (Reserved VM Instances), and GCP (Committed Use Contracts).

Rightsizing Compute and Storage

Save 15-25%Effort: Medium

Identify over-provisioned resources and resize to match actual utilisation. Cloud providers offer rightsizing recommendations. Target instances running below 20% CPU utilisation as first candidates.

Shut Down Dev/Test Environments

Save 60-70% on those resourcesEffort: Low

Development and test environments typically run 24/7 but are used 8-10 hours per day. Automated shutdown schedules reduce cost by 60-70% for these workloads without any functionality impact.

Spot / Preemptible Instances

Save 60-80%Effort: High

Use interruptible spot instances for fault-tolerant batch workloads (ML training, data processing, CI/CD). Requires architectural changes but delivers 60-80% cost reduction for eligible workloads.

Storage Lifecycle Policies

Save 40-70% on cold dataEffort: Low

Automatically tier infrequently accessed data to cheaper storage classes (S3 Glacier, Azure Cool, GCP Nearline). Many organisations have 50-70% of object storage that has not been accessed in 90+ days.

Egress Cost Management

Save Variable, 5-20%Effort: Medium

Data transfer out of cloud providers is often a hidden cost. Use CDNs for public content delivery, keep compute near data sources, and use private connectivity where possible. Review data transfer line items monthly.

Hidden Cloud Cost: Data Egress

Cloud egress fees - the cost of moving data out of cloud provider networks - are one of the most underestimated line items in IT budgets. Companies running at scale can spend $50,000-$500,000+ per year on egress they did not plan for.

Calculate your egress costs at egresscost.com →

Full IT Budget Breakdown

Cloud sits within both infrastructure and software categories.

IT Budget Optimization

FinOps and cloud rightsizing are the top IT cost levers.

IT Spending Forecast 2026

AI infrastructure driving cloud infrastructure growth at 24.2% YoY.

Frequently Asked Questions

What percentage of IT budget goes to cloud services?

Cloud services now represent approximately 45% of total IT budgets in 2026, up from around 30% in 2020. Gartner's most recent public cloud forecast puts worldwide end-user spending on public cloud services at $723.4 billion in 2025, up 21.5% from $595.7 billion in 2024, with growth accelerating to roughly 21% again in 2026 on AI demand. SaaS remains the largest segment, with cloud infrastructure and platform services (IaaS plus PaaS) the fastest growing. SMBs allocate around 31% of IT budget to cloud, while cloud-native technology companies can exceed 60-70% of IT spend on cloud services.

Is cloud more or less expensive than on-premise infrastructure?

Cloud can be significantly less or more expensive than on-premise, depending on usage patterns and optimisation. For variable or unpredictable workloads, cloud flexibility delivers cost savings of 20-40% compared to on-premise capacity provisioning. For stable, predictable workloads running 24/7, on-premise or colocation can be 40-60% cheaper than equivalent cloud capacity. The break-even point depends heavily on utilisation rates, hardware refresh cycles, and the cost of capital. Most organisations run hybrid environments and optimise placement per workload.

How can I reduce cloud spending?

The most impactful cloud cost reduction strategies are: (1) reserved instances and committed use discounts - reduce cost by 30-40% vs on-demand for steady-state workloads, (2) rightsizing - remove over-provisioned compute and storage (saves 15-25%), (3) turning off dev/test environments when not in use (saves 60-70% on those environments), (4) storage lifecycle policies - auto-tiering old data to cheaper storage classes, (5) Spot/preemptible instances for batch workloads (save 60-80%), (6) eliminating unnecessary data transfer (egress) costs.

Why is infrastructure cloud growing faster than SaaS?

Cloud infrastructure and platform services (Gartner's CIPS category, covering IaaS plus PaaS) reached $301 billion in 2025, growing 24.2% year-on-year, faster than the overall public cloud market's 21.5%, driven primarily by AI infrastructure investment. Training large language models and running inference at scale requires massive GPU compute capacity that organisations provision through IaaS providers. AWS, Azure, and GCP are all capacity-constrained for GPU instances, reflecting demand outstripping supply. This AI-driven infrastructure growth is expected to continue through 2027-2028.

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