The Modern Cloud Turns 20 — and the Cloud Cost Reckoning Has Arrived
In 2026, the modern commercial cloud celebrates its 20th anniversary, tracing back to the launch of Amazon’s Elastic Compute Cloud (EC2) and Simple Storage Service (S3). Yet, for many CIOs, this milestone feels less like a cause for celebration and more like a moment of financial reckoning.
Escalating cloud costs have started to undermine one of cloud computing’s earliest promises: that it would be cheaper than running workloads in corporate data centers. According to the 2025 Azul CIO Cloud Trends Survey & Report, 83% of the 300 CIOs surveyed are spending an average of 30% more than anticipated on cloud infrastructure and applications. Moreover, 43% reported that their CEOs or boards of directors have expressed concerns about cloud spending.
Adding to the challenge, 13% of CIOs stated their infrastructure and application costs increased with their cloud deployments, and 7% saw no savings at all.
Given this reality, we asked two CIOs when cloud stopped being cheaper — and why they stayed committed to it anyway. Their answers highlight a truth CIOs know well: cloud cost decisions today are rarely black-and-white. Instead, they are shaped by a complex set of financial, operational, and strategic considerations.
Below are their responses, edited for clarity and brevity.
—
### Thomas Phelps, Laserfiche: The Myth of “Cheaper”
“I never thought cloud was cheaper [than on-premises], even seven or eight years ago,” says Thomas Phelps, CIO of Laserfiche. “Yes, you may be able to reduce or eliminate your data center footprint, but the challenge with cloud spend is its unpredictability — and that’s why it’s not cheaper.
“We’re expanding in one of our regions and moving into a new office. Our existing office has old equipment nearing end-of-life, so we had to explore new options.
“My team analyzed three scenarios: building a new computer room onsite, running workloads in a hyperscaler cloud environment, and a hybrid model combining on-premises and cloud hosting.
“Interestingly, when we compared one-year costs projected out to three, five, and seven years, cloud costs remained relatively expensive.
“At Laserfiche, we still operate a hybrid environment. We have a colocation facility housing much of our compute equipment, and maintain a disaster recovery (DR) site to avoid putting “all our eggs in one basket.”
“We also use many SaaS services and run Laserfiche Cloud on a hyperscaler platform.
“But the bottom line is, it actually costs us less to operate our own compute infrastructure in a colo data center than to be fully ‘all-in’ with the cloud.”
#### The Pendulum Swings Back
Phelps adds, “The bigger issue is understanding what your organization truly needs, because there’s no one-size-fits-all solution.
“Factors such as your organization’s maturity, cloud adoption stage, regulatory compliance requirements, and ability to scale workloads up and down all impact cloud versus on-premises decisions.
“I also believe there’s a pendulum shift underway. Ten years ago, everyone was rushing to the cloud. But in recent years, many organizations have started moving some workloads back to self-hosted environments due to costs — all while balancing business needs.”
—
### Peter Loo, Los Angeles County: The Price of Sophistication
Peter Loo, CIO for Los Angeles County, explains that rising cloud costs stem largely from the growing sophistication and integration of cloud services.
“The main reason our cloud costs have increased is that our usage has become more complex and deeply integrated,” Loo says. “But another factor is that we haven’t been as diligent in managing our cloud resources — in provisioning and ongoing maintenance.”
#### Transparency as a Tool for Cost Control
To rein in spending, Los Angeles County is taking steps to improve cost transparency.
“We’re now making costs and usage data more visible,” Loo notes. “When we scale back cloud licenses and decommission unused resources, we have seen reductions of 6,000 to 8,000 licenses at a time.
“This increased data accessibility empowers department managers to better track and manage their cloud resource consumption.”
#### The Speed Premium: Why We Stay
Despite rising expenses, Loo emphasizes a key cloud advantage: speed.
“My gut tells me that if we moved everything back on-premises, we wouldn’t be able to afford the kinds of initiatives we can do today.
“Cloud enables us to move faster than if we had to acquire hardware and software, install it, and provision everything ourselves. Accessing compute and storage via cloud services is simply more expedient.”
#### The Rising Cost of On-Premises
Loo also points out that the cost of maintaining on-premises environments is increasing sharply.
“About 25% to 30% of our infrastructure is still on-premises. Licensing fees, especially for VMware, have skyrocketed and caught many by surprise.
“In fact, on-premises costs have, in some cases, outpaced cloud services costs — partly because cloud services have become commoditized, while what’s left on-premises has become more expensive.”
—
### Conclusion
As the commercial cloud approaches its 20th anniversary, CIOs face tougher decisions than ever. While cloud promises agility, speed, and scalability, its cost benefits are no longer automatic and must be weighed against on-premises expenses and organizational needs.
For many, a hybrid approach remains the most practical path forward—balancing the innovation and speed of the cloud with the cost control and predictability of on-premises infrastructure.
Ultimately, successful cloud cost management hinges on transparency, continuous optimization, and aligning technology choices with evolving business priorities.
—
*Published by [Your Company/Platform Name]*
https://www.informationweek.com/cloud-computing/ask-the-experts-the-cloud-cost-reckoning