“There is a big” wave of innovation in cloud cost management,” Team8 co-founder and managing partner Liran Grinberg told londonbusinessblog.com as part of our latest cloud investor survey.
After seeing the tailwind for the wave of B2B startups offering cloud cost optimization solutions and cloud management in general, we were curious where VCs thought the space was headed — and the answers we heard hold promise.
Indeed, the tailwind we are talking about is not limited to the current macroeconomic environment. The need to better manage cloud spend is undoubtedly fueled by the downturn, making everyone more cost-conscious. But, as we’ll explore, innovation in this area is also an outgrowth of broader trends, such as the emergence of product-driven growth among B2B SaaS companies, which have become both practitioners and consumers of usage-based pricing.
There are also reasons to think that we haven’t seen everything yet. “We continue to see tremendous opportunities in the cloud management space given how early we are in the cloud adoption journey,” Battery companies venture investor Daniel Dayan said. So what could be next? Let’s dive in.
Beyond Cost Optimization
The first wave of cloud optimization solutions did the obvious: help companies track and reduce their cloud spend. Grinberg of Team8: “The first generation of cloud cost management (represented by Cloudability, CloudHealth) helped provide visibility and clarity on spending on AWS, Azure and GCP. Meanwhile, cloud cost optimization tools (represented by Spot, Granulate) enabled tactical changes to reduce costs.”
Consolidation followed, londonbusinessblog.com’s Kyle Wiggers noted, “as incumbents in adjacent industries saw the opportunities presented by cloud cost optimization. Microsoft acquired Cloudyn in 2017. [ … ]. Then, in 2019, Apptio took hold [ … ] Cloudability, while VMware and NetApp bought CloudHealth and Spot (formerly Spotinst) respectively within a few years.” And in April, Intel bought Granulate for $650 million.
As time and mergers progressed, it became clear that there was more than startups could do in this space for their clients. First and foremost, cloud teams needed more than cost optimization: they needed cloud management.