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How Much of Your IT Budget Should Go to Cloud?

Cloud services now represent 45% of total IT budgets. SaaS $299B, IaaS $182B, PaaS $198B globally in 2026. Benchmarks, growth data, and optimisation strategies.

45%

Cloud % of IT Budgets

All company sizes, 2026

$299B

Global SaaS Market

2026, up 13% YoY

$182B

Global IaaS Market

2026, up 24.8% YoY

31%

SMB Cloud Share

Of SMB IT budgets

Global Cloud Market Breakdown 2026

Cloud Segment2026 SpendYoY Growth% of Total CloudDescription
SaaS (Software-as-a-Service)$299B+13%44%Business applications, productivity suites, CRM, HR platforms
PaaS (Platform-as-a-Service)$198B+20%29%Developer platforms, databases, AI/ML services, middleware
IaaS (Infrastructure-as-a-Service)$182B+24.8%27%Compute, storage, networking; fastest growing due to AI demand

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 IaaS growth at 24.8% 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. This includes SaaS subscriptions (the largest segment at $299B globally), IaaS (infrastructure-as-a-service at $182B), and PaaS (platform-as-a-service at $198B). 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.
What is IaaS growing faster than SaaS?
IaaS is growing at 24.8% in 2026, faster than SaaS at 13% and PaaS at 20%, 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 IaaS growth is expected to continue through 2027-2028.

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