Published on the 23/04/2025 | Written by Heather Wright

And a Southern Hemisphere Ireland…

Sam Higgins has some bad news for Australian and Kiwi companies relying on cloud and not using FinOps.

The Sydney-based Forrester principal analyst says the real impact of the current global geopolitical and economic turbulence will be seen foremost in cloud pricing variability for local businesses.

“If you don’t know what your spend is, it’s like saying you have no idea what your product supply chain is.”

The plummeting New Zealand and Australian dollars earlier this year saw cloud costs biting for local companies.

“Sadly, there are many, many technology teams who do not have any view of what their cloud costs are and the only time they have a look at it is when AWS, Microsoft, Oracle or another provider comes along with annual billing or with the three, four or sometimes five year cloud agreement,” he told iStart.

Numerous reports have highlighted that many companies don’t proactively manage their cloud costs. A CloudZero report last year noted that just 39 percent of companies have implemented formal cloud cost management programs.

Last year New Zealand’s Department of Internal Affairs began investigating how much government cloud computing was costing and identified that for the 10 agencies spending the most on cloud computing, software licensing fees had increased by 70 percent since 2018.

“If you don’t know what your spend is, it is effectively like saying you have no idea what your product supply chain is,” Higgins says. “No one who produces products, trades or is serious about business doesn’t understand the value chain they exist in.”

Recent years have seen Microsoft and other hyperscalers peg their pricing to the US dollar much more stringently.

Higgins says while that transition hasn’t impacted every agreement with every customer across Australia and New Zealand, it will ‘absolutely’ affect spot price on cloud capacity, those on variable agreements and those who have let their agreements lapse.

He dubs it a ‘hidden kicker’ that not enough people are paying attention to.

“The only way to survive these types of volatilities is to build up your IT financial management muscle.”

Microsoft is among the companies hiking subscription prices under the guise of providing greater AI features in its products. It increased the pricing for its flagship 365 offering by up to 45 percent earlier this year, resulting in a consumer backlash in Australia.

A recent Forrester report, How to Thrive Through Volatility, calls for organisations to optimise their spend without sacrificing AI ambitions.

It’s urging companies to put the focus on optimising cloud costs saying hidden within cloud bills is waste.

“Unless you’re an advanced FinOps shop, there is opportunity for immediate savings leveraging native cloud cost management tools or a third-party cloud cost management platform.”

Both options can identify unused, untagged, ownerless, unattached and poorly fitted instances and can often yield an initial 30 percent savings, Forrester says.

Big cloud spenders may also be able to find discounts during hyperscaler negotiations, through additional incentives, but will need to prove growth, use of AI services and credible alternatives in terms of spend on competitors to move the needle.

Higgins, however, has a somewhat more radical view.

He believes price increases could see local organisations considering repatriating cloud capacity to sovereign providers, or refactoring applications.

“If Microsoft isn’t going to give me the AI chips I was expecting in the new Auckland data centre, the price has just gone up 10 percent and I’ve got tariffs on hardware, I suspect what we will see is people looking around to see if they can get non-US hardware from China, run the security gauntlet, deploy it with a sovereign data centre provider in country and either move or refactor apps so they’re not exposed to this volatility of pricing.”

That comment about Microsoft and AI chips? That’s something else Higgins believes might be coming down the track.

Hyperscalers have pulled back on their data centre investments in recent times. Higgins believes that could see changes for both New Zealand, where new Microsoft and AWS data centres are planned and Australia, where existing data centre infrastructure is due for a refresh.

Some of the local activity included an element of provisioning in support of AI.

“The very fact that the Kiwi data centres were going to be the newest generation for both AWS and Microsoft meant you were likely to have AI capacity brought online much earlier and have better service parity between the US and New Zealand, and we might even have gotten some aspects of that in Australia.”

The pullbacks, meanwhile, are a combination of the geopolitical and economic situation and the Deepseek impact which has seen a questioning of the OpenAI approach versus the ‘lite’ language model approach.

“I think we will not get access to some of these technologies as quickly as we thought because of the pull back and confusion,” Higgins says.

We asked the question of AWS and Microsoft.

AWS’ local rep referred us to recent comments by Kevin Miller, AWS vice president of global data centres, saying there haven’t been ‘any recent fundamental changes in our expansion plans’. Instead, Miller says, the company continues to see strong demand for both GenAI and foundational workloads on AWS, and always considers ‘multiple solutions in parallel’. Read into that what you will.

We’re still waiting on any responses from Microsoft.

Meanwhile, the Forrester report also recommends companies look to rationalisation of portfolios, with consolidating contracts, standardising across business units and eliminating redundant capabilities among the ‘low-hanging fruit’, in order to thrive through the current volatility.

Examining abstraction layers and third-party software for value, and exploring alternative Kubernetes paths and cost effective open-source alternatives and leaning on automation and standards also feature in the recommendations.

What not to do: Slash the AI investment. Forrester says it’s important to maintain investments in AI readiness.

“Forrester believes there will be effective AI agents this year and maybe even some form of ‘superintelligence’ in the coming years.

“Your enterprise’s ability to utilise emerging AI breakthroughs may mean the difference between thriving or stagnating. If you’re being pushed to concentrate your efforts, double down on core data management capabilities like data quality and data semantics.”

Continuing to work toward a modern data platform that ensures enterprise data is clean consistent and accessible and prioritising AI projects that have measurable returns and provide reusable capabilities is also important, Forrester says.

Open-source AI projects can also be a way to keep short-term costs low as companies experiment.

But, it adds ‘in dire times, you may be able to rationalise paid generative AI licenses like Copilot’.

A Southern Hemisphere Ireland

Higgins also has another idea to throw into the mix. He says he’s heard from several clients talk about New Zealand becoming the Southern Hemisphere’s version of Ireland.

With the US ‘Brexiting’ the rest of the world, Higgins believes there is an opportunity for New Zealand to position itself as a tech economic hub servicing Asia Pacific for US companies, similar to the way Ireland has with large companies establishing (essentially paper based) companies there to access Europe.

It is, he admits, a long play, which would require tax policies to compete with Singapore and a big increase in corporate and economic skills to manage the activity.

“If you were to be an economy that traded on the intangible software and services of the tech industry as the gateway to APAC, one of the skills you have to have in country is people with a really good understanding of spending, spend optimisation, IT financial management… that’s a discipline we think is underplayed both on vendor end and customer side.”