What Rising Cloud Computing Costs Mean for Australian Businesses
Synopsis
Australian organisations are spending more on cloud services as AI workloads and infrastructure demands grow. Learn what's behind rising cloud costs, where businesses overspend, and why better cost governance has become increasingly important.
From accounting software to customer relationship management (CRM), from cybersecurity to data analytics and artificial intelligence (AI), the use of cloud computing has become integral to how Australian businesses operate.
For years, the cloud has been touted as a cheaper alternative to paying for on-premises technology, and as technology demands change, the cloud can be scaled. This value proposition today is becoming more complex.
Cost management is becoming more than a technology problem as organisations are spending more and more on cloud infrastructure because they are processing more data and rolling out AI applications.
Australian public cloud service spending by end users is expected to grow to A$33.6 billion by 2026, up from A$28.5 billion estimated for 2025, representing 17.9% growth, Gartner says. The Infrastructure-as-a-Service (IaaS) segment should see the fastest growth as enterprises modernize their legacy systems and deploy AI workloads.
Meanwhile, inefficient cloud management efforts are still driving up costs and many organisations are being charged for resources they do not require or utilise.
Australia's cloud market continues to expand
Cloud investment is one of the best areas in enterprise technology throughout Australia. Cloud platforms can now be leveraged to support hybrid working, digital customer services, business applications and AI projects, more and more.
Australian public cloud spending
| Year | End-user Spending | Annual Growth |
| 2025 | A$28.5 billion | — |
| 2026 | A$33.6 billion | 17.9% |
Source: Gartner Forecast Analysis: Public Cloud Services, Worldwide (2024–2030).
Part of this rise is driven by the rising demand for cloud infrastructure that supports AI development and data-intensive applications, Gartner says. With the increased adoption of generative AI applications and advanced analytics platforms among businesses, computing power, storage capacity, and networking resources continue to be in demand.
As others join the ranks of cloud adoption, however, organisations are increasing their exposure to cloud costs that can fluctuate.
Why cloud costs are increasing
There are several trends in the industry, all of which are leading to increased cloud investment among Australian organisations.
AI workloads require more infrastructure
Artificial intelligence applications require much more computing power than conventional enterprise applications.
Different types of graphics processing units (GPUs), large memory, and quick storage are often needed to train and operate these AI models. The infrastructure needs have created the demand for more sophisticated servers and semiconductor components globally, and have put strain on supply chains.
The market for enterprise RAM saw its prices rise by over 40% in the last year, driven by robust demand for AI-ready infrastructure and continuing constraints in hardware supply, according to IT Brief Australia. While cloud providers do not directly reflect all hardware upgrades, with time the higher the infrastructure costs, the higher the price for premium cloud services.
Usage-based billing creates unpredictable expenses
Public cloud services charge customers for usage, whereas traditional software licence requires payments for the licenses and then for the amount of software copies deployed.
The majority of businesses will have a separate payment for:
- Computing resources, virtual machines and processors
- Data storage
- Database services
- Networking and bandwidth
- Cloud-to-cloud data transfer.Cloud-to-cloud data transfer.
- Backup and disaster recovery (BDR).Backup and disaster recovery (BDR).
- Security monitoring
- AI and machine learning services.
This flexible pricing option helps companies to upscale services as per their requirement, but it also increases the uncertainty of the monthly expenditure. Unexpected spikes in application traffic, storage needs or data transfer volumes can have a big impact on the costs of operations.
Inefficient resource management adds to cloud bills
The price of the providers is only a component of the cost.
According to the non-profit FinOps Foundation, which runs the financial management of cloud resources, 20 to 30% of enterprise cloud spending is wasted due to inefficient resource management and lack of visibility of infrastructure usage.
Some of the most common causes include:
- VMs that run beyond the end of projects.
- Computing resources which are much bigger than the requirements of the business.
- Data and storage volumes that are not used frequently.
- Make backups in multiple clouds.
- Developing and testing environments outside business hours.
- Partial visibility over multiple cloud providers.
| Typical Enterprise Cloud Expenditure | Share of Total Spend |
| Business-critical infrastructure | 70–80% |
| Potentially avoidable expenditure* | 20–30% |
Source: FinOps Foundation industry benchmarks.
For enterprises with a multi-cloud strategy, such inefficiencies can add up rapidly, and create a major cost factor for the business.
Organisations are reviewing where workloads should run
For applications that need to scale up quickly, be flexible and highly available around the world, public cloud is the clear choice. Cloud domination in Australia is still largely the same entrants; Amazon Web Services (AWS), Microsoft Azure and Google Cloud.
Organisations are being more selective though about what applications they keep in the public cloud, however.
Australia's IT Brief research reveals that as infrastructure costs are increasing, businesses are considering private cloud and hybrid cloud options for workloads with consistent and predictable demand.
Cloud computing has evolved from a singular platform for cloud infrastructure to the matching of various workloads to environments that best fit operational and financial needs.
Examples include:
- Running customer-facing apps in public cloud systems with rapidly changing demands.
- Running internal business systems on private infrastructure with predictable resource consumption.
- Storing sensitive data in places that meet the Australian requirements for data governance.
- Hybrid cloud to maximize workload flexibility and control of long-term cloud costs.
This is part of a wider trend of moving away from cloud migration towards cloud optimisation.
Cloud governance is becoming a business priority
Finance and executive management teams are increasingly involved in cloud spending management along with technology management teams.
For many organisations, FinOps approaches are being embraced as a means to enhance visibility into cloud spend and gain insight into where infrastructure costs fit into business results.
Some of the Cost Management Practices are:
- Rather than checking invoices for cloud products after they have been used.
- Optimizing computing resources to match real workload requirements.
- Setting automatic shutdowns for non-production systems.
- Where possible, reserving cloud capacity for predictable workloads.
- Defining spending limits and automatic notifications.
- Regularly auditing the cloud to find unused services and redundant infrastructure.
Oracle's research also reveals that organizations with advanced governance frameworks tend to maximize cloud use and more effectively manage their finances.
Government guidance supports regular cloud reviews
Cloud adoption is not a technology project that should be done one-off; Australian government agencies encourage organisations to regularly evaluate their cloud environments.
The Australian Cyber Security Centre (ACSC) advises the review of cloud configurations, access controls and operational processes to bolster cyber resilience and minimise operational risk.
Likewise, before expanding cloud deployments, businesses should also make a list of continuing operating expenses, service contracts, security obligations and business needs, advises business.gov.au.
These resources are primarily geared toward security and operational planning; they also emphasize the need to know the long-term financial impacts cloud adoption can have.
Cloud value now depends on effective cost management
Cloud computing is still one of the essential aspects of the Australian digital economy, allowing for innovation and application of AI and other digital services. Yet, due to the increasing complexity of infrastructure requirements and pricing structures, organizations are becoming more focused on the proper utilization of cloud resources.
According to Gartner's latest forecast, the investment in public cloud in Australia is experiencing rapid growth. Yet, the findings by FinOps Foundation, the Australian Cyber Security Centre, and business.gov.au show that cloud management relies on such aspects as visibility and governance equally as much as on technologies.
For businesses in Australia, managing the cost of cloud solutions means careful monitoring of their resource utilization and infrastructure.
Sources
Gartner – Forecast Analysis: Public Cloud Services, Worldwide, 2024–2030
Computer Weekly Australia – Australian Public Cloud Spending to Surpass A$33.6 Billion in 2026
IT Brief Australia – Rising Hardware Costs Accelerate Shift to Private Cloud Adoption
FinOps Foundation – State of FinOps Report and FinOps Framework
Australian Cyber Security Centre (ACSC) – Cloud Security Guidance
business.gov.au – Cloud Computing for Business
Pooja Malik is a business journalist with over six years of experience covering startups, entrepreneurship, and emerging trends. She has previously worked with leading media platforms such as YourStory Media and BW BusinessWorld, where she reported on business, policy, and market developments. Currently, she serves as Editor at The Inspirepreneur Magazine, where she writes and edits stories across business, lifestyle, and travel, with a focus on clarity, accuracy, and reader relevance.
