Many CIOs say the cloud stopped feeling cheaper once their usage matured and scaled. The early promise was that moving to cloud would cut data center costs, but real-world numbers tell a different story.

According to the 2025 Azul CIO Cloud Trends Survey Report:

• 83% of 300 CIOs reported spending on average 30% more on cloud infrastructure and applications than they had anticipated.
• 43% said their CEOs or boards had raised concerns about cloud spend.
• 13% saw their infrastructure and application costs actually increase with cloud deployments.
• 7% reported no savings at all from moving to cloud.

Some leaders, like Thomas Phelps of Laserfiche, never assumed cloud would be cheaper than on-premises. His team compared three options for a regional expansion—building a new computer room, moving workloads to a hyperscaler, and a hybrid model—and found that even over 1, 3, 5, and 7-year projections, cloud remained relatively expensive.

The result for many organizations is a more nuanced strategy. Instead of going “all in” on cloud, they’re adopting hybrid environments—keeping some compute in colocation facilities or on-premises while using hyperscalers and SaaS where it makes business sense.

Cloud costs are rising for two main reasons: how we use the cloud, and how we manage it.

1. More sophisticated, integrated usage
Peter Loo, CIO for Los Angeles County, points out that cloud services are no longer just basic compute and storage. Organizations are using more advanced, integrated services, which naturally increases consumption and spend. As architectures become more complex, the bill follows.

2. Gaps in governance and resource management
Loo also highlights that many teams are simply not diligent enough in how they provision and maintain cloud resources. Common issues include:

• Overprovisioning compute and storage “just in case.”
• Over-licensing cloud services and not reclaiming unused licenses.
• Leaving resources running that should be decommissioned.

To address this, Los Angeles County is focusing on cost transparency:

• Making sure departmental CIOs can clearly see their cloud costs and what drives them.
• Using Apptio to gain better visibility into cloud spending patterns.
• Actively scaling back licenses and shutting down unused resources—resulting in 6,000–8,000 licenses being curtailed in some cases.

The lesson: cloud costs tend to rise when organizations increase sophistication without matching it with strong governance, cost visibility, and ongoing optimization.

Even when cloud isn’t the lowest-cost option on paper, CIOs stay because of the business value it delivers.

1. Speed and agility
Peter Loo believes that if Los Angeles County moved everything back on-prem, they “would not be able to afford to do the kinds of things” they do with cloud today. The cloud lets them:

• Access compute and storage much faster than buying, installing, and provisioning hardware.
• Experiment and iterate more quickly on new services and digital initiatives.

In other words, cloud is a speed premium—you pay more in some areas, but you get to outcomes faster.

2. Hybrid strategies to balance cost and control
Laserfiche illustrates a different angle. The company runs a hybrid environment:

• A colocation facility for much of its compute.
• A separate disaster recovery (DR) site.
• Significant use of SaaS and a hyperscaler environment for its Laserfiche cloud offering.

For them, it’s actually cheaper to run some compute in a colo than to be fully cloud-native. The decision isn’t binary; it’s about matching workloads to the right environment based on cost, risk, and business needs.

3. Rising on-prem costs
On-premises isn’t standing still either. Loo notes that only about 25–30% of their footprint is still on-prem, and the costs there have been climbing:

• Licensing for on-prem solutions has increased significantly.
• VMware costs in particular have “increased tremendously” and surprised many organizations.

In some cases, these on-prem costs have outpaced cloud services, especially as cloud offerings have become more commoditized.

The net result is that CIOs are reimagining their infrastructure mix. They’re not choosing cloud just because it’s cheaper; they’re choosing it because it helps them move faster, scale more flexibly, and focus on the right mix of cost, risk, and capability across cloud, colo, and on-prem.