Unpredictable technology costs are hammering British businesses

Opaque, unpredictable, or difficult-to-forecast tech provider charges are costing British businesses £3.8 billion a year, new research suggests.

Analysis from the Centre for Economics and Business Research (CEBR), commissioned by Wasabi Technologies, has revealed that infrastructure provider charges hit £47.4 billion across the UK, US, Japan, Italy, Germany, France, Australia, and New Zealand last year.

In the UK, around a third of the total overspend, £1.2 billion, related to AI and machine learning infrastructure – more than any other technology category. It was also the category businesses found hardest to forecast, with 22% saying they found AI infrastructure costs to be unpredictable.

“Our research uncovered the hidden cost of innovation for some of the world’s largest economies and found the economic cost of unpredictable pricing is not simply that firms pay more,” said Owen Good, head of economics advisory at CEBR.

"This means hiring and investment in new technologies are postponed or reduced as budgets are redirected to cover unexpected charges. The technology generating the most unplanned costs is also among the investments businesses are cutting to pay for them.”

Usage-based pricing models sting

Usage-based pricing isn't helping, the study warned. Of the British businesses reporting AI and machine learning infrastructure overspend, 36% cited higher-than-expected token, inference, or usage-based charges as a contributing factor.

Meanwhile, 66% cited unexpected AI platform and model licensing fees as a leading driver of AI overspend, while 43% pointed to integration, deployment, and model operations expenses.

All told, the strain is beginning to mount for many UK firms. Nearly three-quarters (73%) reported moderate or significant budget pressure. Of those, 36% said they'd delayed or scaled back AI, automation, or data science-related initiatives.

The main trade-off for 38% of organizations is hiring in technology, data, and AI roles, followed by technology and software investment at 37% and training and workforce development at 34%.

Switching won’t work

Crucially, the study noted there's nothing to be gained by switching providers or expanding capacity. Many organizations have faced delays in the last 12 months, with 84% noting a lack of access to suitable hardware or compute capacity as the cause.

For those considering a supplier switch, 91% incurred additional costs from fragmented data environments and 85% faced restricted or delayed access to data they needed for a project or decision at least once in the past year.

“Businesses are not short of ambition, but they are blindsided by unpredictable infrastructure costs that prevent them from driving their innovation agendas forward,” said Marty Falaro, president and COO of Wasabi Technologies.

“There is a fundamental problem with how technology infrastructure is bought and priced as businesses need to know what it will cost to store, access and move their data before they commit to an AI project, not after the bill arrives."

Earlier this year, research from Asana found that more than eight-in-ten UK-based IT leaders had encountered unplanned AI cost increases over the last 12 months.

The study warned these unexpected costs were severely impacting broader IT budgets, forcing IT leaders to ditch projects and make difficult investment decisions.

Nearly two-thirds( 65%) of organizations also told Cisco that their observability costs had been higher than their infrastructure or operational costs this year.

Half reported surprise costs with telemetry data, and another third said that had led to reduced data coverage or retention.

FOLLOW US ON SOCIAL MEDIA

Follow ITPro on Google News and add us as a preferred source to keep tabs on all our latest news, analysis, views, and reviews.

You can also follow ITPro on LinkedIn, X, Facebook, and BlueSky.