The modern commercial cloud turns 20 in 2026, dating back to the launch of Amazon’s Elastic Compute Cloud and Simple Storage Service.But for many CIOs, the anniversary feels less like a cause for celebration and more like a financial reckoning. Escalating cloud costs have undercut one of cloud computing’s earliest promises: that it would be cheaper than running workloads in corporate data centers.According to the 2025 Azul CIO Cloud Trends Survey & Report, 83% of the 300 CIOs surveyed are spending an average of 30% more than what they had anticipated for cloud infrastructure and applications; 43% said their CEOs or boards of directors had concerns about cloud spend. Moreover, 13% of surveyed CIOs said their infrastructure and application costs increased with their cloud deployments, and 7% said they saw no savings at all.Other surveys show CIOs are rethinking their cloud strategies, with “repatriation” — moving workloads from the cloud back to on-premises — emerging as a viable option due to mounting costs.
Given that reality, we asked two CIOs at what point did cloud stop being cheaper — and why they stayed anyway.
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Thomas Phelps, CIO and senior vice president of corporate strategy at Laserfiche and an advisory board member for the SIM Research Institute.
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Peter Loo, CIO of Los Angeles County.
Their answers reflect a reality CIOs know well: Cloud cost decisions today are rarely binary but are shaped by a layered set of financial, operational and strategic considerations.
Below are their responses to our question, edited for clarity and length.
Thomas Phelps, CIO and senior vice president of corporate strategy at Laserfiche, speaks at an event. (Photo courtesy Thomas Phelps)
Thomas Phelps, Laserfiche: The myth of ‘cheaper’
“I never thought cloud was cheaper [than on-premises] even seven, eight years ago. Yes, you may be able to get rid of your data center footprint, maybe reduce it, eliminate it all together, but the challenge of cloud spend is that it’s not predictable — and that’s why it’s not cheaper.
“We are expanding in one of our regions. We’re moving into a new office. We’ve got some old equipment in our existing office that’s almost end of life, and so we have to do something different.
“I had my team put together [three options]: some analysis on the cost to build out a new computer room in a new location; two, a look at running these workloads in a hyperscaler environment; and a third option, which is hybrid, a little bit of on-prem and a bit hosted in the cloud.
“Interesting enough, if you look at your one-year cost versus projecting out three years versus five years versus seven years, cloud costs were still pretty expensive.
“At Laserfiche we still have a hybrid environment. So we still have a colocation facility, where we house a lot of our compute equipment. And of course, because of that, we need a DR site because you never want to put all your eggs in that one colo. We also have a lot of SaaS services. We’re in a hyperscaler environment for Laserfiche cloud.
“But the reason why we do both is because it actually costs us less money to run our own compute in a data center colo environment than it does to be all in on cloud.”
The pendulum swings back
“I think the issue is more about what does your organization need, because I don’t think there’s a one-size-fits-all.
“Where your organization is in terms of maturity, cloud adoption, regulatory compliance, the ability to scale up and scale down quickly, are all factors in [cloud versus on-prem] decisions.
“But I also do think there is a pendulum shift. Ten years ago, everyone was trying to move to cloud, and then a couple years ago you saw the pendulum shift where [organizations] started looking at more workloads that were self-hosted versus in the cloud because of the cost involved while balancing what the business needs.”
Peter Loo, CIO, Los Angeles County
Peter Loo, Los Angeles County: The price of sophistication
“The primary reason why the [cloud] costs have been increasing is because our use of cloud services has become much more sophisticated and much more integrated.
“But another reason cloud consumption has increased is we’re not as diligent in managing our cloud resources in provisioning and maintaining.”
Transparency as cost control
“We’re now doing some things to make it a lot more transparent.
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“One is making sure that the CIOs that we have in [the various] departments see the costs that are coming through and then helping them make sure that they are not overprovisioning resources and that there’s inefficient resource usage. I think getting that transparency for them to see what their actual spend and the components of the spend is is important.
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“We also are over-licensing in some areas, so we’re looking at ways to make those costs more transparent and available to the CIOs so that they can more actively manage those licenses.
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“And we have expanded the use of Apptio [a technology business management platform] to get visibility for us to better understand our cloud costs.
“[We know it works] when we scale back on the number of cloud licenses that we have and decommission cloud resources that we don’t need. We’re seeing in some raw numbers 6,000, 7,000, 8,000 licenses being curtailed back. We’re starting to see that happening more as we make the data more available and accessible to the folks in the departments that manage those resources.”
The speed premium: Why we stay
“My gut tells me that if we moved everything back to on-prem, we would not be able to afford to do the kinds of things we’re currently doing with cloud services.
“Cloud is a faster way for us to get to where we want to go than if we were trying to do everything on-premises, because of the acquisition of hardware and software, and the installation and provisioning. Getting access to compute and storage services in a cloud environment is just more expeditious for us.”
The rising cost of on-prem
“We still have an on-premises footprint; I would say maybe 25% to 30% is still on-prem. And the licensing for those has increased significantly, and the cost of VMware has increased tremendously and caught everybody by surprise.
“The costs for those actually have outpaced the cost of cloud services, because the cloud services became more of a commodity and the ones that were left on-premises became more expensive.”
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