Meesho and Dealshare have lowered cloud expenses by up to 50%, per UnearthInsight study.
According to projections by market intelligence company Unearthinsight, Indian startups would be able to save about $200 million in technology expenditures and $800 million in advertising and promotional costs in FY23 as they make spending reductions to get ready for the funding winter.
The entire amount spent on technology is anticipated to decrease to $2.3 billion in FY23 from $2.5 billion in FY22. Spending on advertising and promotions decreased from $4.3 billion in FY22 to $3.5 billion in FY23. These statistics are based on UnearthInsight’s study of more than 2000 startups.
Cloud investment decreased across startup industries in the technology industry, including enterprise tech, fintech, E-commerce/online retail, healthtech, and edtech. While tech and cloud spending decreased by a single digit percentage year over year across all segments, it fell by a double digit percentage year over year in e-commerce/online retail, dropping by 18% and 16% respectively.
The research shows that a select group of growth-stage businesses, like Meesho and DealShare, have reduced cloud expenses by 50%. Overall, cloud expenses are being reduced by 20–30% across the board for companies. As compared to growth and late-stage start-ups, the dip for early-stage start-ups is less significant.
Startups are renegotiating contracts with service providers like Amazon Web Services (AWS) and searching for ways to reduce cloud prices in order to manage tech costs and survive the funding crunch.
The founder and CEO of UnearthInsight, Gaurav Vasu, told Moneycontrol that, in addition to the funding slowdown, the decline in IT spending in the e-commerce market was caused by inflation, which had an effect on average customer spending and new customer addition.
“To survive and operate, they (e-commerce businesses) require a lot of funding. Additionally, they require numerous follow-up rounds with respectable valuations, where technology spending is crucial for them. Although returns and other areas would continue to be the most expensive, he said.
Enterprise technology and fintech won’t experience a major decline in technology spending, according to Vasu. However, Vasu predicted that Edtech would also experience a significant impact as students began returning to their classes. “We don’t expect tech spending to go down further in FY24, we expect it to start recovering in the current fiscal,” the speaker continued.
AWS, Microsoft Azure, and Google Cloud Platform (GCP), three cloud service providers, have previously indicated a decrease in transaction wins by yearly contract value year over year in the fourth quarter of calendar year 2022. Each of the three hyperscalers had claimed YoY growth in the single digits.
Google’s cloud division reported its first-ever profit of $191 million in Q1 2023’s January-March quarter, with sales rising by 28% year over year to $7.45 billion.
During the call, Alphabet CEO Ruth Porat stated that the company is still experiencing slower consumption growth as a result of customers optimising their cloud costs in light of the unsettling macroeconomic climate.
AWS recently warned of a potential downturn in the cloud sector during its results call, showing that it is still being cautious. Operating income for AWS, which generates the majority of its parent’s revenue, decreased by 21% year over year (YoY) from $6.5 billion in Q1 2022 to $5.1 billion.
Fintech companies reported a decline in YoY ad spends of $108 million, with estimates for $900 million in FY23; e-commerce had a reduction in YoY ad spends of $388 million, with an expected $1.1 billion; and edtech witnessed a decline in YoY ad spends of roughly $100 million, with $350 million in FY23.
During the call, Alphabet CEO Ruth Porat stated that the company is still experiencing slower consumption growth as a result of customers optimising their cloud costs in light of the unsteady macroeconomic environment.
During a recent earnings call, AWS also maintained its prudence and cautioned of a potential slowdown in the cloud industry. AWS, which generates the majority of its parent company’s revenue, saw its operating income decline by 21% year over year (YoY), from $6.5 billion in Q1 2022 to $5.1 billion.
Fintech companies had a decline of $108 million in YoY ad spends expected to come in at $900 million in FY23, e-commerce had cut Ad spending by $388 million YoY reaching an anticipated $1.1 billion, and edtech’s ad spending was down by roughly $100 million, striking $350 million in FY23.
Moneycontrol stated in August of last year, during the height of the financing winter, that start-ups had cut their marketing budgets by 30 to 60 percent. The most drastic declines had been witnessed in the fintech, edtech, and cryptocurrency industries.
