Cloud Battleground Shifts to Object
April 20, 2017
its latest analysis of cloud pricing, 451 Research reveals that the
cloud price battlefield has shifted from virtual machines (VMs) to
object storage. The analyst firm predicts that other services,
particularly databases, will undergo the same pricing pressures over the
next 18 months.
Until recently, the prices of services beyond compute held steady in the
face of intense competition, according to 451 Research’s Cloud Price
Index. Virtual machines have been the traditional battleground for price
cuts as providers have sought to gain attention and differentiation. The
tide has now turned, with object storage pricing declining in every
region, including a drop of 14% over the past 12 months. For comparison,
the cloud mainstay of VMs has dropped a relatively small 5% over the
Analysts believe market maturity is leading to price cuts moving beyond
compute. Other factors include increasing cloud-native development and
faith in the cloud model, as well as a competitive scrum to capture data
migrating out of on-premises infrastructure.
While some in the industry have speculated that cloud providers have
been using cheap VMs as 'loss leaders' in their cloud portfolios, 451
Research finds that, even in the worst case, margins for VMs are at
least 30%. There is little data suggesting cloud is anywhere near a
commodity yet. Analysts believe the cloud market is not highly
price-sensitive at this time, although naturally, end users want to make
sure they are paying a reasonable price.
“The big cloud providers appear to be playing an aggressive game of tit
for tat, cutting object storage prices to avoid standing out as
expensive,” said Jean Atelsek, Analyst, Digital Economics Unit at 451
Research. “This is the first time there has been a big price war outside
compute, and it reflects object storage’s move into the mainstream.
While price cuts are good news for cloud buyers, they are now faced with
a new level of complexity when comparing providers.”
The cloud storage battle started in Q3 2016 when 451 Research’s Digital
Economics Unit identified a reduction in IBM SoftLayer’s object storage
prices. Google, AWS and then Microsoft followed suit with cuts as well.
The 451 Research Digital Economics Unit predicts that prices for virtual
machines and object storage will continue to come down, with relational
databases likely to be the next competitive front.
About the CPI and Methodology
Cloud Price Index is the industry's most rigorous analysis of the cost
of cloud computing. It explores the external costs associated with
ownership of public and private cloud, including colocation, hardware
and software. It provides benchmark indicators for the costs of
deploying and operating private cloud infrastructure to help service
providers appropriately price their services and help end users assess
and compare their procurement options.
The CPI uses a transparent 'basket of goods' approach to track price,
services and economic data on the cloud market, covering 30 private and
public cloud services from 60 providers, and representing 90% of global
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