Cloud Computing Price Discount Era Is Ending

Cloud computing has long been seen as a cheap and convenient option for data storage. While this is true to some extent, managed IT services business NexusOS is warning consumers that the days of extreme price slashes and discounts has come to an end, and that a more realistic picture of the price of the cloud is needed.

In the not too distant past, companies would choose their cloud data centers based on price alone. They would consider Google, Microsoft, and Amazon and generally find the ones that offered the cheapest deal. Essentially, cloud computing was synonymous with cheap, particularly compared to expensive internal data centers.

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Managed IT services company warning organizations that this idea is not just too simplistic, it is also inaccurate. There has long been a strong price war between the three cloud giants, and this has reinforced the perception that cloud computing is cheap. However, certain things were missed in this debate.

One of the things that organization did not take into consideration is that storage and computing prices did fall, but the price of data analytics, workflow analytics, and networking services did not. Additionally, companies did not take into consideration the time and money involved in actually moving data away from one cloud and onto another one, or to physical storage.

A representative from NexusOS says: “Price is absolutely a factor when it comes to choosing a cloud provider, but it should not be the only one. In fact, there have been some financial reports from Germany to show that the price cuts we have become accustomed to peaked two years ago.”

The research NexusOS refers to was released by the Deutsche Bank (DB), who stated that Amazon’s new approach, which is to be more “rational” has changed the playing field. Their research demonstrated that Amazon Web Services (AWS) showed a few specific trends:

  1. A decline in basic services prices of between 10% and 20% every year since 2014. This did not come as a surprise.
  2. A price cut on the S3 storage and Glacier archival storage.
  3. A price cut on some of their EC2 computing options.

Looking at those three pointers, it seems that huge corporate customers in particular can still negotiate excellent deals and contracts with the big cloud providers. Indeed, it is a known fact that Fortune 500 companies can usually get some very good discount if they choose to use IBM, Google, Amazon, or Microsoft for their clouds. Other cloud providers simply do not have the power to attract those types of companies.

AWS is the original public cloud provider, starting their efforts around 10 years ago. They gained fame by enabling startup companies to join their services. Now, however, they seem to focus on larger enterprises instead. It is believed that this focus will become even more prominent at the AWS Re:Invent, an annual conference held in Las Vegas.

The NexusOS representative adds: “The big three cloud vendors seem to be lowering the costs of their own infrastructure. If this goes properly, they should have bigger profit margins, which investors love to hear. However, what it also means is that the smaller cloud providers are likely to be swallowed up very quickly. And when that happens, and we believe it to be soon, the huge price slashes will also cease to exist. While the big three are in competition with each other, they also work together and it is very likely that they will start to hike their prices to see even greater profit margins as there are no more small time competitors out there.”