Storage is the new battleground in cloud price wars

cloud-war

A new front is emerging in the cloud price wars, with vendors now battling it out in storage.

According to new research from 451 Research LLC, other services, especially databases, will experience pricing pressure over the next year and a half. 451 Research’s latest Cloud Price Index reveals that object storage pricing has declined in every region, falling by an average 14 percent over the last year.

IBM Corp. kicked off the latest price war when it lowered its object storage prices in the third quarter of 2016. Since then, rivals Amazon Web Services, Google Inc. and Microsoft Corp. have all reduced pricing for their own services.

Meanwhile, the price of virtual machines, which 451 Research reckons is “the traditional battleground for price cuts as providers have sought to gain attention and differentiation,” has fallen by 5 percent over the same period. Still, the cuts have hardly had an impact on cloud providers’ revenues, as margins for virtual machines are “at least 30 percent,” the analyst firm said.

The report notes that cloud computing is still some way from becoming a commodity. It says the cloud market is not highly price-sensitive at this point, though customers still consider pricing to be an important factor in their purchasing decisions.

451-research-cloud-price-index

Source: 451 Research

“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 for the 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.”

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