Cloud price cut: Are CIOs making more investment?

US dollar
Enterprise CIOs have not started making additional investments in Cloud deployment despite some price cut declared by top Cloud vendors.

Google, Amazon Web Services (AWS), Microsoft, IBM, Oracle and Rackspace are some of the major cloud service providers.

With cloud being one of the aggressively adopted technologies, the price war among major cloud service vendors heightened.

Technological research firms currently give a mixed picture of cloud prices. In March, IT research firm 451 Research said its Cloud Price Index has dropped by 6 percent since October 2015, reflecting global price cuts from Amazon Web Services and Microsoft.

According to a Wall Street Journal blog published on May 13, a survey by UBS Group AG found that, chief information officers and other enterprise IT buyers believe that the total bill for cloud services isn’t getting any cheaper, and may even be going up.

Wall Street Journal reports that more than half of 505 enterprise IT decision-makers surveyed by UBS said their total costs for public cloud services didn’t change in the past year, or decreased only marginally. Another 15 percent, mostly among large firms, reported cost increase. This trend shows that enterprise CIOs are not benefitting from price cut in Cloud.

These findings come on the backdrop of fierce competition among cloud vendors.

The price war

Cloud providers continue to challenge their competitors with frequent price cuts.  So far, the year 2016 has witnessed price cuts from AWS, Google and Microsoft, which are considered as the Big 3 cloud providers.

On January 5, AWS lowered prices for its popular Elastic Compute Cloud instances by 5 percent in January, its 51st cost cut to date across all its services.

Three days later, Google said its Custom Machine Types, that’s how Google calls its cloud resources, are 15-41 percent less expensive than AWS.

On January 14, Microsoft announced price reductions up to 17 percent on the latest version of the popular Azure D-series virtual machines, Dv2 Virtual Machines.  To address the competition, Microsoft has also announced further discounts and more flexible purchasing programs.

James Staten, Microsoft’s Chief Strategist, Cloud and Enterprise wrote in a blog that enterprises need to be attentive in optimising cloud deployments.

One can always scale up their requirement in cloud.   “Rather than allocating for the maximum load, ask what the minimum footprint is, in terms of instances in the cloud,” he said.

From an economic point of view, it’s important to scale down workloads. “You shouldn’t pay for what you don’t need or use,” he wrote.

In the blog, Staten suggests tools – like those from Cloudyn, CloudCruiser, or Microsoft’s own Application Insights will help to understand and optimize cloud deployments.

Competitive regions

451 Research also noted that US is the cheapest place to use public cloud compared to other regions.

Compared to US, the research firm says cloud prices in Europe are 7 percent to 19 percent and 14 percent to 38 percent in Asia Pacific, depending on the complexity of the application.

451 Research says the range of costs reflects a higher premium for large applications, composed of compute, storage, platforms and support, compared to simpler virtual machines.

The research firm said these discrepancies are due to skills shortages followed by the willingness of SME market to pay more for support when implementing complex applications.

Arya MM
[email protected]