Update: We've updated this article with some information from 451 Research's Cloud Pricing Index, which claims businesses in Europe are paying more because of uncertainties over Safe Harbour, Privacy Shield and local data protection regulation.
Several years of fierce, public competition from three of the biggest public cloud vendors – AWS, Microsoft and Google – has established a certain narrative in cloud pricing. But just what is going on with public cloud pricing today, does it quite deserve the importance it’s being given, and what does it mean for any CIO worth their strategic salt?
Cloud price cuts: headlines and potshots
This month alone Amazon Web Services (AWS) and Microsoft both slashed their prices. For AWS, it was the company’s 51st reduction. Meanwhile, Google rang in the new year with a blog post that opined: “As you can see, we’re anywhere from 15 to 41 percent less expensive than AWS for compute resources, after their reduction.”
But an argument that's gaining traction is undermining these skirmishes despite the attention they’re receiving. It goes that decision makers should not be making judgments that affect their entire organisation based on where prices are right now – and they especially shouldn’t bet on where pricing could be in months to come.
The battleground may not just be in pricing, after all, but in offering the right range of services and a willingness to act as a partner, not just as a provider.
“The reality on the ground is something completely different [to the reporting on the price wars],” says Paul Miller, senior analyst for cloud computing at Forrester Research.
“The latest price cuts will generate some headlines – it’s a way to lob cheap potshots at the competition, but a CIO from any large organisation is going to be engaging a far richer, far more detailed conversation, and price is a very small part of that.”
Selecting a cloud provider is partly down to technical ability, says Miller. “But really, as organisations are looking to drive broader business transformation, you need to be looking for a partner who shares your view of the way you want your business to evolve.
“You need to be selecting a partner that’s going to work with you and carry you on that journey, and be with you for the long haul – not a partner you’re going to drop next time there’s a price cut.”
It's not about the money, money
Despite the admittedly entertaining takes on the price wars doing the rounds, one of their supposedly biggest patrons, AWS, agrees that there’s so much more to think about.
“It can be difficult to find a true apples-to-apples comparison when it comes to pricing among cloud providers,” an AWS spokesperson told Computerworld UK, also pointing us to an AWS whitepaper on pricing.
“There are a number of things CIOs look at when considering which cloud provider is right for them. While cost may not be first and foremost for all of them, it is a consideration – alongside things like reliability, scalability and security.
"They also consider the experience a provider has, the breadth of services a provider offers, their track record of serving customers and customer references. Cost is just one of many considerations.”
There are a number of variations in the way the major cloud vendors price their services. Microsoft’s virtual machines include load balancing and autoscaling for free, for example – twin this with the fact AWS’ EC2 instances are billed by the hour, rather than by the minute like Azure, and it’s a small window into how straight-up price comparisons are not a simple task.
It’s no wonder, then, that customers often turn to third parties to help decipher and manage costs.
While there are obvious benefits to saving cash with the right cloud infrastructure – News Corp and the Financial Times are just two examples – Forrester’s Paul Miller suggests that selecting the right cloud is about choosing a service that fits with what you already have, as well as a mindset that gels with where you want to take your business. This is particularly important given the pace with which vendors are adding new services, such as around analytics and machine learning.
“Cost really can’t be the primary motivator there,” he says.
“As all of these clouds become richer and contain a broader range of services, enterprise customers are far more interested in making a longer-term bet, recognising that they need the basic infrastructure, and then the range of value-added services that sit on top of it,” Miller says.
Local data law means European CIOs pay more
Uncertainties about data protection laws following the falling apart of Safe Harbour and the creation of Privacy Shield mean European CIOs are paying more for their cloud services.
The latest Cloud Price Index from analyst group 451 Research says European CIOs are paying more for cloud services – largely as a premium to ensure local provisions are met within the EU.
Although US pricing is the most competitively priced, it costs European businesses between seven and 19 percent to host the same application in Europe depending on complexity.
Penny Jones, Senior Analyst for European Services, examines the issues surrounding data protection at 451Research.
Penny Jones, senior analyst for European services, said: “As European nations can place layers of regulation of top of agreements such as the EU-US Privacy Shield, we expect the latest agreement will do little to appease concerns, particularly in Germany.”
“It won’t be clear what the European Court of Justice thinks about the legislation until they have reviewed a case or two. The courts may then say the US needs to do more to protect EU citizens’ data privacy.”
Ryanair-as-a-Service: thinking short-term on cost
Ultimately a focus on cost will result in short term benefit. Founder of business advisory firm Quocirca, Clive Longbottom, says he has spent “so long trying to educate organisations on the fact that if you do something purely for hypothetical cost reasons, it will inevitably end up being more expensive to the business.”
“If you do something for the right reasons – i.e. it is the best way of doing it – it will invariably result in cost savings,” Longbottom says.
“This seems so sensible to us we thought that we would be seeing far fewer cost-based decisions being made.”
So the cutthroat braggadocio of the top vendors will find some favour from customers who value saving cash in the short term. But for customers, generally speaking? A more level-headed approach to picking the right service will benefit the wider customer base in the longer term.
“It will get to the point where you a) get what you are paying for or b) get a RyanAir version of the cloud,” warns Longbottom. “‘You want connectivity? That’s extra. Reports? Extra.”’
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