Cloud Market: Service Prices Flat, But at What Cost?

For years, tech professionals followed a pretty simple formula when it came to infrastructure planning: They could spend lots of money building out an on-premises tech stack (and hire more tech professionals to run it), or they could save money and effort by pulling compute and storage from the cloud.

The rapid proliferation of SaaS (Software-as-a-Service), Infrastructure-as-a-Service (IaaS), Platform-as-a-Service (PaaS), and pretty much every other “as-a-Service” hinted at which route tech professionals opted to take. In the process, companies such as Oracle, which profited enormously from the sales and maintenance of on-premises infrastructure, found their competitive positions threatened by Salesforce, Amazon, and other cloud vendors.

But with the cloud market fully mature, some new trends are emerging—and they might not be great for tech professionals trying to drive down their infrastructure budget. Analyst firm RedMonk has done one of its periodic breakdowns of IaaS pricing and found two big things:

Less Cloud Differentiation

To quote RedMonk:

“In recent years, however, there has been a convergence amongst the industry. The [cloud] offerings are largely clustered. There are fewer instances where a distinct pricing strategy for a given resource notably differentiates one provider from the others.”

Costs are Flattening

“The downward pricing pressure again seems tempered; when controlling for instance size, prices have largely leveled out or have even risen slightly,” RedMonk added. “This indicates that while price is still important, it is no longer the primary point of competition.”

What Does This Mean for You?

Whether you’re a sysadmin tasked with maintaining a sizable amount of existing infrastructure, or a startup founder trying to figure out how much cloud-based storage and compute you’ll need for a big project, it’s clear that you’ll have to really hunt to find a “special deal,” given how pricing has largely “clustered.” (This all depends, of course, on taking RedMonk’s analysis at face value, but its methodology is pretty rigorous.)

The stabilization of prices across the cloud industry could prove a good thing for tech professionals who are trying to budget and strategize; there might be less chance of a rival service deciding to rapidly lower the price of compute and storage options after you’ve signed a contract with a particular provider. (For SaaS and IaaS providers themselves, this current paradigm translates into the need for a radically different support and sales model, but that’s a totally different story.)

With companies such as Salesforce and Google snatching up smaller companies in massive acquisition sprees (it seems that data-analytics firms are the current targets), the number of bundled services offered via the cloud will only increase. These “arms races” between tech giants also make it less likely that a single vendor will offer appreciably more than its rivals, which, again, is good for client firms that are looking for the maximum amount of options at the lowest possible price. 

Then again, those massive acquisitions, paired with the difficulty that other companies face in joining the cloud arena as robust competitors, means that clients are limited to a few “big” options when it comes to cloud services. (Even Oracle, one of the richest companies on the planet, is having issues overcoming its late start as a cloud vendor.) That’s good for stability, perhaps, but not so great when it comes to deal hunting.