Thursday, November 23, 2017

Object storage assumes frontline in cloud wars as VMs fall into fog of war arena

Analysts pinpoint the cloud market is not highly price-sensitive at this time but massive changes lie ahead.

The fierce ongoing cloud wars between big players such as AWS, IBM or Microsoft have suffered a major shift as object storage has taken the lead from virtual machines (VMs) in relation to pricing.

According to 451 Research’s Cloud Price Index, this trend is also set to be felt across a range of other services, particularly databases, which will undergo the same pricing pressures over the next 18 months.

Analysts have explained that traditionally, VMs have been used by cloud providers in their advances towards market domination through price reduction.

“The tide has now turned, with object storage pricing declining in every region, including a drop of 14% over the past 12 months,” analysts said.

“For comparison, the cloud mainstay of VMs has dropped a relatively small 5% over the same period.”

Analysts believe market maturity is leading to price cuts moving beyond compute. Other factors include increasing cloud-native development and faith in the cloud model, as well as a competitive scrum to capture data migrating out of on-premises infrastructure.

While some in the industry have speculated that cloud providers have been using cheap VMs as ‘loss leaders’ in their cloud portfolios, 451 Research finds that, even in the worst case, margins for VMs are at least 30%.

The report also highlights that “there is little data suggesting cloud is anywhere near a commodity yet”. Analysts believe the cloud market is not highly price-sensitive at this time, although naturally, end users want to make sure they are paying a reasonable price.

Jean Atelsek, Analyst, Digital Economics Unit at 451 Research, said: “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.

“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.”