Competition, Innovation Drive Down Enterprise Cloud Costs: Report

Analysts put cost of entry-level Windows cloud instance at 12 cents an hour

Chris Burt

January 12, 2016

2 Min Read
Competition, Innovation Drive Down Enterprise Cloud Costs: Report
Werner Vogels, CTO, Amazon, speaking at AWS re:Invent 2015 in Las Vegas (Photo: AWS)

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The price of enterprise cloud computing services has dropped by two-thirds since 2013, but is starting to stabilize, according to a report released Monday by Tariff Consulting LTD. The Pricing the Cloud 2 – 2016 to 2020 report puts the cost of entry-level cloud instances at about 12 cents an hour with Windows OS.

The report follows up a 2014 report, with research running through November 2015. It surveys published prices for more than 20 public cloud providers among 45 companies considered worldwide and breaks down into public and private clouds, with the pricing categories pay as you go, hybrid, and private.

Read more: Digital Realty Leans on IBM, AT&T to Hook Enterprises on Hybrid Cloud

Furious competition in public cloud price and “rapid product innovation” are driving cloud prices down, and TCL counts over 500 product features launched since 2008 by AWS, which is the largest provider, with one quarter of the IaaS market. AWS also made its 51st price cut just a week ago.

TCL notes that competitors like Rackspace have narrowed the range of pricing over the two-year period. Reductions in private cloud prices are also encouraging hybrid adoption, and creating a market opportunity for cloud integration.

Read more: How Microsoft Plans to Win in Enterprise Hybrid Cloud

Cloud pricing has also become “more rational” in the past two years, with free tiers of service being replaced by one or three-month free trial periods.

As the price range decreases and service innovation is becoming the main differentiator, with Compute Instances being offered for specialized and intensive needs, and analytical services for cloud applications being introduced. This conclusion confirms what Faction CEO Luke Norris told the WHIR in 2014, when the cloud price cuts were fast and furious. Peer 1 found shortly after that customer were not entirely thrilled at the market’s rapid changes.

TCL forecasts cloud pricing will fall by a further 14 percent over the next four years, while public cloud revenues treble to $82 billion USD.

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