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Shocking Cloud Pricing Trends and How it Can Make Cloud 700% More Expensive

Thu 25, 11 2021

I was really shocked when looking at calculations about the cost of on-prem vs cloud. Let me explain.

Since 2015 the price of AWS $/GB standard tier has been approx. $0.023 – that’s six years without significant price change.

And this is despite the underlying cost of HDDs / TB falling pretty much steadily:

Other large cloud storages have similarly held their pricing in the face of underlying hard drive costs remaining static. So, what’s going on here? Why haven’t cloud costs been reduced in the period?

The True Cost of a Cloud Service

Of course, the cost of the HDD isn’t the only cost for a service provider, some other costs include:

  •   Networking including for some services bandwidth
  •   Professional Services
  •   Rack Hosting
  •   Insurance + Legals
  •   Energy

But even so, I can’t help but ask the question why a cost that was regularly falling in prior years (e.g., AWS standard tier pricing was once over 600% more expensive than in 2015) has been stuck in the mud.

What About Lower Cost Storage Tiers?

Of course, one tactic employed by some cloud services has been to introduce lower-cost storage tiers, perhaps with lower levels of data redundancy or lower speeds of access available. That’s all well and good, but it doesn’t really answer why the standard pricing has stuck.

Why You Should Care versus On-Prem

When considering whether to host yourself (to buy on-prem or use a private cloud) a key consideration is cost and if the cost of cloud isn’t falling whereas the cost of on-prem is, then there is a very strong argument that on-prem might be a better option.

E.g., take a data store that will rise in size from 1PB to 5PB over 5 years, growing 1PB per annum.

If the cloud system costs $276k per annum per PB (based on $0.023 / GB PCM), then year 1 = $276k and year 2/2PB = $552k etc. Over 5 years, ending up with 5PB the total cost comes to $4,140,000 (plus egress fees, but let’s ignore that for now).

Let’s compare that to on-prem where 1PB = $169k to buy. If the on-prem system is scalable over time (as per MatrixStore from Object Matrix), and the cost of that scaling falls by 20% per annum as HDD prices fall then the total cost over 5 years and ending up with 5PB comes to $568,110.

Yes, you read that correctly:

Cloud = $4.1m
On-prem = $568k

Of course, a TCO calculation will look at other factors such as energy and hosting but even so, the difference is perhaps too significant to ignore if you have a growing media store.

Why Isn’t Cloud Pricing Falling then?

What we are seeing, I believe, are a combination of factors that are affecting cloud pricing. First, I think it is natural for vendors of cloud to add in services and underlying costs that need to be reflected in the price. But increasingly the casual buyer of the service may end up paying for something that just isn’t required. For instance, do you really need worldwide distribution of data with caching, e.g., in China? If not, then you may be paying for capabilities that you just will never use.

Secondly, there is a suspicion of lock-in. We’ve seen it over and over where large vendors start to get greedy; they have their customers and can make more money by holding prices for their locked-in customers rather than by being ultra-competitive against an open market. Third, the complexity of large-scale cloud solutions is enormous, and this cost is being passed on. 

OM Note

Please note that the calculations made are approximate and consider only the headline numbers. We’d encourage everyone to make their own calculations. Please also note that we supply both on-prem and cloud solutions – we are pro-cloud! – but are also strong advocates of open markets, competitive pricing and people buying the appropriate solution for their needs.

About Object Matrix

Object Matrix is the award-winning software company that pioneered object storage and the modernisation of media archives. It exists to enable global collaboration, increase operational efficiencies, and empower creativity through deployment of MatrixStore, the on-prem, hybrid and cloud storage platform. Their unified deployment approach ensures content spans on-prem and cloud storage whilst their focus on the media industry gives them a deep understanding of the challenges organisations face when protecting, processing, and sharing video content. Customers include BBC, Orange, France Televisions, BT, HBO, TV Globo, MSG-N and NBC Universal.

 

 

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