IBM Initiated Cloud Storage Price Cut Wave; All Drop 14% - InformationWeek

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5/2/2017
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IBM Initiated Cloud Storage Price Cut Wave; All Drop 14%

In the third quarter of 2016, IBM bid for a larger share of the enterprise market in the cloud by dropping storage prices; AWS, other bigs followed.

A quiet struggle for cloud market share was launched by IBM in the third quarter last year as it cut its storage prices. As a result of the IBM move, there has been a general drop in storage prices as Amazon Web Services, Microsoft and Google followed suit.

IBM SoftLayer lead the price cutting, with drops in its object storage prices, said 451 Research's Digital Economics Unit. The move marked a switch from high profile cuts in virtual machine pricing, practiced by Amazon to build market share, to an emphasis on storage as a way to secure and hold cloud customers.

While prices on virtual machine servers in all clouds have continued to drop, they were reduced 5% over the last 12 months, compared to a 14% drop in object storage prices, over the same period, the Digital Economics Unit said on April 20.

Jean Atelsek, the San Francisco-based analyst for the unit, noted: "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." In the past, that price war has tended to occur over compute instance pricing, with each supplier appearing to try to offgger more bang for the buck with low cost instance types that appealed to what it believed was its core audience. The 14% drop in storage pricing, on the other hand, "reflects object storage's move into the mainstream," she said.

Want to learn more about cloud price cuts? See Amazon Starts 2016 With Three Price Cuts.

Atelsek termed the focus on storage for price cuts "the first time there has been a big price war outside of compute," but in fact the major suppliers have tried first one, then the other, as a way gaining market share over the last four years. At different times, particular forms of storage have been drastically reduced in a supermarket's loss leader fashion.

In December 2013, Google cut its prices for cloud storage attached to working virtual machines by 60% as a way to make gains on AWS as it brought its Google Compute Engine into general availability. The move made its Google Cloud Storage cheaper than Amazon's Elastic Block Store, both based on high speed movements of blocks of data.

Likewise, Google, Microsoft and AWS competed on prices for the longer term, object storage. Enterprise Strategy Research claimed in 2015 that Google enjoyed an advantage over Amazon, without addressing Azure pricing as well.

Source: Pixabay
Source: Pixabay

Instead of storage becoming a new competitive front, what is more likely is the most popular emerging services are the ones most likely to be subject to price cuts over the next 2-3 years, as each provider bids to capture customers coming into the market and not yet allied with a particular vendor. Storage is a common focal point as enterprises get serious about moving more of their data into the cloud.

Atelsek reached a somewhat similar conclusion, saying pricing on both virtual machines and storage will continued to come down, with "relational databases likely to be the next competitive front."  As data occupies the cloud, more work will be available for cloud-based relational systems to do.

While 451 Research cited relational as the next field of competition, another front may be the functions that can be provided for serverless applications, such as Microsoft Azure Functions, Google Cloud Functions or AWS Lambda.

451 Research offers a Cloud Price Index to give customers a chance to compare prices to services offered by 12 different suppliers.

Charles Babcock is an editor-at-large for InformationWeek and author of Management Strategies for the Cloud Revolution, a McGraw-Hill book. He is the former editor-in-chief of Digital News, former software editor of Computerworld and former technology editor of Interactive ... View Full Bio

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