July 19th, 2015 by Adam Armstrong
451 Research Finds Cloud Costs Are Falling But More Savings Can Be Found
451 Research has released its most recent Cloud Price Index and has found that on-demand cloud pricing has dropped 2.25% since October (using 451 Research’s cloud pricing model, representing a typical multi-service on-demand application the price went from $1.72 per hour in October 2014 to $1.68 currently). However the price index shows that companies can save up to 12% through negotiation and commitment.
451 Research’s Cloud Price Index was created to understand the real-world cost of cloud over time, similar to a consumer price index. The Cloud Price Index is the specification of a multi-service three-tier cloud application consisting of Linux VMs, object storage, block storage, relational databases, NoSQL databases, load balancing, access control lists and snapshot backup in a resilient architecture. In order to obtain information for the index, 451 collected quotes from major providers such as AWS, Google, Verizon, and Microsoft. The pricing is based off of end-users real usage. Prices can be analyzed for both on-demand and negotiated and committed prices.
The Cloud Price Index showed that through negotiation, subscriptions, reserved instances, term commitments, and sustained-use discounts users can save up to 44% compared to on-demand, best price at $0.95 per hour. The index also points out that compute pricing has fallen 4% and bandwidth has fallen 3%, however service providers are still seeing increased revenue through services such as management, PaaS, and data and storage pricing. This, 451 points out, shoots a hole in the “Cloud Wars” that are brought up on tech sites. Things such as Google lower prices or Amazon’s AWS doing the same, are more ploys to get customers to use their service. As 451 Research Analyst Owen Rogers states, “Cloud has no bottom price. Even if infrastructure is eventually given away for free, as long as the provider sells other services, which offset this loss, then it can still be a profitable business.”