Data storage costs drop as vendor competition increases

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In its latest analysis of cloud pricing trends, research firm 451 Research showed that the cloud price battlefield has shifted from virtual machines to object storage. The firm predicts that other services, particularly databases, will undergo the same pricing pressures over the next 18 months.

Until recently, the prices of services beyond computing held steady in the face of intense competition, according to 451 Research’s Cloud Price Index. VMs have been the traditional battleground for price cuts as providers have looked to gain attention and differentiation.

The tide has now turned, the report said, with object storage pricing declining, including a drop of 14% over the past 12 months. For comparison, VMs have dropped a relatively small 5% over the same period.

Analysts think market maturity is leading to price cuts moving beyond computing. Other factors include increasing cloud-native development and growing confidence in the cloud model.

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%. There is little data suggesting cloud is anywhere near a commodity yet. Analysts think the cloud market is not highly price- sensitive at this time, although organizations want to make sure they are paying a reasonable price.

“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,” said Jean Atelsek, analyst, Digital Economics Unit at 451 Research. “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.”

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