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Can Falling Prices of the Cloud Make Hosted Solutions Irrelevant? | @CloudExpo #Cloud #DataCenter
One big takeaway from the various reports published over the years is how much affordable cloud has become
By: Harry Trott
Jul. 7, 2017 05:00 PM
The margins of cloud products like virtual machines are still in the 50% range. In essence, price drops are going to be a regular feature for the foreseeable future. This begets the question - are hosted solutions becoming irrelevant today?
Boston-based market research firm, 451 Research, has been publishing their ‘Cloud Price Index' for a few years now. The quarterly study looks into the pricing of various offerings in the cloud market to understand the shifting dynamics in the public, private and hybrid cloud market. According to Dr. Owen Rogers from 451 Research, the approach here is similar to how inflation is calculated - the price of a distributed sample of products from the market are analyzed periodically to ascertain the rise or drop in the prices of the various cloud offerings.
One big takeaway from the various reports published over the years is how much affordable cloud has become. For instance, the price of Amazon AWS alone has been cut more than fifty times in ten years since 2006. A client who has stayed with them through all these years would have seen a price drop of nearly 18%.
The falling prices have helped more businesses shift their operations to the cloud and this contributes towards improving the economies of scale that further brings down the price of the cloud. Dr. Rogers says that the margins of cloud products like virtual machines are still in the 50% range. In essence, such price drops are going to be a regular feature for the foreseeable future.
This begets the question - are hosted solutions becoming irrelevant today? Most enterprise products and service providers continue to offer both cloud and hosted variants to their clients. But could this be a thing of the past very soon? Or, are there still places where cloud may not make sense?
According to technology writer Oren Rofman, there are still specific areas where cloud may not make sense. Speaking specifically about CDN services, Rofman writes that businesses with a modest or extremely localized user base, or those that need to adhere to stringent governance requirements may find it necessary to host their data on a local server.
It is not just CDNs though. Healthcare and financial enterprises routinely host sensitive information in private data centers instead of public clouds in order to ensure data security. In countries like China where content on the web is heavily censored, a lot of global businesses choose to host data in localized private data centers for a more reliable access. This is also popular because it is easier to control latency inside private data centers and across private WAN networks. Public clouds simply cannot match the kind of latency that such hosted centers provide.
Last, cloud suffers from a perception problem. Private data centers suffer from cyber-attacks all the time. But a similar attack on a cloud-based product or service tends to affect millions of customers and is thus a lot more newsworthy. The barrage of news reports over the past few years about attacks on cloud tools mean enterprise businesses are likely to always treat cloud with suspicion.
To put this in short, hosted software products and services are not going away anytime soon. But as adoption of cloud increases, the negative perceptions about security are likely to fade away. Industries like healthcare and finance, as well as businesses in countries like China are likely to prefer hosted data centers. But as a policy, businesses are already going cloud-first and this is only going to go up over time.
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