Cloud price wars could drive ‘volatility as a service’

A race to the bottom on cloud costs sounds good on the surface, but it could also drive volatility for cloud users.

Since Google announced the launch of its Compute Engine in mid 2012, the competition for this lucrative slice of the cloud market has heated up.

Amazon AWS, which has the lion’s share of the cloud infrastructure market, has progressively reduced its pricing no less than 30 times in the last 7 years, and this downward cost trend will no doubt continue with Google’s recent drop in its raw compute costs .

A race to the bottom on cost has to be a good thing for consumers, universities, governments and business alike, all looking to cut IT costs, right? Well, maybe not.

How this seemingly unending disruption plays out for organisations and individuals that are dependent on the cloud will depend on a range of factors, so it’s important for both individuals and organisations alike to consider more than the short-term cost.

To make sense of this, we firstly need to break open the layers of cloud computing.

Complexity as a service

Generally speaking, the 3 key ingredients making up the layer cake of cloud computing are from the bottom up: Infrastructure as a Service (IaaS), Platform as a Service (PaaS) with the icing on the cake being Software as a Service (SaaS). It is the IaaS layer that defines the underlying compute and storage power of the cloud, and it is at this layer that much of the competition is occurring, due to the standardised nature of the intrinsic offering.

Conceptually, and aside from quality of service considerations, a server is a server at the end of the day. It’s what’s done with it, how it’s configured and what software’s deployed on this infrastructure that ultimately determines its usefulness and value.

The vanishing cloud provider

The recent and sudden demise of Nirvanix, a cloud provider who reportedly hosted in the order of 40 petabytes of data, is a case in point. When Nirvanix announced its closure at the end of September 2013, customers had just two weeks to move their data off their infrastructure.

The closure also had a ripple effect on a range of IT providers including IBM, Dell, HP, Riverbed and Symantec, all of which reportedly used Nirvanix for their cloud storage.

Individuals who rely on someone else’s cloud to store precious, irreplaceable digital artefacts such as kids photos and videos, need to be aware of their backup and restore position in case their cloud service provider disappears. This runs counter to the perception that the cloud might be secure, and one where the cloud provider, for the most part, is taking care of the complex magic behind the scenes to keep your digital assets safe and sound.

For organisations, for the most part, the use of cloud computing is more complex. Organisations that rely solely on public cloud for their critical IT services that have conducted the appropriately rigorous pre-signup due diligence will be well aware of the longitudinal risks that are relevant to their specific organisation and circumstance. For the rest, it may be time to review their situation, and sooner rather than later.

Now for the market squeeze

The continued reduction of cloud compute costs that underpins the public cloud will certainly be great news for many organisations. Lower costs are good for organisations … at least while the music keeps playing. For organisations relying on cloud providers that are not one of the global majors, it’s worth asking what assurances can be given that your local cloud provider will survive the sheer competition arising from the collapsing compute cost.

The most obvious risk is that your cloud provider will be forced out of business. That can happen relatively suddenly as was the case mentioned earlier, leaving you scrambling to replace services upon which you’ve grown to depend. To make things worse, when you’re scrambling, you may have little or no negotiating leverage or recourse against the failing organisation.

Expect change

A less obvious challenge is that when the market consolidates, when cloud providers acquire each other, there can be a progressive withdrawal (or euphemistically termed “rationalisation”) of products and services. The situation you don’t want to find yourself in is one in which your cloud provider gives notice that it will be changing or withdrawing certain products or services that will force you to reconsider your risk profile, strategy, or even change your business processes. This is especially relevant if your organisation’s operational strategy hinges upon having predictable functionality and cost.

So what can you do to mitigate these risks? This may be a good time to reread the contract you signed with your cloud provider, paying special attention to the termination, functionality and service-guarantee conditions.

The evolution and reshaping of the cloud provider’s offerings could be beneficial to you, bringing improved capabilities, but there’s no guarantee.

As a user, ultimately you have no control over what’s going to happen in the cloud provider world. But if your organisation is absolutely dependent on a public cloud offering, ignoring the volatility of the cloud provider marketplace is a risk in itself.

Whether as an individual or organisation, understanding your long-term position and risks in the volatile cloud marketplace is key to protecting your data in the rapidly evolving and volatile cloud computing market.