Analyzing Cloud Price Changes: How They Affect Your Bottom Line

Cloud pricing is growing more complex each month. As cloud IaaS vendors change prices and introduce new services, cloud users are finding it increasingly difficult to project their cloud costs.  PlanForCloud, a free cloud cost forecasting tool from RightScale, includes more than 12,000 different prices across 6 cloud providers. Over the last 14 months, we counted 29 price reductions in cloud services provided by AWS, Google Compute Engine, Windows Azure, and Rackspace Cloud. As the onslaught of changes in cloud pricing continues, now is a great time to update your forecast of cloud costs for 2013.

It’s probably not surprising that Amazon, a company with a business model focused on low margins, has announced 8 price reductions on core cloud services – including compute, storage, and bandwidth – over the last 14 months. But the drive to lower cloud prices extends to other cloud providers as well.  For these same core cloud services, Rackspace announced four price reductions over the same period, and Google Compute Engine and Windows Azure each announced three price reductions in the eight months since they launched. AWS also announced another 11 reductions in a variety of add-on services, such as database, messaging, search, and caching, and Windows Azure reduced database pricing once. With all these changes, the price/performance value of cloud IaaS gets increasingly more attractive.

Competition seems to be a factor in at least some of the price changes. In 2012 the November Storage Wars kicked off when Google reduced prices on storage by 20 percent on November 26. AWS followed with a 24 to 26 percent reduction on November 29, and Google responded the same day with an additional 10 percent reduction on storage. Windows Azure got into the game a week later with a 22 percent reduction in storage prices on December 5. In the space of 11 days, storage prices on 3 major public cloud providers went down by 20 to 30 percent. A couple of months later, in February 2013, Rackspace introduced new tiered pricing for storage that resulted in price reductions of as much as 25 percent.

It is important to note that each cloud provider’s price change announcement typically applies to only a subset of its services. Therefore, each reduction impacts only a fraction of a customer’s cloud spend. Analysis by PlanForCloud shows that about two-thirds of cloud costs are associated with compute services, yet only 23 percent of the price reductions involved compute, and the average amount of the price reduction for compute was just over 20 percent – more modest than the reductions in some of the less-used cloud services.

In this environment of complex and changing prices, cloud users face a couple of critical imperatives:

1. Develop competency in cloud cost forecasting

Although the continued reduction of cloud prices is a positive trend and may make it easier to justify the costs of cloud IaaS, it does not eliminate the need to forecast cloud spending as accurately as possible. The free PlanForCloud cost forecasting tool can help with that task. It automatically calculates future costs based on the latest prices combined with an organization’s current and planned usage.

2. Consider all your options for price, performance, features, and support

Price is only one of the factors you need to consider in choosing the right cloud provider. Many enterprises have a portfolio of cloud services, including public and private, to meet the requirements of varied applications. Each cloud provider offers differing combinations of price, performances, features, and support. To get the best value, carefully map your requirements to the cloud providers’ offerings.

3. Make sure you efficiently use the cloud resources you have

It’s easy for cloud users to forget to turn off or scale down unused cloud resources. Often the cost of instances left running unnecessarily or services that are overprovisioned can far outweigh price reductions from a cloud provider. RightScale customers use features like automation, alerts, monitoring, and auto-scaling to avoid wasted resources and wasted spending.

RightScale Cloud Management provides a multi-cloud platform that helps you deploy each application into the cloud provider of your choice. Let us show you how to manage all your clouds from a single dashboard.