The After Effects of the Cloud Pricing Wars

The biggest headline for cloud in 2014 has been the massive reduction in price from the top 3 public cloud providers. Now that the dust is beginning to settle, the positive after effects are starting to be seen.

Michael Simonsen is the CEO of a startup called Altos Research. His business uses the cloud to sift through the analytics of home prices all across the United States. Since there are over 100 million homes for Altos Research to sift through, using the public cloud to facilitate this heavy number crunching operation became a natural choice. Once Amazon announced their reduction in price, Simonsen found himself saving 40% of his cloud operational costs.

In an interview with the Wall Street Journal, Simonsen mentions, “Nobody ever gives you a 40% price break overnight.” This sudden price slash came as a surprise and the additional capital allows Simonsen the ability to invest more resources in his company. Simonsen said that he plans to use the extra money to “Create more products, faster.” To facilitate this process, Simonsen hired two additional developers with the money his organization is saving.

Technology research firm Gartner says that organizations will spend over $13 billion in public cloud computing resources this year. Even when experts account for the cloud’s price reductions, the $13 billion number represents a 45% rise in adaption over last year’s numbers.

The economics of the cloud are simple. As cloud technology continues to mature and drop in price, organizations will be more willing to adapt and invest in the public cloud. Many experts feel as if the private cloud push is more of a proving ground for big corporations as they dip their feet into the public cloud pool. Firms such as Microsoft expect these larger corporations to work towards the model of a “Boundary-less datacenter” which essentially marketing speak for using a hybrid cloud. In the meanwhile, small to medium sized businesses have leveled the playing field by rapidly adapting to the more affordable public cloud offerings.