Cloud storage is big business, a $100+ billion market on track to quadruple by the end of the decade. Use of the technology is broad, with cloud storage providers catering to consumers, small businesses, and enterprises alike. With this size and breadth comes a lot of variation, and not a small amount of complexity in cloud storage pricing. This article explores how cloud storage services are priced, and how new trends such as AI and edge computing are affecting cloud storage prices.
The Current State of Cloud Storage Pricing
Customers large and small have a range of choices when it comes to cloud storage. The main cloud storage services are all similar, but each is different in its own way. Whether people choose Google Cloud Storage, Microsoft Azure Blob Storage, or Amazon Simple Storage Service (S3), everyone can take advantage of a free tier. More specialized enterprise players like IBM Cloud and Oracle Cloud also offer free storage tiers. With Amazon S3, users get 5GB for free for one year. With IBM, it’s 25GB forever, and so forth.
The two predominant modes of cloud storage pricing are per-gigabyte and tiered, or a combination of the two. Cloud storage tiers represent different levels of performance with higher prices for faster input/output (I/O) rates and more PUTs and GETs. That way, if a customer only wants to put data in the cloud for backup, and rarely if ever accesses it, then a low performing, low-cost tier would be most economical.
Cloud storage vendors also typically charge for data access frequency, as well as egress fees for customers that want to download their data after they’ve placed it on the cloud. Or, they charge for PUT requests over a defined limit. With Alibaba, for instance, the customer gets 500 million PUT requests for free. After that, there’s a charge.
Emerging Technologies Affecting Cloud Storage Pricing
Changes in technology, as well as shifts in storage use cases, are having an effect on cloud storage pricing. Consider the rise in artificial intelligence (AI); though not new, AI is becoming more advanced and widespread in its adoption. This will have at least two impacts on cloud storage. For one thing, it’s likely that AI will be used to manage cloud storage, so some of the current practices, such as deciding which storage tiers to utilize, will be performed by AI rather than human admins.
AI also creates new demands for cloud storage, like a need for significant volumes of data storage while an AI model is being “trained.” After the training phase, the AI model may not need so much data storage, so flexibility in cloud storage contracts will be useful. AI training will also likely require more I/O activity than traditional cloud storage, so the best vendor plan will be one that does not penalize the customer for excessive I/O.
Edge computing is another technological trend that is having an impact on cloud storage and cloud storage pricing along with it. Edge computing involves deploying compute and storage closer to end users, typically in data centers that are significantly smaller than core “hyperscale” facilities. The Internet of Things (IoT) is an adjacent technology that is driving the growth of edge computing. IoT devices generate a great deal of data, and the consensus is that it is more economical and practical to keep the data close to where it is created, versus moving it to the cloud. This is known as “data gravity.”
Market Competition
The size of the market and the rate of growth ensures that there will be plenty of healthy competition in the cloud storage category. The competitive landscape is informed partly by the major players’ other lines of business. For example, Amazon and Microsoft each run large cloud businesses, of which storage is a part. Amazon has Amazon Web Services (AWS) and Microsoft has Microsoft Azure.
To a certain extent, therefore, their storage customers are “captive” to their cloud computing platforms. IBM and Oracle have similar storage relationships. These dependencies may not be good for price competition, however. If an AWS customer has its data on S3, they’re probably not going to get its compute service from to Oracle Cloud; the process would be too complex and time-consuming to be worthwhile.
Competition for new customers, however, looks different from a cloud storage pricing perspective. The industry might see competitive pricing related to free tiers and reduced prices for PUTs and GETs and other data access fees. Storage tiers might see similar pricing incentives to lure new customers, a new “ultra-low cost tier.”
User Demands and Behavior
Changing patterns of user behavior may change the way cloud storage vendors price their products. For example, the evolution of edge computing might lead to new cloud storage pricing models. As of today, edge computing is usually set up for a specific purpose, not for public-facing cloud storage-as-a-Service. That may start to change soon, however. A new class of vendor, the “edge cloud provider” has begun to offer cloud computing services, but with an edge model. So, instead of storing all of one’s data in, say, Northern Virginia, with an edge cloud provider, the customer can select cloud storage services in a dozen or more localities. This will most likely have an effect on cloud storage pricing.
Data Security and Compliance
Cloud storage customers have increasing needs for security and compliance. The threat of ransomware, for example, makes it wise to create multiple backup copies of data, ideally in “air gapped” architectures or immutable data formats that cannot be encrypted by attackers. Regarding compliance, customers may be subject to data sovereignty or consumer privacy regulations. Customers are willing to pay more for added security, so cloud storage vendors are adapting and offering new levels of service to accommodate these evolving security and compliance needs.
Future Predictions
While it is difficult to predict what’s going to happen in cloud storage pricing, the trends seem to indicate that the market will reward vendors that offer a broader range of service levels and price points. For example, as the need for data storage inevitably grows, vendors that offer low priced cold storage tiers will probably earn greater market share. On a related front, as solid-state drives (SSDs) become the norm, pricing will probably drop for higher performing storage. Fewer restrictions on customers’ handling of their own data will also likely be popular. Not charging egress fees, or other hidden fees, for example, should prove popular.
Tips for Users Navigating Cloud storage Pricing
It is a good practice to stay abreast of changes in cloud storage services and pricing. There is a lot of data and analysis available, if one takes the time to review it. The key to getting the best price, however, is to be prepared and plan for storage requirements in advance. It may be optimal, for instance, to have one main cloud storage supplier, regardless of where one’s cloud computing is going on. By concentrating as much cloud storage business as possible with one vendor, one can get the best terms. This will take planning, e.g., to arrange for Amazon S3 storage even if one is using Google Cloud Platform, and so forth.
Conclusion
Cloud storage pricing is not standing still. Vendors are coming online with new services and pricing strategies. New use cases like AI and edge computing will add to the mix. Customers are likely to see evolution of tiered storage options, especially the size of the free tier, along with changes in pricing for PUTs, GETs, egress, and so forth. Security and compliance concerns are driving innovations in secure storage offerings, with security likely to be a factor in cloud storage pricing going forward. The industry is rich with reporting and analysis of pricing trends, so it’s easy to keep up to date on the latest in cloud storage pricing dynamics.
To learn about Wasabi’s predictable, affordable cloud storage, which has no egress fees or hidden charges, visit our pricing page or try our pricing calculator.
Originally published on the Wasabi blog, January 17, 2024, by Luke Boland.
