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IaaS Series: Cloud Storage Pricing – How Low Can They Go?

IaaS Series: Cloud Storage Pricing – How Low Can They Go?

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With recent “price wars” between Google, Amazon and Microsoft, the cost of storage in the cloud has never been cheaper.  The question is, how long can these vendors keep reducing their prices and are we any closer to the bottom as far as Infrastructure as a Service is concerned?

The latest price drops from the big IaaS players puts the cost of storage as follows:

Note: Amazon EBS pricing is variable by region, lowest pricing shown.  There are additional vendor charges for data transfers and I/O, not shown here.  Microsoft are due to drop their Azure storage pricing on 1st May by up to 65%.

Cost of Delivery


Backblaze Pod Pricing, courtesy of Backblaze

Assuming cloud providers want to make a profit, then understanding the cost of delivery of their services gives us a baseline to measure against.  A recent Backblaze blog post discussed how the company has continued to evolve their storage pod devices (currently in generation 4.0) and how that has translated into $/GB savings.  In an effort to reduce costs, their solution has moved to larger drives and simplified some of the components, including moving to a single power supply.  Even so, the rate of cost reduction isn’t stunning as this table shows.

In some respects this may be a simplistic example compared to the types of engineering available to Google, Amazon or even Facebook.  However there’s a big difference between storing your inactive and effectively archive data on Blu-ray and 4TB drive arrays and the performance needed to run virtual machines.

So say, for a moment that the Blackblaze costs did reflect the cost of storage delivery.  To that we’d need to add data centre space costs, power, cooling and management.  As Dave Merrill points out in this white paper, acquisition cost is about 20% of TCO, so we can extrapolate and say storage cost per GB could be $0.26.  Assuming a three year deployment period, Google as an example would earn $0.93 on each GB, with a cost of $0.26, still making a healthy margin.

Dodgy Maths

OK, it’s easy to call out my maths here as being somewhat suspect (despite my degree in the subject) as some of these variables could be wildly inaccurate:

  • The big vendors will be getting much better discounts on their hardware
  • The big vendors have plenty of cash to fund short term losses in order to develop more efficient businesses
  • Efficient design and smart software can have a massive impact on  the management costs for storage solutions

The Architect’s View

Although the cost per GB numbers seem tiny, in reality we should be looking at terabyte and petabyte scale for our calculations.  For example, Amazon EBS is $50/TB per month; a single 1TB drive is almost this cheap, whereas storing multiple terabytes of data in the cloud starts to sound expensive.  I wouldn’t be surprised to see the cloud vendors incorporating the cost of the storage needed to run a virtual machine into the VM price then charging for ancillary storage at a lower $/TB rate as hardware prices continue to drop.  For now it seems we can assume we’ve not seen the last of the big price reductions.

Related Links


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Copyright (c) 2009-2014 – Chris M Evans, first published on http://blog.architecting.it, do not reproduce without permission.

About Chris M Evans

Chris M Evans has worked in the technology industry since 1987, starting as a systems programmer on the IBM mainframe platform, while retaining an interest in storage. After working abroad, he co-founded an Internet-based music distribution company during the .com era, returning to consultancy in the new millennium. In 2009 Chris co-founded Langton Blue Ltd (www.langtonblue.com), a boutique consultancy firm focused on delivering business benefit through efficient technology deployments. Chris writes a popular blog at http://blog.architecting.it, attends many conferences and invitation-only events and can be found providing regular industry contributions through Twitter (@chrismevans) and other social media outlets.
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