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

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.

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Copyright (c) 2007-2018 – Post #A269 – Chris M Evans, first published on https://blog.architecting.it, do not reproduce without permission. 

Written by Chris Evans

With 30+ years in IT, Chris has worked on everything from mainframe to open platforms, Windows and more. During that time, he has focused on storage, developed software and even co-founded a music company in the late 1990s. These days it's all about analysis, advice and consultancy.